Hyundai Engineering & Construction: Cash Collection After Earnings Recovery
Analysis date
Published
MW GOBLIN · AI company research
As of 2026-09-30, the recovery in profitability is positive. However, to argue that the stock is undervalued at KRW 118,100, a reduction in cash outflows and confirmation of the profitability of the nuclear power plant main contract are needed. The already disclosed partial work stoppage also needs to be monitored.
Toss Securities
Quote September 30, 2026 at 19:59 KST
Retrieved September 30, 2026 at 23:01 KST
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Improved building and housing margins supported earnings
Improved building and housing margins supported earnings. In the first half of 2026, consolidated revenue fell 13.5% year on year to KRW 13.12 trillion, but the gross margin for building and housing rose from 6.5% to 10.4%, and operating profit increased 2.8%. An August correction for Marjan PKG12 listed the end date as March 30, 2027. How much the KRW 182.9 billion contract increase offsets additional costs is a variable for future earnings. [1][2]
Collecting construction payments matters more than raising debt
Cash conversion of earnings remains weak. Subtracting purchases of property, plant and equipment and intangible assets from operating cash flow of -KRW 1.68 trillion in the first half of 2026 gives -KRW 1.86 trillion. Borrowings of KRW 4.43 trillion at the end of June exceeded cash of KRW 3.49 trillion. The KRW 500 billion convertible bond paid in July strengthens liquidity but also increases debt. Under the original terms, approximately 3.32 million shares, convertible from July 2027, represent 2.98% of existing common shares and are a potential source of dilution. [1][3]
Partial work stoppage is an already disclosed risk
Work restrictions following a safety accident have already occurred. The September 4 disclosure specifies a fatal accident on September 3 at Shahin PKG1 and a partial work stoppage order covering refractory work and other work. Whether it had been lifted as of September 30 is unconfirmed. The cost impact of the separate September 29 fatal accident at The H Classest is also undetermined. If the stoppage is prolonged, schedule extensions and additional costs could worsen margins and collection of construction payments, but no loss amount is estimated. [5][6]
1.43 times reference book value
KRW 118,100 is 1.43 times the reference BPS of KRW 82,483, calculated by dividing June-end equity attributable to owners of the parent of KRW 9.27 trillion by a total of 112,410,458 common and preferred shares. This is based on book equity after deducting liabilities and does not reflect the effect of the July convertible bond. Despite the recovery in building and housing margins, cash outflows and the unconfirmed FERMI nuclear EPC contract constrain any premium. A target price is not provided due to insufficient support for sustainable returns and investment costs. [1][3][4]
What could change the thesis
- Upside condition: A return to positive operating cash flow and confirmation of the contract value, schedule, and cost burden for the FERMI nuclear EPC project. Completion of the basic design is not a confirmed order.[1,4]
- Downside condition: A prolonged Shahin work stoppage or additional Marjan costs that worsen margins and collections. Check for disclosures on whether the work stoppage has been lifted and on accident costs.[2,5,6]
Sources and Evidence
- Hyundai Engineering & Construction semiannual report ↗2026-08-14 · Consolidated financial statements, segment information and events after the reporting period
- Marjan PKG12 correction to contract amount and period ↗2026-08-31 · Corrections, contract details and duration
- Hyundai Engineering & Construction decision to issue convertible bonds ↗2026-06-09 · Issuance amount, conversion terms and use of proceeds
- Disclosure clarifying the U.S. FERMI nuclear power project ↗2026-08-24 · Section 4: clarification of media reports
- Serious accident at The H Classest ↗2026-09-30 · Incident details, occurrence date and response plans
- Serious accident and partial work stoppage at Shahin PKG1 ↗2026-09-04 · Incident details; item 5 other matters relevant to investment decisions
This AI-generated report is for information. Check the analysis date and primary sources. Terms