现代工程建设公司（000720 KS）买入评估核电业务价值

Issuer of report:The Hongkong and ShanghaiBanking Corporation Limited, SeoulSecurities BranchView HSBC Global Research at:https://www.research.hsbc.comListen to our insightsHSBC Global Research PodcastsMAINTAIN BUYTARGET PRICE(KRW)93,000SHARE PRICE(KRW)65,700(as of02 Jun 2025)MARKET DATAMarket cap(KRWb)Market cap (USDm)3m ADTV (USDm)FINANCIALS AND RATIOS(KRW)Year toHSBC EPSHSBC EPS (prev)Change (%)Consensus EPSPE (x)Dividend yield (%)EV/EBITDA (x)ROE (%)52-WEEK PRICE(KRW)Source:LSEGIBES, HSBC estimatesYushin Park*Analyst, Korea Industrials & UtilitiesThe Hongkong and Shanghai Banking CorporationLimited, Seoul Securities Branchyushin.park@kr.hsbc.com+82 2 3706 8756* Employed by a non-US affiliate of HSBC Securities (USA) Inc, and isnot registered/ qualified pursuant to FINRA regulationsEquitiesConstruction & EngineeringKorea06/24Target price: 93000.00High: 66900.00 Low: 24100.00 Current: 65700.00 Find out morePREVIOUS TARGET(KRW)64,000UPSIDE/DOWNSIDE+41.6%7,316Free float5,290BBG000720 KS32RIC000720.KS12/2024a12/2025e12/2026e12/2027e-1500.425871.427641.959045.81-1500.425871.427641.959045.810.00.00.04111.045430.146697.047023.92nm11.28.60.91.21.2nm3.72.2-2.17.99.615000.0062500.00110000.0012/2406/25 ◆◆◆ 65%0.07.31.21.310.3 2Financial statementsYear to12/2024a12/2025e12/2026eProfit & loss summary(KRWb)Revenue32,67030,71431,649EBITDA-1,0421,2771,673Depreciation & amortisation-221-258-282Operating profit/EBIT-1,2631,0181,391Net interest11699108PBT-9861,1751,578HSBC PBT-9861,1751,578Taxation219-282-379Netprofit-169660859HSBC net profit-169660859Cash flow summary(KRWb)Cash flow from operations-119-5351,294Capex-179-200-200Cash flow from investment21218-155Dividends-67-90-90Change in netdebt17593-1,053FCF equity-298-7351,094Balance sheet summary(KRWb)Intangible fixed assets751749747Tangible fixed assets1,2891,2331,153Current assets21,09021,14422,702Cash & others5,1304,5385,591Total assets26,99526,93228,436Operating liabilities13,43512,60412,982Gross debt3,3163,3163,316Net debt-1,815-1,222-2,275Shareholders' funds8,0258,5959,365Invested capital4,5645,9846,029Ratio, growth and per share analysisYear to12/2024a12/2025e12/2026eY-o-y % changeRevenue10.2-6.03.0EBITDA-206.231.1Operating profit-260.936.6PBT-204.934.4HSBC EPS-131.530.2Ratios (%)Revenue/IC (x)6.25.85.3ROIC-18.414.717.6ROE-2.17.99.6ROA-3.72.73.7EBITDA margin-3.24.25.3Operating profit margin-3.93.34.4EBITDA/net interest (x)9.0Netdebt/equity-18.8-11.7-19.6Net debt/EBITDA (x)1.7-1.0-1.4CF from operations/net debtPer share data(KRW)EPS Rep (diluted)-1500.425871.427641.95HSBC EPS (diluted)-1500.425871.427641.95DPS600.00800.00800.00Book value71393.8076465.2383307.18Financials & valuation:Hyundai E&C Nuclear division revenue forecastsand valuationsWelookat historical cases of nuclear power plant revenue recognition to forecast the salestrendsfor Hyundai E&C’s nuclear revenue going forward.Exhibit1:Revenuerecognitionfrom UAEBaraka (Hyundai E&C + Samsung C&T)Exhibit2:Hyundai E&C–Korea domesticNPP revenue recognition trendSource: Company data,HSBCSource: Company data,HSBCWhile there could be some difference in revenue recognition given the expansion of work-scope, we still think this would provide investors withapotential sense of how thenuclearrevenue andearnings woulddevelopunder different scenarios.We also note that the expansionof work-scope towards EPC(engineering, procurement, and construction)should also enablethe company to have more control over theprojectand resultin higher margins.Exhibit3:Hyundai E&C’s work-scope for nuclear projectsEngineeringProcurementTeam Korea(NPP)Nuclear Island(c30%)Turbine IslandBOPWestinghouse(NPP)Nuclear Island(c50~55%)Turbine IslandBOPHoltec(SMR)Nuclear Island(c60~65%)Turbine IslandBOPSource:Companydata, HSBCExhibit4:Nuclear division value underdifferent scenarios(KRWtrn)BaseBullNPV-10 year FCF1.812.95Terminal value3.006.16PV ofterminal value1.513.10Fair value3.326.05Source:Bloomberg, HSBCestimates* Key assumptions:terminalgrowthrate of 1%, RFR of 3.75%,risk premium of 4.75%, 5-year adjusted beta of 0.962,interest rate of 3.2%, and WACC of 7.1%02004006008001,0001,2001,400201020122014201620182020HDECSSCT(KRWbn)02040608010012020072008 2009 2010 2011 2012 2013 2014Shingori 3 & 4(KRWbn) Construction 3Bear0.871.510.761.63 In our base casescenario, we assume Hyundai E&C willbe conductingtwooverseas nuclearprojects andtwoSMR projects in 2030. We assumetheadditional overseas NPP projectstobegin in early 2030 which would mean recognition ofthreeoverseas NPP in 2035(one projectnear final stage).Additionally,we useanOPM assumption of 10% for our base case scenarioas the company is known to have recorded low-teens GPM for UAE’sBarakah project.Exhibit5:Base case scenario–two overseas NPPs and SMRs in 2030eSource:HSBCestimatesExhibit6:Hyundai E&C–nuclear revenue forecasts (Base case)(KRWtrn)2025e2026e2027e2028e2029e2030e2031e2032e2033e2034e2035eRevenue0.100.741.312.082.873.724.985.305.455.004.65OP0.010.070.130.210.290.370.500.530.540.500.4