[Weekend Money] Public-Led Housing Supply to Benefit "These Companies"?

Hana Securities names Kyeryong Construction its top pick
Revenue at small and midsize construction companies rebounds starting this year

The current administration is expanding the insufficient housing supply through public-sector leadership. Analysts say small and midsize construction companies with a high share of orders in the Korea Land and Housing Corporation (LH)-led public procurement market are likely to benefit.

Kim Seungjun, an analyst at Hana Securities, said, "The shift to public-sector leadership stems from recognition of the supply shortage and the search for ways to supply housing quickly. With construction costs rising, companies have had to raise sale prices, but the market is not accepting those higher prices. In an environment where private-sector developers face difficulties, the public sector is the only way to rapidly and dramatically increase supply."

Apartments and houses in a residential complex in Songpa-gu, Seoul. Photo by Kang Jinhyung.

In line with this policy, LH plans to place orders for 426,000 housing units, with construction costs totaling more than 130 trillion won, from this year through 2030. According to the recently announced Housing Stability Plan, about 600,000 of the 1,188,000 public housing units planned through 2030 will be built as rental housing or offered for public sale. "One notable feature is that the annual targets grow larger with each passing year, signaling that the public procurement market will expand year after year," Kim said.

Kim named small and midsize construction companies, including Kyeryong Construction, Kumho Engineering & Construction, and Dongbu Construction, as the biggest potential beneficiaries of the public procurement market. Kyeryong Construction, in particular, has taken on the largest number of projects currently being carried out by LH. Kyeryong Construction and its subsidiary KR Construction have won a total of 20 projects worth 2.4 trillion won. Kyeryong Construction also ranked among the top five companies for public construction orders every year from 2022 to 2025.

"In fact, order backlogs at small and midsize construction companies began to increase significantly last year, and the impact was reflected in a rebound in revenue starting this year," Kim said. "There are ample reasons to buy, including low valuations of less than two times the price-to-earnings ratio (PER), the prospect of predictable revenue growth as the LH procurement market expands, and the market's current lack of interest."

He added, "The relocation of government agencies in a second phase and the low price-to-book ratio (PBR) company disclosure initiative could serve as short-term catalysts, potentially drawing greater interest toward the end of the year as well." He named Kyeryong Construction his top pick among small and midsize stocks.

Dongbu Construction is also expected to see revenue growth driven by public-sector orders. "In particular, increased construction starts for government-funded projects in the building and housing segment are expected to lift revenue by 31.0% next year compared with this year," Kim said. "The public procurement market is set to expand, and there is still room to raise our 2028 estimates depending on the scale of public-sector orders."

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