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Annual OP poised to rise for the first time since spin-off

2025 outlook: OP to expand for the first time since spin-off

For 2025, we forecast DL E&C to post consolidated revenue of W7.89tr (-5.2% YoY) and operating profit of W483.9bn (+78.6% YoY). Notably, the builder appears poised to achieve annual operating profit growth for the first time since its 2021 spin-off. While housing revenue remains under pressure due to lingering impact of declining housing starts, we forecast plant revenue to expand 35% YoY thanks to progress in key projects (S-Oil’s Shaheen project, Baltic Chemical Complex, etc.). Operating profit is likely to rise sharply due to: 1) conservative accounting standards applied to DL Construction in 2024; and 2) housing cost ratio improvements in 2025. For DL E&C (standalone), the improvement in cost ratio should be supported by the W31.8bn increase in the LH project contract value for 2025 (partially reflected in 1Q25; remainder to be reflected throughout 2025).

Strong housing starts in 2025

In 1Q25, DL E&C’s housing starts (consolidated) totaled around 7,800 units, already achieving 65% of its full-year guidance (12,000 units). Notably, DL Construction has already met its full-year housing presale target of 4,000 units, and there is potential for further upside depending on the performance of public projects. Against this backdrop, we expect housing revenue―which has declined since 2022 amid a sharp fall in housing starts―to rebound in 2026.

Lift TP to W61,000 and maintain Buy; still our second-most preferred pick

We maintain our Buy rating on DL E&C and retain the stock as our second-most preferred pick in the construction sector. We lift our target price to W61,000 (from W53,000) as we raised our target P/B from 0.4x to 0.5x (aligning with the target P/B applied to housing-focused builders). Key investment points for DL E&C include its sound financials, likely improvement in housing cost ratio from 2Q25, and W34bn share buyback planned for 2H25. Valuation momentum could also be supported by visible progress in the nuclear segment, including co-development projects with US small modular reactor (SMR) manufacturer X-energy (in which DL E&C holds a stake).