K-construction equipment makers eye major orders as US-Iran ceasefire opens $58B rebuilding market

South Korean construction equipment makers are expected to benefit from the US-Iran ceasefire deal, as demand for heavy machinery is set to surge during the reconstruction of infrastructure destroyed in the war. HD Construction Equipment, which has built a strong presence in the Middle East, is particularly well-positioned to secure large-scale orders.

According to industry sources on Monday, Donald Trump announced Sunday (local time) that a ceasefire agreement with Iran had been reached, fueling expectations of a major Middle East reconstruction drive.

Trump said the Strait of Hormuz would open once the formal agreement is signed Friday. Post-war reconstruction projects in the region are expected to accelerate once the waterway reopens. Norwegian energy consultancy Rystad Energy has estimated that rebuilding energy infrastructure across the Middle East could cost up to $58 billion (about 88 trillion won).

HD Construction Equipment is widely seen as the Korean company best placed to benefit when reconstruction gets underway. The company has long cultivated the Middle East market, drawn by the region's consistently active infrastructure development relative to other areas.

HD Construction Equipment has pursued sustained marketing efforts in the Middle East and secured large-scale orders as a result. Last year, it exported 333 units of construction equipment to Saudi Arabia, the UAE and Qatar. That track record pushed its market share in the Middle East and Africa to 13.9 percent as of the first quarter of this year — up roughly 2 percentage points from the same period a year earlier.

An HD Construction Equipment official stressed at the company's first-quarter earnings briefing that both its brands — Hyundai (HYUNDAI) and Develon (DEVELON) — have a clear presence in the Middle East, and that the company is ready to respond when post-war reconstruction demand materializes.

Compact equipment maker Doosan Bobcat is also expected to benefit. The company relies on North America for roughly 70 percent of its total sales but has recently stepped up efforts to expand in the Middle East and Africa as a prolonged downturn in the North American construction market weighs on results. Last month, Doosan Bobcat hosted a demo day in the Czech Republic, inviting customers from the Middle East and Africa as well as Europe to preview new products.

A wave of Middle East orders would send earnings at Korean construction equipment makers sharply higher. HD Construction Equipment, which derives a relatively large share of its sales from the region, stands to see the biggest gains. The Middle East and Africa accounted for about 17 percent of HD Construction Equipment's construction machinery sales in the first quarter of this year — the highest share among its eight operating regions.

HD Construction Equipment and Doosan Bobcat posted operating profits of 190.7 billion won and 207 billion won, respectively, in the first quarter of this year, up 88.3 percent and 3.5 percent from the same period last year. Should tailwinds such as the ceasefire continue, securities analysts project their full-year operating profits could reach 682.1 billion won and 759 billion won, respectively — gains of 299.1 percent and 10.6 percent from the prior year.