Hyosung Heavy Industries' stock price fell below 400,000 won during trading on the 24th. The company's construction division's decision to take on debt guarantees is cited as the reason for the drop in stock price.
Hyosung Heavy Industries' shares traded at 392,000 won on the Korea Composite Stock Price Index (KOSPI) market at 2:51 p.m. The stock price dropped by 7.66% (32,500 won) compared to the previous day. It started trading at 425,000 won and fell to 366,000 won during the day.
Lee Dong-hun, a Research Institute at Shinhan Investment Corporation, noted, "Hyosung Heavy Industries' construction division took on two debt guarantees, which has raised concerns related to the 4th quarter performance and additional risks, leading to the drop in stock price."
Hyosung Heavy Industries' construction division announced that it decided to take on two debt guarantees for unstarted sites in Oncheon-dong, Busan, and Daegu Hanyang I&P on the 20th. The scale of the debts is 103.8 billion won and 43.6 billion won, respectively. Shinhan Investment Corporation estimated that Hyosung Heavy Industries would take on one more debt guarantee, estimating the total scale to be around 200 billion won.
As a result of Hyosung Heavy Industries' acquisition of debt guarantees for unstarted sites, a loss of 40 billion to 50 billion won is expected to be reflected as an operating expense in this year's 4th quarter performance. This research institute stated, "Although there are concerns regarding the sluggish construction market, the acquisition of the debt guarantees has been perceived negatively (by investors), it also noted that the risks at the sites are not significant and that related losses in construction are expected to conclude in the 4th quarter of this year."
This research institute commented that given the likelihood of good performance by Hyosung Heavy Industries' power equipment division until 2025, it still considers the stock worth buying. He said, "I see it as an oversold period due to construction-related risks, and considering the improvement in the power equipment business, it is still a buying opportunity."