iM Securities projected that Hyundai E&C would reflect up to 200 billion won in expenses due to the accident at the construction site of the Anseong expressway. Hyundai E&C is the parent company of Hyundai Engineering, the contractor for the expressway. Nevertheless, it set a target stock price of 42,000 won and an investment opinion of 'buy.' On the 25th, Hyundai E&C closed at 35,300 won, and iM Securities estimated that it could rise an additional 19% from there.
On the 26th, Bae, a researcher from iM Securities, noted, "The scale of expenses related to the highway collapse accident is not expected to be large, stating that the company's projected expenses are estimated to be around 30 billion to 35 billion won, and in the worst-case scenario, it could reflect expenses of about 200 billion won." He also determined that "the scenario of 200 billion won has a low probability of occurring considering the fragmentation of the work process."
The previous day, a structural failure at the construction site of the Seoul-Sejong expressway resulted in 10 workers falling from a height of 52 meters. This accident resulted in the deaths of four individuals, while five others were seriously injured and transported to the hospital. One person was classified as having minor injuries. The construction section between Seoul and Anseong spans a total of 4.1 kilometers, and the accident site covers the entire 540 meters of the Cheongyongcheon Bridge. The ordering agency for the site is the Korea Expressway Corporation, with the total contract amount for the site being 205.3 billion won. The contractors are Hyundai Engineering (62.5%) and Hoban Industrial (37.5%), with the current progress rate being 56.6%.
In the securities market, the likelihood of deciding to completely demolish and reconstruct the entire site of 4.1 kilometers (including tunnels and bridges), where more than half of the work has been completed, is reported to be low. Researcher Bae explained, "If a complete reconstruction is decided for just the Cheongyongcheon Bridge section, the revenue recognized in accounting for that section, which amounts to 18.3 billion won, and the gross profit of 1.3 billion won could be reflected as one-time expenses."
He projected, "Additionally, regarding the demolition and complete reconstruction of the 540-meter section, expenses of 32.5 billion won could be reflected, concluding that the total expenses for the complete reconstruction of the Cheongyongcheon Bridge section could be around 30 billion to 35 billion won."
If a decision is made to completely reconstruct the entire bridge section (1.1 kilometers), the estimated recognized revenue would be around 30 billion won, with a gross profit of 2 billion won. In terms of expenses, combining the removal of recognized revenue and gross profit along with demolition and reconstruction could result in expenses at the level of 65 billion won. Researcher Bae stated, "In the worst case, if there is a need for reconstruction for the entire process, the removal of revenue recognition for the whole section of 4.1 kilometers would entail 70 billion won (based on a 62.5% equity assumption for Hyundai Engineering), with a gross profit removal of 5 billion won, and the complete reconstruction (100% burdened by Hyundai Engineering) could assume expenses of about 200 billion won."
As a fatal accident has occurred, the risk of administrative penalties for business suspension in the civil engineering institutional sector has also arisen. According to the current Occupational Safety and Health Act, business suspension is possible in the event of a major accident.
In June 2021, during the redevelopment project in the Hakdong 4 area of Dong-gu, Gwangju, the Hakdong disaster claimed the lives of nine individuals, resulting in HDC Hyundai Development Company receiving an 8-month business suspension. Researcher Bae explained, "The recent collapse accident at a large construction site where fatalities occurred led to administrative penalties for business suspension."
Meanwhile, Hyundai Engineering stated, "We sincerely apologize for the precious lives lost and for those injured due to the accident at our construction site," adding that it is actively cooperating with relevant authorities for a prompt site recovery and accurate identification of the cause of the accident.