Samsung Securities on the 27th said IPARK Hyundai Development Company(294870) is in an extremely undervalued state despite higher profitability than rivals and active shareholder returns. It maintained a "buy" investment rating and a target price of 28,000 won.
Heo Jae-jun of Samsung Securities said, "On a consolidation basis in the second quarter, IPARK Hyundai Development Company posted revenue of 914.6 billion won and operating profit of 122.7 billion won, meeting the consensus (brokerage forecast average) on operating profit," adding, "Revenue slightly missed the consensus, but the in-house and outsourced dwellings divisions maintained high profitability."
Heo assessed that in the second quarter this year, IPARK Hyundai Development Company's gross profit margin (GPM) for in-house dwellings and outsourced dwellings was 32.5% and 16.3%, respectively, a high level compared with rival builders.
Heo said, "This reflects a reduced share of low-margin business sites and an increased share of high-margin sites such as Seoul One IPARK," and predicted, "As the share of high-margin business sites continues to expand, high profitability will be maintained going forward."
Earnings improvement in the second half and new orders are also expected to accelerate. Heo said, "Cumulative revenue in the first half (1.6 trillion won) is 38% of the annual guidance (4.2336 trillion won), and the achievement rate for new orders remained at 20%," but added, "Revenue recognition for Cheonan IPARK City and Seoul One IPARK will kick into full gear from the second half, and urban renewal orders are also concentrated in the second half."
Heo also noted that IPARK Hyundai Development Company's commitment to shareholder returns is one of the positives. With its earnings release, IPARK Hyundai Development Company said it will newly acquire about 30 billion won worth of treasury shares for the purpose of cancellation.
He said, "Despite higher profitability than rivals and active shareholder return efforts, the stock is extremely undervalued at this year's expected price-earnings ratio (P/E) of 3.4 times and price-to-book ratio (P/B) of 0.3 times," adding, "With continued strong results ahead, the valuation discount will be resolved."