KOSPIMachinery267270

HD Construction Equipment

₩118,000▼ 1.34%2026-10-02 close

Market Cap

₩5.6T

Turnover

₩41B

Volume

350,000 shares

Shares out.

47.5M

PER

12.5×

PBR

1.4×

EPS

₩11,212

Dividend Yield

0.36%

PER, EPS, PBR and BPS are calculated in-house from the last 4 quarters (2025Q3–2026Q2) · Dividend yield is based on ₩500 per share · Prices as of the 2026-10-02 close

Report overview

Double-Digit Margin in Year One of Merger, Engines as the New Axis

The merged entity created by absorbing HD Hyundai Infracore lifted both scale and margin in the first half of 2026, while defense and power-generation engines are emerging as a second growth axis.

1
The company absorbed HD Hyundai Infracore on January 1, 2026, and the ownership chain runs from HD Hyundai through intermediate holding company HD Hyundai Site Solution, which holds 35.8% after the merger.
2
In the second quarter of 2026 the company posted revenue of KRW 2.4342 trillion and operating profit of KRW 248.9 billion, a 10.2% operating margin and its first double-digit quarterly margin since the merged entity launched (company release, July 29, 2026).
3
On the pre-merger standalone audited numbers the operating margin had slid from 6.7% in 2023 to 4.5% in 2025, so the durability of the first-half 2026 margin level is the key item to verify.
4
Management guided to 2026 revenue of KRW 8.7-9.0 trillion with a 5-7% operating margin, and first-half cumulative revenue reached KRW 4.7390 trillion with operating profit of KRW 439.6 billion (company conference calls, February and July 2026).
5
Centered on the Gunsan new plant, whose expansion is due to complete at the end of October, the company is doubling K2 tank defense engine capacity and building a 1,250-unit-per-year power generation engine line (Asia Today, August 18, 2026).

Business structure

HD Construction Equipment was created in 2017 through a spin-off of Hyundai Heavy Industries' construction equipment division, and on January 1, 2026 it absorbed HD Hyundai Infracore to launch as a merged entity.

The ownership chain runs from HD Hyundai through intermediate holding company HD Hyundai Site Solution to HD Construction Equipment, with Site Solution holding 35.8% after the merger.

The business splits into a construction equipment division covering excavators, wheel loaders, articulated dump trucks and forklifts, and an engine division covering industrial, defense, power generation and vehicle engines, with aftermarket parts and service being cultivated as a third axis.

Per the company release of July 29, 2026, second-quarter 2026 construction equipment revenue was KRW 2.0182 trillion and engine revenue was KRW 386.1 billion, with divisional operating margins of 9.9% and 15.3% respectively, so engine profitability ran higher.

The company kept a dual-brand structure maintaining HYUNDAI and DEVELON separately, and has laid out a plan to raise in-house engine adoption within each brand to 85% and 90% (Financial News, February 4, 2026).

Production sites span Ulsan, Incheon and Gunsan domestically plus India, China, Brazil and Norway abroad, with the parent and 25 subsidiaries handling manufacturing, marketing and sales.

Demand is spread across developed markets in North America and Europe, China and India, and emerging markets in Latin America and the Middle East and Africa, and from 2026 the company began disclosing revenue by region at investor briefings.

Competitors are global majors such as Caterpillar, Komatsu, Volvo, SANY and XCMG, and the merged entity was projected to move up to roughly 12th-13th place by market share (Seoul Economic Daily, September 16, 2025). Within the Korean stock market it stands as the only listed manufacturer of large construction equipment.

Earnings trend

Quarterly revenue · Operating profit

₩967.7B₩40B25Q2₩954.7B₩55.8B25Q3₩947.3B₩33.4B25Q4₩2.3T₩190.7B26Q1₩2.4T₩248.9B26Q2

RevenueOperating profit

Annual revenue · Operating profit

₩3.5T₩170.6B2022₩3.8T₩257.2B2023₩3.4T₩190.4B2024₩3.8T₩170.9B2025

RevenueOperating profit

Quarterly results · Last 5 quarters
Quarter	Revenue	Operating profit	Op. margin
2025Q2	₩967.7B	₩40B	4.1%
2025Q3	₩954.7B	₩55.8B	5.8%
2025Q4	₩947.3B	₩33.4B	3.5%
2026Q1	₩2.3T	₩190.7B	8.3%
2026Q2	₩2.4T	₩248.9B	10.2%

Annual results
Year	Revenue	Operating profit	Net income (parent)	Op. margin	ROE	Debt-to-equity
2022	₩3.5T	₩170.6B	₩111.5B	4.9%	7.6%	106.8%
2023	₩3.8T	₩257.2B	₩139.4B	6.7%	8.8%	86.2%
2024	₩3.4T	₩190.4B	₩100B	5.5%	6.0%	85.3%
2025	₩3.8T	₩170.9B	₩99.4B	4.5%	5.5%	86.6%

Consolidated basis (financial statements including subsidiaries) · Final figures from DART filings · Net income attributable to owners of the parent · Data as of 2026-09-04

Earnings analysis

On the pre-merger standalone audited annual figures, revenue moved between roughly KRW 3.4 trillion and 3.8 trillion: KRW 3.5156 trillion in 2022, KRW 3.8250 trillion in 2023, KRW 3.4381 trillion in 2024 and KRW 3.7765 trillion in 2025.

