Gadukdo Airport Railway Project Win: What Does it Mean?
HJ Heavy Industries has been selected as the preferred bidder for the Gadukdo New Airport access railway’s first section construction project (TK), securing a contract worth approximately KRW 101.9 billion. This is expected to lead to an increase in HJ Heavy Industries’ construction sector’s order backlog and sales.
Securing Growth Momentum in the Construction Sector, But What About Profitability?
This project win is positive for securing growth momentum in HJ Heavy Industries’ construction sector. However, considering the recent trend of declining profitability in the construction sector, cost management and securing profitability remain crucial tasks. The solid performance of the shipbuilding sector is expected to partially offset the volatility of the construction sector.
Macroeconomic Variables: How Will They Influence Investment Decisions?
- Fluctuations in interest rates and exchange rates could affect the cost of importing raw materials and financing costs for the construction sector.
- Rising raw material prices and falling freight rates could negatively impact the profitability of the shipbuilding sector.
- Increases in gold prices and government bond yields could lead to an overall contraction in investment sentiment.
Action Plan for Investors
This contract win can provide positive momentum for the stock price in the short term. However, considering the high debt ratio and uncertainties surrounding the profitability of the construction sector, we maintain a ‘Hold’ recommendation. Investors should keep an eye on the future improvement in the construction sector’s profitability and order intake trends in the shipbuilding sector. Closely monitoring the profitability strategies for the Gadukdo New Airport access railway project, further project acquisitions, and financial soundness strengthening strategies are crucial.