Kyeryong Construction Stock Analysis: Will the ₩184.8B Deokso 4 Project Rescue Profitability?

The Contract Win: Kyeryong Construction Secures ₩184.8 Billion Redevelopment Project

Kyeryong Construction Industrial announced on September 29, 2025, that it had been finally selected as the contractor for the ‘Deokso 4 District Redevelopment Project,’ valued at approximately ₩184.8 billion (excluding VAT).

While specific market expectations are not yet visible, large-scale redevelopment projects typically serve as a strong positive signal for a construction company’s future performance improvement and increased corporate value.

Kyeryong Construction Fundamentals: Can They Sustain Growth?

Before assessing the new order’s true impact, it is crucial to examine Kyeryong Construction’s current fundamentals and past stock performance. The company’s financial health over the past few years remains the primary driver of long-term investment decisions.

Stock Price Volatility and Market Sensitivity

Kyeryong Construction’s stock price declined significantly after its 2020 peak (₩30,500) and has recently been range-bound between ₩13,000 and ₩20,000 since 2023. In 2024, movement has been minimal, hovering near the lower boundary of ₩13,000. This pattern—characterized by large trading volumes accompanying sharp fluctuations—indicates the market’s high sensitivity to specific issues or major announcements. Foreign ownership has also shown corresponding volatility.

Analyzing Profitability Decline vs. Financial Stability

The most significant concern remains Kyeryong Construction’s severe downward trend in profitability.

• Revenue Projection: Revenue is expected to fall sharply from ₩91.2 billion (2022) to an estimated ₩31.6 billion (2024).
• Operating Profit Concern: Operating profit is projected to swing from a surplus of ₩10.3 billion in 2022 to an estimated deficit of ₩15.9 billion in 2024.
• Indicators: A negative trend is observed across all core profitability indicators (operating profit margin, net profit margin, and ROE).

However, financial health remains relatively sound. The debt-to-equity ratio and current ratio are improving, and the high retained earnings ratio suggests low short-term liquidity risk. Furthermore, the estimated PBR of 0.75x for 2024 suggests the company may be entering an undervalued phase.

Investment Impact: Weighing the Risks and Rewards of the New Order

The Deokso 4 District Redevelopment Project selection presents both clear opportunities and substantial financial challenges for Kyeryong Construction.

Positive Catalysts: Revenue Growth and Securing Future Drivers

• Direct Revenue Boost: The ₩184.8 billion order directly increases revenue by 5.83%, providing crucial momentum for short-term performance improvement.
• Strengthening Portfolio: Winning a major redevelopment project reinforces the housing business portfolio and secures opportunities for future ventures.
• Investor Sentiment: Positive contract news can temporarily lift investor confidence and may trigger a short-term stock price rally.

Key Concerns: Persistent Profitability Issues

• Fundamental Profitability Slump: One order alone may not resolve the core issue of a projected operating deficit in 2024. The overall margin structure remains questionable.
• Increased Volatility Risk: Given the stock’s history of sharp reactions to news, the order may amplify short-term expectations, leading to heightened price volatility without guaranteed sustained growth.
• Macroeconomic Headwinds: External factors (e.g., changes in raw material prices, economic uncertainty) continue to exert downward pressure on the construction sector.

Smart Investment Strategy: Key Considerations for Prudent Investors

The Deokso 4 Redevelopment Project provides significant short-term positive momentum. However, long-term investors must look beyond the headline number and evaluate the following:

1. Detailed Project Profitability: Ascertaining the estimated margin and profitability of this specific project is crucial. Investors need profit contribution, not just revenue growth.
2. Prospects for Additional Orders: Monitor Kyeryong Construction’s future order pipeline. Consecutive successful orders are needed to solidify growth momentum and offset existing deficits.
3. Efforts to Improve Financial Structure: Observe concrete measures (cost reduction, efficiency gains) taken to combat the profitability decline, even while maintaining current financial soundness.
4. Overall Market Indicators: Continuously monitor macroeconomic variables such as interest rates, exchange rates, and raw material prices, as these disproportionately affect the construction industry.

Frequently Asked Questions (FAQ)

Q1: What is the ‘Deokso 4 District Redevelopment Project’ that Kyeryong Construction won?

A1: This is an event where Kyeryong Construction Industrial was selected as the contractor for the project, valued at approximately ₩184.8 billion (excluding VAT). It represents about 5.83% of the company’s recent revenue.

Q2: How will this order affect Kyeryong Construction’s performance?

A2: It will generate approximately ₩184.8 billion in new revenue, contributing to overall revenue growth. It positively impacts the housing business portfolio and aids in securing future growth drivers.

Q3: What is the most concerning aspect of Kyeryong Construction’s current financial state?

A3: The severe deterioration in overall profitability indicators, including the projected operating deficit for 2024. This order alone may not immediately resolve these underlying issues.

Q4: How likely is Kyeryong Construction’s stock price to rebound due to the Deokso 4 order?

A4: A short-term positive movement is possible due to improved sentiment. However, sustained upward momentum requires fundamental profitability improvements, making the short-term impact highly volatile.