Samsung Engineering, Hyundai Engineering Stand out
The author is an analyst of NH Investment & Securities. He can be reached at minjae.lee@nhqv.com. -- Ed.
For construction players, the size of sales is determined by the number of infrastructure/building/plant design personnel. While the number of plant domain workforce has been shrinking at most companies since 2015, Samsung Engineering and Hyundai Engineering are each retaining more than 2,000 plant division members, a factor which should differentiate them from competitors once the plant construction market turns to boom.
Plant division design labor force numbers, by company
Looking at the business reports of seven Korean construction players (Hyundai E&C, Hyundai Engineering, Samsung Engineering, GS E&C, DL E&C, Daewoo E&C, and SK E&C), the combined labor force number at their plant divisions totaled 11,094 in 2020, down 21% from 2015. Of particular note, GS E&C, DL E&C, and SK E&C’s plant division manpower has declined by nearly 40%, with many personnel transferring to these firm’s construction or new business domains, or moving out to other engineering companies. In contrast, Hyundai Engineering (including Engineering Center, the company’s specialized organization for plant design) and Samsung Engineering are each retaining around 2,100 plant division personnel.
Having recorded large-scale plant business losses over the past few years, construction firms have been downsizing their plant-related operations. That said, having a sufficient number of plant design personnel is still important for sustaining the competitiveness of plant domains. After totaling W8.9bn over 2012~2015, average new orders per plant division worker at the seven above-listed construction players decreased 48% to W4.6bn over 2017~2020. The new order amount per plant division member declined at almost all of the firms, with the exception of Samsung Engineering. As of 2020, the figure came to W8.6bn for Samsung Engineering, 6.2bn for Hyundai Engineering, W5.6bn each for Hyundai E&C and Daewoo E&C, W2.8bn for DL E&C, W2.2bn for GS E&C, and W1.4bn for SK E&C. Given the sizes of Samsung Engineering and Hyundai Engineering’s plant division labor forces, once the plant market turns to boom, they should be well capable of actively responding to market needs.
Key construction/real estate news from last week
Hyundai Engineering is proceeding with an initial public offering. As Hyundai Motor Group (HMG)’s subsidiary focuses on plant/infrastructure construction, Hyundai Engineering has grown in scale by acquiring both Halla Engineering and Hyundai Heavy Industries Engineering Center in the 1980s. The largest shareholder is Hyundai E&C (38.6% stake), with HMG chair Chung Euisun being the second-largest shareholder (11.7% stake). As of 2020, Hyundai Engineering stood as the seventh-largest player in terms of domestic construction contract amount, showing consolidated sales of W7.2tn and OP of W258.7bn last year. Its current market capitalization based on OTC transactions stands at W8.0tn. With the lead manager for the IPO to be selected early next month, the listing is to take place within this year.