[Click E-Stock] "DL E&C Delivers Solid Results... Buy Rating Maintained, Target Price Lowered"

"Expected to Meet Market Forecasts"


Outlook for New Businesses in SMR and Data Centers

DL E&C is expected to report results for the second quarter of this year that are in line with market expectations. Although short-term topline growth appears limited, analysts say that expectations for a reduction in the company's valuation discount remain valid as the visibility of new businesses such as small modular reactors (SMR) and data centers continues to increase.

According to Mirae Asset Securities on July 8, analyst Kim Giryong stated the previous day, "DL E&C’s consolidated results for the second quarter of this year are expected to meet market forecasts, with revenue of 1.74 trillion won (down 12.6% year-on-year) and operating profit of 121.7 billion won (down 3.6% year-on-year)." He maintained a "Buy" investment rating but lowered the target price from 128,000 won to 100,000 won.

Analyst Kim noted that DL E&C’s consolidated revenue for the second quarter is expected to continue declining, influenced by a contraction in the standalone plant business and its subsidiary DL Construction.

He explained, "It is difficult to expect significant topline growth in the short term due to a decrease in new orders and the selective business strategy of subsidiary DL Construction." He added, "New orders in the first half of the year include approximately 1.8 trillion won for the Hannam District 5 project, about 1 trillion won for the Jeungsan 4 public housing project, and around 500 billion won for the Jeju Clean Energy Complex Power Plant project. This will bring the company’s total new orders for the first half slightly below half of its annual target of 12.5 trillion won."

Nevertheless, he emphasized that investment points related to new businesses, such as SMR and data centers, remain valid. Kim stated, "In March, the company signed a standardized design contract worth approximately 15 billion won with X-energy in the United States, and it is also aiming to participate in additional projects led by North American clients." He added, "Through collaboration with local energy and power companies in the UK and the Philippines, the company is also pursuing joint overseas expansion with X-energy."

The potential for additional orders in the data center sector is cited as another positive factor. Following the Bucheon project contract in May, there is a possibility of securing three additional contracts within the year, which is expected to contribute to future results. In addition, revenue from the S-Oil Shaheen Project’s plant segment and potential increases in the contract value from Korea Land & Housing Corporation (LH) are also cited as factors that could further boost earnings.

Kim concluded, "Although the target price has been adjusted, the SMR business is taking shape through collaboration with X-energy in the United States." He added, "The company’s ongoing commitment to shareholder returns, utilizing approximately 2.9% of its treasury shares, remains an attractive factor for closing the valuation discount."

This content was produced with the assistance of AI translation services.