Kiwoom Securities maintained its buy recommendation and target price of 43,000 won on GS Engineering & Construction (KOSPI: 006360) on the 8th, forecasting that the company's third-quarter operating profit will modestly exceed market consensus.
Analyst Shin Dae-hyun estimated GS E&C's third-quarter 2026 operating profit at 123.7 billion won, roughly 4.5% above the market consensus of 118.4 billion won. That said, the figure still represents a 16.7% decline year on year. Revenue for the same period is projected at 2.8 trillion won, down 12.9% from a year earlier.
Housing pre-sales drive near-term recovery
The primary engine of third-quarter improvement is a sharp pick-up in residential pre-sales. GS E&C has already pre-sold approximately 13,700 units on a cumulative basis through the third quarter of 2026, reaching 96% of its full-year guidance of 14,320 units. Kiwoom projects annual pre-sales of around 17,000 units, which would comfortably surpass the company's own target.
The rebound is striking in context. Pre-sales collapsed from peaks of 26,880 units in 2021 and 28,001 units in 2022 before bottoming out at 8,850 units in 2025, when South Korea's housing market was at its most depressed. The recovery suggests GS E&C is emerging from a two-year slump caused by a prolonged downturn in residential property.
Plant division set to normalise
The engineering and plant division is also expected to contribute meaningfully in the second half. Remaining work on the Fadhili Gas project in Saudi Arabia should generate incremental revenue, and the business should recover from a one-off gross profit loss of around 61.2 billion won that weighed on second-quarter results. On the order front, a Turkish sustainable aviation fuel (SAF) plant worth approximately $500 million and a railway contract for "The Wave Stage 2" infrastructure project worth 250 billion won are both expected to be awarded in the fourth quarter.
Data centres: the valuation re-rating story
The more consequential question for medium-term investors is whether GS E&C can secure a string of data centre contracts large enough to warrant a meaningful re-rating of the shares.
The company — including its subsidiary Zi C&A — is widely regarded as having the deepest data centre construction expertise among South Korean contractors. Kiwoom highlights the East Sea AI Data Centre project being developed by GS Group, with the first phase (100 megawatts) scheduled to break ground in November, potentially expanding to 200MW next year. The full project spans four sites totalling 1,200MW (200MW, 200MW, 600MW and 200MW respectively) and is targeted for completion by 2028.
Beyond that flagship project, GS E&C has a pipeline of additional data centre opportunities including developments in Ilsan Siksa (80MW), Busan Jangnim (40MW), a facility for LG U+ in Paju, and other sites in the greater Seoul metropolitan area.
Valuation: cheap, but with caveats
Kiwoom's 43,000-won target price is derived by applying a price-to-book ratio of 0.73 times — the average during the peak residential revenue years of 2021 — to its estimated 2026 book value per share of 57,014 won. At the 7 October closing price of 32,850 won, the shares trade at roughly 0.58 times book, above the historic trough range of 0.2–0.4 times but already reflecting some optimism about data centre prospects.
Investors should, however, note a significant divergence in profit estimates. Kiwoom's forecast for 2026 net profit attributable to controlling shareholders stands at 77.1 billion won — a striking 47.6% below the market consensus of 147.1 billion won. The gap stems from the complex relationship between pre-tax and post-tax earnings, including non-recurring tax items and the treatment of minority interests. The discrepancy is even wider for 2027: Kiwoom projects 171.7 billion won against a consensus of 367.4 billion won, less than half the market's expectation.
Annual operating profit is on a gradual upward path after a painful few years. GS E&C's profitability was severely damaged in 2022–23 by losses tied to troubled real-estate project finance (PF) deals and surging construction costs. Operating profit recovered to 43.8 billion won in 2025; Kiwoom forecasts 40.9 billion won (operating margin of 3.7%) for 2026, rising to 52.1 billion won (4.3%) in 2027. Those margins remain well below the 2021–22 peak, and execution risk — particularly in housing and the broader construction market — remains considerable.
The shares are currently 23.8% below their 52-week high of 43,100 won. The pace at which data centre contracts translate into signed orders and recognised revenue is likely to be the single most important determinant of whether the stock can reclaim that ground.