Eugene Investment Securities announced on August 13 that it has raised its target price for GS Construction from 34,000 won to 48,000 won, citing increased visibility in the Donghae AI Data Center (AIDC) project, which is expected to significantly offset the profit gap resulting from the sale of GS Enima. The firm maintained its 'buy' rating.
Research analyst Ryu Tae-hwan stated, "GS Group is pushing to build a 1.2GW AI data center in the Donghae Bukpyeong General Industrial Complex in Gangwon Province. We have established GS AI infrastructure for the data center business and plan to develop it gradually according to tenant demand."
He added, "We assume a scenario where a 150MW data center will begin construction every six months starting at the end of 2026. With a construction period of 20 months and a construction cost of 1.5 trillion won per 150MW, we estimate that the revenue from the Donghae AIDC will be approximately 1.3 trillion won and operating profit around 100 billion won in 2027."
Ryu evaluated that the phased development structure, rather than a one-time construction of 1.2GW, reduces the production capacity burden on GS Construction while securing a stable order backlog over the long term, which is a positive aspect.
He also noted, "Upon completion of the GS Enima sale, we estimate that 900 billion won in annual revenue and 120 billion won in operating profit will be excluded from consolidated results. We believe that the 2027 revenue from the Donghae AIDC will replace the revenue gap and significantly offset the decline in operating profit."
Ryu projected that if additional phases of construction follow, the profit contribution from the AIDC is expected to gradually increase. He added, "Considering the improvement in financial structure and reduction in financial costs due to the sale of GS Enima, the pre-tax profit gap will be further minimized."
However, he cautioned that as data centers emerge as a key growth momentum within the construction sector, the increasing visibility of the Donghae AIDC has led to a reduction in the valuation discount rate. He raised the target price-to-book ratio (PBR) from 0.60 to 0.85, presenting it as a preferred stock within the sector.
* This article has been translated by AI.
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