Shinhan Investment & Securities on the 12th said momentum for orders related to data centers and nuclear power at GS Engineering & Construction remains intact. However, reflecting weakened investor sentiment across the domestic construction sector and a slowdown in nuclear power momentum, it cut the target price to 37,000 won from 48,000 won. The previous trading day's closing price of GS Engineering & Construction was 26,200 won.
Kim Sun-mi, an analyst at Shinhan Investment & Securities, said, "Since May, as the share price has entered a correction phase, it will be difficult to expect the steep gains seen in the first half," but added, "Considering quarterly earnings improvement, expansion of data center orders, financial structure improvement following the sale of Inima, and the possibility of nuclear power orders in Vietnam, the upside potential is greater than the downside."
In particular, the data center business was highlighted as a new growth engine. Kim said, "Team Korea's Vietnam nuclear power order, which the market had high expectations for, has been somewhat delayed to after the third quarter, but the data center order pipeline, which has a short construction period and high short-term earnings contribution, is instead expanding."
Currently, projects in Paju, Naver Sejong Data Center, Goyang, the Gyeonggi-region AI Data Center (AIDC), the Seoul Edge Data Center, and those related to LG Uplus are being mentioned as order candidates. Kim said, "GS Engineering & Construction is participating across the value chain from data center development to construction and operation through headquarters, Gvesco Asset Management, and Xi C&A," adding, "Recently, the company has also been reviewing entry into the Southeast Asian data center market, so expansion of related orders and improved earnings are expected."
The plant business was also assessed to have mid- to long-term growth potential. Kim said, "Amid tensions between Iran and Israel, global investment in energy infrastructure is expected to increase," adding, "While GS Engineering & Construction's plant orders have been reduced to around 1.5 trillion won per year under a profitability-focused strategy, considering stable cost ratios at key sites and an improving business environment, there will likely be greater room to expand orders after 2027."
Earnings are expected to improve more sharply toward the second half of this year. Kim said, "Although a somewhat sluggish trend may continue through the second quarter, quarterly earnings growth should appear, supported by an increase in groundbreaking at headquarters and subsidiary building sites and improved execution cost ratios."
Valuation, however, was adjusted conservatively. Kim said, "We lowered the target price reflecting the possibility of domestic rate hikes and weakened investor sentiment toward nuclear power within the construction sector," adding, "If factors such as expansion of Middle East reconstruction projects, higher utilization in the plant institutional sector due to a reshaping of the global energy market, and visible Team Korea nuclear power orders are confirmed, a valuation re-rating would be possible."