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 a variety of investment points within the sector, meaning every company has a reason to be appealing."

Jang Moonjun, a research analyst at KB Securities, offered this assessment of the domestic construction sector. He explained that, unlike in the past when both domestic and overseas business segments had posed challenges, now both are considered compelling investment points for construction companies.

Domestically, the normalization of housing cost ratios, coupled with the emergence of data centers as a new growth axis, has become an investment factor. Recently, major construction firms have shown clear improvements in their housing cost ratios, reaching a level where structural normalization can be considered. Jang noted, "Although there is still the possibility of additional expenses such as provisioning for unsold units, the significance of cost ratio stabilization is substantial since the housing business remains the largest source of revenue for most construction firms." He further analyzed, "While it is difficult to expect a significant increase in pre-sale volumes, this limitation is compensated for by the data center sector."

Looking overseas, there are specific expectations for new business opportunities, such as nuclear power projects in the U.S., large-scale projects in the Middle East, and LNG. Jang stated, "Overseas business factors are more about expanding the sector's multiples than generating short-term profits," adding, "While these businesses may not immediately boost EPS (Earnings Per Share), they are important as they demonstrate that domestic construction firms are broadening their order books and growth areas."

Examining each company, he predicted that the potential for mid- to long-term profit growth based on domestic business would support their downside, while overseas growth axes would serve as the "alpha" that differentiates them. Jang evaluated, "If domestic business raises the floor for profits and share prices, overseas business opens the ceiling for growth expectations and multiples," concluding, "It is now a phase where the construction sector should focus more on upside potential than downside risk."

In particular, KB Securities recommended a portfolio centered on Hyundai Engineering & Construction, SAMSUNG E&A, and GS Engineering & Construction. Regarding Hyundai Engineering & Construction, they pointed out, "It seems unavoidable to accept high share price volatility," but added, "As year-end approaches, opportunities in nuclear power projects within the U.S. will become clearer, leading to differentiated share price gains."

As for SAMSUNG E&A, "It is expected to enter a growth phase based on a record-breaking order cycle," the report continued. "Although explosive share price movements may be difficult to expect, a steady upward trend is anticipated."

Regarding GS Engineering & Construction, the report stated, "Recent additional trends are positive," highlighting that "clear prospects for increased earnings in 2027, expansion into AI data center projects, and potential participation in overseas nuclear power projects make these important investment points."

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