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 gaining attention as profit forecasts are rising due to new growth drivers such as data centers and power plants.
![Solid Earnings and Positive Catalysts... Which Sectors to Watch on the Market in Advance [Weekend Money]](http://www.asiae.co.kr/news/img_view.htm?img=2024102108501765710_1729468217.png)
On August 9, Eugene Investment & Securities stated in its report titled "Strong Rebound, Time to Look at Construction Again," that strong second-quarter results, momentum from the San Francisco Artificial Intelligence (AI) Summit via data centers, and entry into the US power plant market through investment projects in the US are expected to lift the share prices of construction companies.
Fundamentals in the construction sector have improved. In the second quarter of this year, operating profits for Hyundai Engineering & Construction, Daewoo Engineering & Construction, DL E&C, and SAMSUNG E&A all surpassed market consensus. The report explained that based on this, profit estimates are being raised, so a strong rebound is expected.
The data center momentum is also positive for share price growth. At the recent San Francisco AI Summit, domestic companies and global big tech firms announced AI data center investment collaboration plans. SK Telecom is pushing for the construction of gigawatt-scale data centers with NVIDIA and Anthropic, while Naver plans to expand the scale of the Sejong AI Factory through investment from NVIDIA, supply of graphic processing units (GPU), and funding from Brookfield.
The construction industry may benefit from the news of the first US-bound investment project. It has been reported that the first project is likely to be the Encinal combined-cycle gas power generation project in Texas, worth $19.8 billion. Since, in response to rising power demand in the US, investment in power plants is expected to prioritize timely advancement and high specifications over type of power source, this could make expansion into the US more visible for domestic construction companies.
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Taehwan Ryu, a researcher at Eugene Investment & Securities, stated, "You should look for companies with experience in carrying out power plant projects, strong and stable profitability, and sound financial health to withstand interest rate hikes," adding, "We present DL E&C—which has extensive experience designing, procuring, and constructing (EPC) multiple power plants domestically and internationally, as well as direct project experience in the US—as the top pick."
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