This file photo showed a collapsed section of parking lots of an apartment building under construction in Incheon, west of Seoul. (Yonhap)
SEOUL, July 6 (Korea Bizwire) — Shares in GS Engineering & Construction Corp. tumbled nearly 20 percent Thursday morning, one day after the government blamed the major builder for the April collapse of an apartment parking lot.
The land ministry announced Wednesday that GS Engineering & Construction’s poor management from design to quality control was responsible for the April 29 collapse of an underground parking lot’s roof at an apartment complex being built in Incheon, 27 kilometers west of Seoul.
GS Engineering & Construction said it will rebuild the 17 apartments, which some analysts said may cost up to 1 trillion won (US$766 million), given additional financial costs for compensation to prospective residents and an increase of construction costs.
Shares in GS Engineering & Construction closed at 14,520 won ($11.13) on the Seoul bourse Thursday, down 19.47 percent from the previous day’s close and far underperforming the broader KOSPI’s 0.88 percent drop.
A day earlier, GS Engineering & Construction shares fell more than 4 percent from the previous session.
Following the government announcement, local securities companies cut their investment ratings on the construction arm of GS Group and its target prices.
Samsung Securities Co. lowered its estimate for GS Engineering & Construction’s 2023 operating profit to 401 billion won, down around 40 percent from its earlier forecast.
The brokerage house also reduced the construction company’s target share price by 27 percent to 22,000 won.
“It seems inevitable for GS Engineering & Construction to set aside a large charge for the reconstruction,” Samsung Securities analyst Baek Jae-seung said.
“There is a high possibility that part or all of the expected allowance may be reflected in its earnings reports for the second quarter or the third quarter.”
In the first quarter of this year, GS Engineering & Construction’s operating profit stood at 158.9 billion won, up 3.7 percent from a year earlier.
Another brokerage house Korea Investment & Securities Co. downgraded its investment rating of GS Engineering & Construction to “neutral” from “buy,” citing its estimated loss from a decision to rebuild the apartments.
The securities company thus cut its projection of GS Engineering & Construction’s operating profit for all of this year by 53 percent.
(Yonhap)
