The Sector Once Considered Declining... Now "Every Company Is Thriving" Is [Weekend Money]

Domestic Operations Provide Support, Overseas Markets Raise Multiples
Both Segments Now Serve as Key Investment Points for the Construction Sector

"There are various investment points within the sector, so every company has a reason to be considered a buy."

Moonjun Jang, a researcher at KB Securities, shared this perspective on the domestic construction sector. Unlike in the past, when both domestic and overseas businesses were seen as burdens, now both areas have become key investment points for the construction industry.

Domestically, the normalization of housing cost ratios and the emergence of data centers as a new growth axis have become key investment factors. Recently, the housing cost ratios of major construction companies have shown a clear improvement, reaching a level where structural normalization can be considered significant. Researcher Jang stated, "While the possibility of additional costs, such as provisions for unsold housing, remains, the stabilization of cost ratios is highly significant given that housing is the largest revenue source for most construction companies. The limitation of not being able to expect an increase in presale volumes is offset by the growth of data centers."

As for overseas opportunities, there are concrete expectations for business opportunities in new markets such as nuclear power plants in the United States, large-scale projects in the Middle East, and LNG. Researcher Jang noted, "Overseas projects are factors that can expand the valuation multiples of construction companies, rather than driving short-term profits. These businesses are important not for their immediate EPS (Earnings Per Share) contributions, but because they demonstrate that the order book and growth areas for Korean construction companies are expanding."

Analyzing each company, he predicted that the potential for mid- to long-term profit growth, underpinned by domestic operations, will serve as a support for the downside, while each company's overseas growth drivers will determine their 'alpha.' Researcher Jang commented, "If domestic operations raise the floor for profits and share prices, overseas operations open the ceiling for growth expectations and valuation multiples. The construction sector is now entering a phase where it should focus more on upside potential than downside risk."

In particular, KB Securities suggested a portfolio centered on Hyundai Engineering & Construction, SAMSUNG E&A, and GS Engineering & Construction. Regarding Hyundai Engineering & Construction, they stated, "It seems inevitable that investors will have to accept high share price volatility,” but added, "As the end of the year approaches and U.S. nuclear project opportunities become more concrete, we expect to see differentiated share price gains."

For SAMSUNG E&A, they said, "The company is expected to enter a growth phase based on a record-breaking order cycle. While explosive share price movements may be unlikely, we anticipate a steady upward trend."

Regarding GS Engineering & Construction, Jang remarked, "The company has shown additional positive momentum recently. Investment points include the potential for notable earnings growth in 2027, the expansion of its AI data center business, and the possibility of participating in overseas nuclear power projects."

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