Kiwoom Securities reaffirmed its "Buy" rating on GS Engineering & Construction (KOSPI: 006360) on July 10th, maintaining a target price of 47,000 won. That implies upside of 60.7% from the stock's closing price of 29,250 won on July 9th.
The brokerage projects the construction group's second-quarter operating profit at 132.9 billion won, down 18% year on year, broadly in line with the market consensus of 126.9 billion won.
The Donghae data centre: a potential game-changer
The centrepiece of the bull case is an AI data centre project in Donghae, a city on Korea's eastern seaboard. On June 29th, the South Korean government announced three flagship "mega-projects" for national development; among them was a plan by GS Group — GS E&C's parent conglomerate — to build 2.4 gigawatts of AI data centre capacity. In the first phase, GS Group intends to construct a 1.2GW facility in Donghae, with total project costs estimated at over 10 trillion won (roughly $7.2 billion).
The target completion date is 2028. Kiwoom Securities argues that strong government backing should accelerate the permitting process, making it plausible that a contract could be awarded and construction begun within the year. GS Group has already secured the necessary land, and plans to source electricity from GS Donghae Power's 1.2GW coal-fired plant.
Risks remain, however. No tenant has yet been confirmed for the data centre, and it is unclear whether GS E&C has the construction capacity to deliver the entire 1.2GW project on its own. Kiwoom estimates the project could add 1.6 trillion won to GS E&C's revenue in 2027.
Housing: weakness now, recovery later
The building and residential division has been dragged down in the first half of the year by a decline in new apartment pre-sales — a critical revenue indicator in Korea's construction industry, where buyers commit to purchases before completion. Even so, GS E&C has already pre-sold 11,000 units in the first half, representing 77% of its full-year target. A recovery in the second half is expected. The company also has three smaller data centre projects (totalling 130 megawatts) scheduled to begin construction in the latter half of the year.
Other businesses
In the plant engineering division, the Fadhili gas plant in Saudi Arabia is expected to contribute more meaningfully to revenues in the second half. Meanwhile, the sale of GS Inima — the group's water treatment subsidiary — to Abu Dhabi's TAQA is proceeding as planned, with the exception of Algerian assets, which will be retained.
Valuation
Kiwoom Securities forecasts full-year 2026 revenue of 11.068 trillion won and operating profit of 435 billion won, implying an operating margin of 3.9%, up from 3.5% the previous year. The brokerage notes that even stripping out any benefit from the data centre opportunity, GS E&C trades at just 0.5 times its 2026 book value — a level it characterises as undervalued.