"Have They Hit Bottom?" Construction-Materials and Cement Stocks Seen Rebounding Next Year on Housing and Infrastructure Investment

[Financial News] Construction-materials and cement stocks have struggled to rebound amid a prolonged housing-market slowdown and rising raw-material and freight costs. However, expectations are growing that the construction industry's downstream sectors will recover as the government's housing-supply expansion coincides with increased investment in industrial infrastructure. Securities analysts are focusing on the possibility that earnings improvements will gain momentum next year as construction investment expands.
According to the Korea Exchange (KRX) on the 23rd, LX Hausys closed at 32,350 won the previous day, down 8.62% from 35,400 won at the end of last month. Over the same period, KCC rose 0.53%, from 473,500 won to 476,000 won. Compared with the 4.30% gain in the KOSPI Composite Index during the period, the stocks showed lackluster performance. 
Cement stocks have also continued to decline. During the same period, Sampyo Cement (-16.29%), Asia Cement (-5.70%), and Hanil Cement (-4.84) all saw their share prices fall. 
The weak performance is attributed to the prolonged housing-market slowdown, as well as surging raw-material prices and freight-rate volatility stemming from the war in the Middle East. 
However, securities analysts expect construction-materials and cement stocks to recover over the long term as housing supply expands under measures such as the 8/13 housing-supply package. With expectations for the construction industry rising alongside the expansion of AI data centers and regional construction investment, analysts say that increased investment in industrial infrastructure and surrounding-city development could also benefit downstream sectors such as construction materials and cement. 
Sunmi Kim, an analyst at Shinhan Investment & Securities, said, "The expansion of domestic construction investment is expected to drive a turnaround across the construction industry," adding, "In particular, Asia Cement is expected to see an earnings turnaround next year, supported by increased housing starts and industrial infrastructure investment." She continued, "It is expected to be the biggest beneficiary of the construction-investment expansion cycle," and advised, "Investors should continue to increase their exposure in preparation for next year." 
Expectations are also high for KCC, which is stepping up shareholder returns as its earnings improve. NH Investment & Securities raised its target price for KCC the previous day from 680,000 won to 730,000 won. 
Lee Eun-sang, an analyst at NH Investment & Securities, said, "Improved profitability in the silicone business and the continued expansion of shareholder returns are positive," adding, "Under the plan announced last March, KCC will cancel 77% of its treasury shares by September next year. This represents 13% of the total shares outstanding." 
LX Hausys is also receiving a positive outlook as its sales from business-to-business and consumer transactions (B2C) in construction materials increase.
Shin Dong-hyun, an analyst at Hyundai Motor Securities, said, "The company is continuously strengthening its B2C sales and distribution capabilities while expanding its portfolio of high-value-added products," adding, "Investors should consider the gradual recovery in industry conditions and earnings, as well as the possibility of resuming dividend payments following a return to profitability."  
[email protected] Lee Joo-mi Reporter