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2Q25 results disappoint, but investment points remain intact

2Q25 review: OP misses consensus by 18%

For 2Q25, Daewoo E&C reported consolidated revenue of W2.27tr (-19.4% YoY) and operating profit of W82.2bn (-21.6% YoY; 18% below the consensus of W100.6bn). Revenue continued to decline due to sluggish order intake in previous quarters. Although the number of unsold homes declined by around 900 QoQ, W50bn in bad debt expenses related to unsold homes were booked under SG&A. The housing cost ratio improved QoQ and YoY to 88.1%, helped by favorable mix effects (arising from the completion of low-margin projects) and project completion gains. Regarding consolidated subsidiaries, W60bn in land sale gains at THT Development (Vietnam) helped improve margins. On the non-operating front, the firm booked W60bn in FX-related valuation losses and W30bn in provisions, causing both pretax profit and net profit attributable to owners of the parent to swing to a loss.

2Q25 results disappoint, but key investment points remain intact

Despite the soft 2Q25 results, we believe the key investment points for Daewoo E&C ―i.e., recovering overseas revenue and nuclear project momentum―remain intact. While there are concerns about a potential revenue gap after the completion of the Nigeria LNG project in 2H26, new overseas projects―including the Turkmenistan mineral fertilizer plant (W940bn) and Mozambique LNG Area 1 project (W820bn), both expected to break ground within 2025―should help fill the void. In 1H25, overseas orders amounted to W1.1tr, already exceeding the 2024 total (W0.6tr) but representing only 26% of the firm’s full-year guidance (W4.4tr). However, if the firm signs an EPC contract for the Czech nuclear project with Korea Hydro & Nuclear Power (KHNP) in 3Q25, it could hit its full-year target ahead of schedule.

In 1H25, housing presales totaled 6,415 units, representing 34% of the company’s full-year guidance. Notably, the company raised its full-year presales guidance for the second consecutive quarter.

Maintain Buy and TP of W5,600; stock to watch

We maintain our Buy rating on Daewoo E&C with a target price of W5,600 (based on a target P/B of 0.5x). The company remains one of our stocks to watch in the sector. We expect the firm’s recovering overseas order intake and participation in nuclear power plant projects in the Czech Republic and Poland (as part of the Team Korea consortium) to support a valuation re-rating. In Vietnam, beyond the ongoing Hanoi Starlake project, the firm is exploring opportunities for additional projects through joint ventures with local developers.