Solid Earnings and Positive Catalysts... Which Sectors to Watch on the Market in Advance [Weekend Money]

"Data Center and Plant Momentum Is Coming"

"Second-Quarter Earnings Beat Expectations, Leading to Upward Profit Revisions"

The construction sector is drawing attention as profit estimates are rising, driven by new growth engines such as data centers and power plant projects.

On August 9, Eugene Investment & Securities stated in its report, "A Strong Rebound: Time to Refocus on Construction," that robust second-quarter earnings, data center momentum generated by the San Francisco Artificial Intelligence (AI) Summit, and entry into the U.S. power plant market via U.S.-targeted investment projects are expected to drive construction sector stock prices higher.

The fundamentals of the construction sector have improved. In the second quarter of this year, operating profits of Hyundai Engineering & Construction, Daewoo Engineering & Construction, DL E&C, and SAMSUNG E&A all exceeded market consensus. The report explained that, based on these results, profit estimates are being revised upward and a strong rebound is anticipated.

Data center momentum is also positive for stock price growth. At a recent AI Summit in San Francisco, Korean companies and global big tech firms announced cooperation plans for investment in AI data centers. SK Telecom is pursuing the construction of gigawatt-scale data centers with partners like Nvidia and Anthropic, while Naver plans to expand the scale of its Sejong AI Factory with investment from Nvidia, GPU supply, and financial support from Brookfield.

The announcement of the first U.S.-targeted investment project may benefit the construction industry. The Texas Encinal Gas Combined Cycle Power Project, with a project size of USD 19.8 billion, is reportedly being strongly considered as the first such project. Since the priority in the U.S. is expected to be investment in advanced, timely power plants to meet growing electricity demand—rather than in specific types of power sources—Korean construction companies’ entry into the U.S. market may soon materialize.

Tae-Hwan Ryu, a researcher at Eugene Investment & Securities, said, "We need to focus on companies that possess experience in executing power plant projects, stable earnings fundamentals, and financial soundness to cope with interest rate hikes." He added, "Our top pick is DL E&C, as it has extensive experience in designing, procuring, and constructing (EPC) multiple power plants both domestically and abroad, as well as local project experience in the United States."

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