On Wednesday, HSBC analysts upgraded Hyundai (OTC:HYMTF) Engineering and Construction Co Ltd (000720:KS) from a Hold to a Buy rating.
The upgrade reflects a positive outlook for the company’s future performance, with expectations of a margin expansion cycle beginning in 2025.
The analysts cited multiple factors that previously contributed to margin contraction for Hyundai E&C, including cost overruns at overseas projects, sharp rises in construction costs over the past three years, and a sales mix heavily weighted towards low-margin projects.
However, they anticipate an improvement in the sales mix starting from the second half of 2025, which is expected to continue through 2027 as older projects are completed.
The improved sales mix is not the only factor expected to bolster Hyundai E&C’s margins. Analysts also pointed to several margin-accretive development projects that are projected to contribute to the company’s earnings from 2026 onward.
Among these projects are the Gayang project, which has recently secured financing of approximately KRW2.8 trillion, as well as various hotel land redevelopment projects and the Bokjeong station area redevelopment project.
The analysts increased the price target to KRW40,000 from KRW33,000. Their commentary highlighted the significance of the upcoming years for Hyundai E&C, with 2025 being an inflection point for the company’s share price.
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