HD Construction Equipment Co., Ltd. upgraded to 'A+' on merger benefits; engine business proves a cash cow [fn Market Watch]

[Financial News] Korea Ratings said on the 5th that it had upgraded HD Construction Equipment Co., Ltd.’s credit rating on its unsecured bonds by one notch, from 'A' to 'A+'. The rating outlook was changed from 'Positive' to 'Stable'. It also assigned a new 'A2+' rating to the company’s commercial paper (CP).
The upgrade followed improvements in the company’s business structure and financial strength after it absorbed HD Hyundai Infracore this past January. Korea Ratings cited enhanced business stability resulting from the merger, an expanded earnings base through the addition of the engine business, and improved financial stability through increased capital and earnings as the main factors behind the upgrade.
The benefits of the merger are also evident in the company’s global market standing. HD Construction Equipment Co., Ltd.’s ranking in the global construction equipment market rose from around 25th to 15th. Its market share increased to 2.3%. It secured a top-tier market position in South Korea and diversified its sales regions to include Europe, the United States, China and emerging markets.
Kim Hyun-jun, a researcher at Korea Ratings, said, "We believe the merger has strengthened the company’s business scale and market position, and improved business stability by expanding its regional portfolio and product lineup." 
HD Construction Equipment Co., Ltd. reported consolidated year-to-date revenue through the third quarter of this year of 6.8305 trillion won and operating profit of 597.3 billion won. Its operating margin was 8.7%, far above the two companies’ pre-merger operating margins in the 5% range, based on a simple combined calculation for 2025.
Kim said, "Considering the increased capital and stronger earnings-generating capacity following the merger, the company should also be able to handle the burden of future capital expenditures." He estimated that the borrowings-to-total-assets ratio would decline from around 20% at the end of this year to approximately 16% in 2028. He also projected that the consolidated operating margin would remain in the 7% to 8% range from 2026 onward.
However, volatility in the construction equipment business remains a risk factor. In the third quarter of this year, performance in the construction equipment division weakened somewhat due to factors including the seasonal off-season, logistics disruptions caused by the prolonged war in the Middle East, and a stronger won. 

[email protected] Kim Hyun-jung Reporter