Hyundai Motor Securities announced on September 8 that it has lowered its target price for IS Dongseo from 31,000 won to 23,000 won. This adjustment follows a second-quarter earnings shock attributed to one-time factors, along with changes in the revenue recognition timing and sales rate assumptions for the Gyeongsan Pentahills W Phase 1 project. The investment recommendation remains a 'buy.'
Shin Dong-hyun, a researcher at Hyundai Motor Securities, stated, "The adjustment in the revenue recognition timing for the total sales of Gyeongsan Pentahills W and the changes in sales rate assumptions have led to a decrease in the estimated EPS for 2027 from 3,765 won to 2,838 won."
Shin explained that the significant drop in operating profit for the second quarter was due to the cancellation of existing sales contracts for the Goyang Deok-eun 8-10BL project, which affected the recognized revenue. He noted that the canceled units are expected to be resold at a discount in the future, contributing to revenue recognition.
Looking ahead, he anticipates a normalization of performance starting in the second half of the year. He highlighted that key construction sites for the company will include Gyeongsan Pentahills W Phase 1, Goyang Deok-eun 6-7BL, Ulsan New City Ailin's Field Phase 2, and the B-14 district in Ulsan, which is set to be supplied starting September 14. He expressed optimism that the one-time issues from the second quarter will dissipate, allowing for revenue normalization.
Shin assessed the business viability of Gyeongsan Pentahills W Phase 1 as still favorable, stating, "The likelihood of proceeding with Pentahills W Phase 1 is high based on current progress." He conservatively estimated a 70% contract rate for the first interim payment date. He added that the sales schedule for Phase 2, expected in the first half of 2027, will be flexible depending on the contract rate of Phase 1, emphasizing that the overall expected sales amount remains unchanged despite timeline adjustments.
* This article has been translated by AI.
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