Small and mid-cap construction stocks that had been overlooked in the domestic market rally are surging. Expectations that small construction companies will benefit from the government's public housing supply policy have warmed related shares. However, because small and mid-cap builders have small market capitalizations and often attract speculative money, there is advice to be cautious when investing.
According to the Korea Exchange (KRX) on Dec. 10, small and mid-cap construction stocks soared after the Ministry of Land, Infrastructure and Transport released follow-up measures to the "9.7 housing supply expansion plan" on Nov. 26. During this period (Nov. 27–Dec. 9), shares of small and mid-cap builders Sangji Construction, ILSUNG Construction, and Dongsin Construction rose 108.31%, 83.32%, and 39.20%, respectively. As these stocks spiked, they were also designated as investment warning issues.
During the same period, Hanshin Engineering & Construction and Kumho Engineering & Construction rose 19.83% and 8.23%, respectively. That was higher than the gains of large builders Hyundai E&C (11.80%) and Samsung C&T (8.85%).
In 2026 alone, the government plans to supply 29,000 units of public dwellings in the Seoul metropolitan area. It aims to start construction on a total of 1.35 million dwellings in the metropolitan area by 2030.
Small and mid-cap builders are expected to participate more actively than large builders in the government's public housing projects. Because the goal of public dwelling construction is to supply dwellings, construction costs and sale prices are not high, giving large builders little incentive to participate. In contrast, small and mid-cap builders, for whom stable cash acquisition is important, are expected to actively take part in these projects.
Park Sera, an analyst at Shinyoung Securities, said, "Although the economy remains sluggish, expectations that construction investment will increase next year are being reflected, sending small and mid-cap construction stocks sharply higher," and added, "As the public share expands, small and mid-cap builders that pursue stability over high revenue will benefit more."
A leading case of improving results through public housing projects is Kumho Engineering & Construction. Focusing on public dwelling projects as a core business, Kumho Engineering & Construction won 1.7776 trillion won worth of public dwelling supply projects this year. That figure is up 1.1292 trillion won from a year earlier.
In the third quarter of this year, Kumho Engineering & Construction's gross profit and operating profit both increased by 160.4 billion won and 172.8 billion won, respectively, from the third quarter a year earlier, returning to the black. Kim Sun-mi, a senior analyst at Shinhan Investment & Securities, said, "Since 2024, construction costs have stabilized and outsourcing expense has fallen, leading to cost improvement," and added, "With an increase in some public dwelling orders, it is recovering faster than large companies."
However, even as small and mid-cap construction stocks are jittery on improved results and the effects of public housing projects, there is advice to exercise caution when investing. These long-undervalued stocks have small market capitalizations, so even a small inflow of investment funds can cause large price swings.
An industry official said, "In some stocks, we are also detecting flows of speculative funds," and added, "Investors should assess corporate results and growth potential before investing."