DL E&C posts sharp profit recovery in H1, drawing securities industry attention

DL E&C is drawing attention from the securities industry after posting a marked improvement in profitability in the first half of this year. Brokerages have highlighted the company's strengthened earnings capacity and solid financial structure as key competitive advantages, while interest continues to grow in its prospects for expanding plant and data center orders and advancing future growth businesses such as small modular reactors.

DL E&C recorded consolidated sales of 3.53 trillion won ($2.55 billion) and operating profit of 316.8 billion won in the first half of this year, according to industry data released Friday. Operating profit rose 53 percent from the same period a year earlier. First-quarter operating profit surged 94.3 percent year-on-year, and second-quarter operating profit climbed 26.3 percent to 159.4 billion won, continuing the profitability recovery trend.

The improvement stands out as a differentiating trait for DL E&C amid a broader slump in the construction sector. Securities firms have responded positively to the shift. Samsung Securities noted that DL E&C's second-quarter operating profit beat the market consensus by 28.8 percent, attributing the strong results to improved profitability across major business segments including housing, civil engineering and plant work.

In a report published after the second-quarter earnings release, Samsung Securities offered an upbeat outlook on future profitability. It projected that stable earnings generation would continue through the second half, as the revenue share from low-margin projects declines and higher-margin projects account for a growing portion of the mix.

LS Securities attributed DL E&C's strong second-quarter performance primarily to the continuation of high margins in the housing segment. It noted that housing margins remained above 20 percent for the second consecutive quarter, and that the plant segment also sustained solid profitability with limited impact from one-off factors.

Beyond profitability, the securities industry has also taken note of DL E&C's robust financial structure.

As of the end of the second quarter, DL E&C held net cash of approximately 1.2 trillion won and a debt-to-equity ratio of 86.4 percent. Since its spinoff in 2021, the company has posted positive operating cash flow every year, maintaining a stable cash-generation track record.

Shinhan Investment also cited strong earnings, net cash of more than 1 trillion won, and expectations for expanded shareholder returns as relative strengths for DL E&C, arguing that these factors could serve as a meaningful buffer against heightened market volatility.

The company's cash-generation capacity has translated into shareholder returns as well. In July, DL E&C entered into a trust agreement to buy back 55.5 billion won worth of its own shares. The buyback is part of a three-year shareholder return policy covering 2024 to 2026, under which the company is committed to paying a cash dividend equal to 10 percent of consolidated net profit and repurchasing shares equivalent to 15 percent.

The industry is also watching DL E&C's potential to expand new orders in plant and data center work. DL E&C's consolidated new orders in the first half of this year totaled 5.24 trillion won. According to IBK Investment Securities, new orders in the first half rose 110.7 percent year-on-year, and the order backlog grew to 28.9 trillion won. In the second half, the company is pursuing approximately 2.5 trillion won in domestic and overseas plant orders and around 2 trillion won in data center orders, with a preliminary plant order pipeline of approximately 10 trillion won.

IBK Investment Securities forecast that the combination of a housing profitability recovery and expanding plant and data center orders would strengthen DL E&C's revenue base from 2027 onward. Hyundai Motor Securities offered a positive assessment as well, noting that DL E&C's standard design work for small modular reactors — conducted in partnership with global SMR developer X-energy — is progressing smoothly, and that requests to join standard design projects are coming in from other SMR developers.

DL E&C has signed a standard design contract with X-energy as it seeks to enter the fourth-generation SMR market. In the data center segment, its subsidiary DL Construction secured a 126.8 billion won AI data center project in Bucheon in the first half, while the company is exploring further opportunities in large-scale projects across the Greater Seoul area and the Chungcheong region.

"Building on our solid financial strength, we will continue to select high-quality projects to further improve profitability, while accelerating results in future growth businesses such as plant, SMR and data centers to firmly establish a foundation for sustainable growth," a DL E&C official said.

Meanwhile, DL E&C has set safety as its top management priority this year, conducting a comprehensive review of its on-site safety management systems and working to build a safety ecosystem that extends to partner companies.