[Click eStock] "GS Engineering & Construction Positive on New Data Center Business... Target Price Raised"

NH Investment & Securities raises GS Engineering & Construction's target price to 45,000 won

NH Investment & Securities said on October 7 that it was raising its target price for GS Engineering & Construction from 42,000 won to 45,000 won while maintaining its “Buy” rating, citing a positive view of the company’s efforts to strengthen its new-business portfolio around data centers.

GS Engineering & Construction plans to begin construction this year on Phase 1 of the GS Donghae Data Center project, with completion targeted for 2029. “Assuming construction costs of 10 billion won per MW, total construction costs are expected to reach 12 trillion won. Since large-scale construction projects are typically awarded in separate packages, we estimate that 100 MW will be put out to bid this year and that the amount likely to be recognized as new orders will be 1 trillion won,” said Lee Eunsang, an analyst at NH Investment & Securities.

The data center business is highly likely to expand beyond captive demand from affiliates through partnership models with a range of sponsors. Including construction by its sub-subsidiary Xi C&A, GS Engineering & Construction has the largest number of domestic construction project references.

“If global big tech companies increase their investment in domestic data centers to establish a hub in Northeast Asia, they are likely to select proven Tier 1 construction companies,” Lee said. “A recent example that bears this out is the selection of Hyundai Engineering, which is not an affiliate, as the construction company for SGC Energy’s data center in Gunsan.”

Meanwhile, NH Investment & Securities forecast third-quarter revenue of 2.917 trillion won for GS Engineering & Construction, down 9.1% year over year, and operating profit of 120.7 billion won, down 18.7%. Operating profit is expected to be in line with the market consensus of 119.4 billion won.

“Given the trend toward fewer project sites reaching completion from the second half of the year onward, we believe the one-off costs incurred in the previous quarter at plant operations and maintenance (O&M) sites, as well as at infrastructure and housing sites reaching completion, are unlikely to recur,” Lee said.

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