Hanwha Investment & Securities on the 23rd said industry valuation normalization is progressing quickly with nuclear power at the forefront for DL E&C. It maintained a Buy rating and raised the target price by 103.7% to 110,000 won. DL E&C's previous closing price was 67,400 won.
Hanwha Investment & Securities said it saw a limit-up for the first time since it began covering DL E&C in 2016.
Song Yu-rim, an analyst at Hanwha Investment & Securities, said, "Despite the limit-up, DL E&C's share price is around 0.5 times price-to-book ratio (PBR), and it is expected to benefit from catalysts such as nuclear power and an end to war."
For the first quarter of this year, DL E&C's revenue is forecast at 1.7 trillion won and operating profit at 121.0 billion won. That would be down 8.2% and up 49.4%, respectively, from a year earlier. Operating profit was estimated to be 12.4% higher than the market consensus (average estimate) of 107.7 billion won.
Song said, "It has strengths in all investment points that are driving construction stocks higher, including nuclear power such as SMRs and large reactors, reconstruction related to Iran, and low PBR."
DL E&C is also a strategic investor predicated on an engineering, procurement and construction (EPC) partnership with U.S.-based X-energy. Accordingly, news is expected soon on entering the U.S. small modular reactor (SMR) market by participating in the early design phase.
Song explained, "Currently, the nuclear workforce includes 30 people for SMRs, with a plus alpha for plants, and based on this, participation is sufficiently feasible not only in SMRs but also as a non-leading contractor in large nuclear projects."
Meanwhile, DL E&C is described as the company best positioned to respond quickly after an end to war, based on its extensive experience and network in the Iranian market. In fact, it holds the record for the most orders in Iran, and back in 2016, when economic sanctions on Iran were lifted, it was the first to announce winning a 2.2 trillion won project to upgrade the Isfahan refinery.