Construction stocks entered a sector-specific rally on the morning of the 22nd, diverging from the broader market weakness. The buying momentum was triggered by Samsung E&A's third-quarter results significantly exceeding expectations.
At 11:00 a.m. on the Korea Exchange, the KRX Construction Index rose 59.11 points (5.03%) from the previous trading day to 1234.55, leading the sector indices in terms of gain. The intraday high reached 1246.91, up 71.47 points (6.08%).
Samsung E&A is driving the index higher, trading at 55,600 won, up 7,900 won (16.56%) from the previous day. DL E&C and LS Marine Solutions are showing gains in the 3rd% range, Hyundai Engineering & Construction and GS E&C in the 2nd% range, and HDC in the 1st% range.
In an intraday report, Kim Seok-hwan, a researcher at Mirae Asset Securities, stated that "expectations for earnings improvement in the construction industry have spread," adding that "with the confirmation of improved profitability in overseas infrastructure projects, expectations surrounding profit growth have risen."
Samsung E&A provisionally disclosed third-quarter consolidated revenue of 2.9105 trillion won and operating profit of 500.6 billion won. Revenue increased by 45.8% and operating profit by 183.6% year-on-year, surpassing the consensus estimates (revenue of 2.77 trillion won, operating profit of 252 billion won) compiled by FnGuide.
Subsequent news regarding shareholder returns further boosted the stock price. Samsung E&A disclosed that its board of directors decided to acquire 780 billion won worth of treasury shares through on-market purchases from the 23rd until January 22 next year, canceling 690 billion won worth based on the previous day's closing price and utilizing the remainder for employee bonuses and other purposes.
Samsung E&A explained that profitability improved due to increased revenue contribution from large-scale chemical and advanced industry projects, as well as project cost management and technology-based business innovation. The order backlog stood at 27.2 trillion won as of the end of the third quarter, equivalent to three years' worth of last year's revenue (9 trillion won).
Samsung E&A also raised its own annual performance targets for this year, fueling market expectations. The revised annual outlook disclosed on the same day showed revenue of 11 trillion won and operating profit of 1.4 trillion won, representing increases of 10.0% and 75.0%, respectively, compared to the beginning of the year. The order forecast surged by 58.3% to 19 trillion won.
Some in the market also cited government messages on housing supply as a background for the strength in the construction sector on the day. With the industry's profitability held back by the cooling phase of the housing market, it is seen that a positive factor emerged to ease investor sentiment.
Hong Ji-sun, Minister of Land, Infrastructure and Transport, stated in a post on X (formerly Twitter) the previous day: "The fundamental solution is supply. The biggest cause of rising monthly and semi-annual rental prices is the decrease in move-in volume due to sluggish starts." She added, "Approximately 100,000 public housing units in the metropolitan area will be occupied by the end of next year. We will also expand 20-year long-term private rentals and universal public rentals to broaden options for people to live with peace of mind for a long time."
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