[Click e-Stock] GS Engineering & Construction Ramps Up AI Data Center Business... Target Price Raised

On September 15, Hana Securities maintained its 'Buy' investment rating for GS Engineering & Construction, citing heightened expectations for fourth-quarter orders due to the full-scale launch of its artificial intelligence (AI) data center business and an increased likelihood of future earnings growth. The target price was raised from 36,000 won to 46,000 won.

Seungjun Kim, a researcher at Hana Securities, stated, "GS Group announced that it would complete a total of 2.4 gigawatts (GW) in AI data centers at the Bukpyeong No. 2 Industrial Complex in Donghae, with 1.2GW (Phase 1) by 2028 and an additional 1.2GW (Phase 2) by 2029. An application for a construction permit was submitted in early August and is currently under review, and the project is progressing smoothly with construction slated to begin in November after approval is expected in September or October."

Kim added, "If construction begins with an initial phase of 100 megawatts (MW), the order value is estimated at about 1 trillion won, which will contribute to GS Engineering & Construction’s consolidated performance. Should orders exceeding 10 trillion won, such as the gigawatt-scale Donghae project, be recognized as sales within the next two to three years, overall company revenue could grow at a very rapid pace."

He further evaluated, "Since the 2010s, GS Engineering & Construction has built over 20 data centers for clients such as LG Uplus, Hana Financial Group, and Naver (in Chuncheon and Sejong), steadily building its reference portfolio. More recently, the company has expanded its business scope to directly investing equity in and operating development projects."

He also mentioned the potential for improved performance in the second half of the year. Researcher Jeong noted, "Although second-quarter results were weak due to one-off costs, such as preemptively booked losses from the plant business and amortization of uncollected SG&A receivables, there is significant potential for improvement in the second half as these one-off expenses are excluded."

He explained, "Even in the housing sector, as projects with high cost ratios are completed, the company can expect a margin recovery. Given GS Engineering & Construction's conservative accounting policy, additional margin increases are likely each quarter as budgets are adjusted in line with project execution."

Kim concluded, "Reflecting the growing fourth-quarter order expectations arising from the progress of the Donghae data center project, the target price was revised upward. The new target price is based on an estimated price-to-earnings ratio (P/E) of 9 times the projected 2027 earnings per share (EPS)."

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