Operating profit, however, peaked at KRW 257.2 billion in 2023 for a 6.7% margin and then narrowed to KRW 190.4 billion in 2024 (5.5%) and KRW 170.9 billion in 2025 (4.5%), showing margin came under pressure before scale did.

Net profit attributable to owners also eased from KRW 139.4 billion in 2023 to KRW 100.0 billion in 2024 and KRW 99.4 billion in 2025, while operating cash flow fell for three straight years from KRW 318.2 billion in 2023 to KRW 260.6 billion in 2024 and KRW 166.0 billion in 2025.

The balance sheet trend ran the other way. The debt-to-equity ratio came down from 106.8% in 2022 to 86.2% in 2023, 85.3% in 2024 and 86.6% in 2025, holding in the mid-to-high 80% area, while total equity grew from KRW 1.6673 trillion in 2022 to KRW 1.9303 trillion in 2025. The quarterly series breaks at the merger.

Second-quarter 2025 revenue was KRW 967.7 billion with operating profit of KRW 40.0 billion (4.1%), followed by KRW 954.7 billion and KRW 55.8 billion (5.8%) in the third quarter and KRW 947.3 billion and KRW 33.4 billion (3.5%) in the fourth, keeping quarterly margins in the 3-5% range, and second-quarter 2025 net profit to owners was just KRW 4.8 billion.

With merger effects included, first-quarter 2026 showed revenue of KRW 2.3049 trillion, operating profit of KRW 190.7 billion (8.3%) and net profit to owners of KRW 173.9 billion, and the second quarter showed KRW 2.4342 trillion, KRW 248.9 billion (10.2%) and KRW 180.4 billion, lifting scale and margin together.

Management attributed the second-quarter improvement to wider sales of next-generation new models and region-specific core machines, price increases and reduced promotion spending, and also cited a higher mix of mid-to-large and mining equipment (July 29, 2026).

Still, first-half 2026 figures include HD Hyundai Infracore, so the reported year-on-year growth of 151.5% in revenue and 522.3% in operating profit cannot be read as underlying growth; on the combined pre-merger basis the company cited growth of 18.2% and 92%.

Industry analysis

Global construction equipment demand slowed through 2022-2024 amid higher rates and delayed replacement in developed markets, and an increasing number of assessments see the direction turning around 2025.

In a June 2026 industry report, Hana Securities judged that global construction equipment conditions, having passed through three cycles since 2000, entered a fourth cycle starting in 2025, and projected that North American tariff burdens would gradually be offset by accumulated price increases.

The company itself raised its 2026 global market view to about 631,000 units from 573,000 last year, roughly 10% growth and far above the 2-3% it had assumed at the start of the year (July 29, 2026). Regional conditions diverge sharply.

Early in 2026 management said North American demand was stable but that intensifying price competition and tariff uncertainty would limit the pace of recovery, and projected demand of 116,000 units, down 2.5%, on the base effect of pre-buying in the second half of 2025 (Bloter, February 6, 2026).

China, by contrast, saw June 2026 excavator sales rise 35.3% year on year per the China Construction Machinery Association, while infrastructure and mining investment in Africa and Southeast Asia also supported demand (Newspim, July 8, 2026).

A Korea Institute of Machinery and Materials outlook likewise singled out construction equipment as the only major domestic machinery segment expected to grow exports in 2026, on the back of Indian infrastructure projects and Middle East construction demand.

In the competitive landscape, positioned between leaders such as Caterpillar and Komatsu and price-competitive Chinese makers, a heavier mix of mid-to-large and mining machines plus rising in-house engine content is being presented as the differentiator.

Outlook

Management guided 2026 revenue of KRW 8.7-9.0 trillion with a 5-7% operating margin, and first-half cumulative revenue reached KRW 4.7390 trillion with operating profit of KRW 439.6 billion (company conference calls, February 6 and July 29, 2026).

The next-generation integrated models are cited as the second-half growth driver. Five model types rolled out sequentially in Europe since last year saw first-half unit sales rise 53% year on year, and the company said launches in Korea and North America run sequentially through October (ZDNet Korea, July 29, 2026).

The engine business centers on the Gunsan new plant. Once the KRW 116.8 billion expansion completes at end-October, K2 tank defense engine capacity doubles to 240 units a year, alongside a 1,250-unit annual line for 1-3MW power generation engines and an 880MWh battery pack line (Asia Today, August 18, 2026).

Start-of-production timing runs from battery packs in August and defense engines in October to power generation engines beginning with a 37-liter class unit in January 2027, with a 77-liter class to follow (Financial News, February 4, 2026; ZDNet Korea, July 29, 2026).

Longer term, the company has set a 2030 group revenue target of KRW 14.8 trillion, including KRW 2.5 trillion from engines, KRW 1.3 trillion from compact equipment and KRW 1.4 trillion from aftermarket (Seoul Economic Daily, January 1, 2026).

On shareholder returns, in February 2026 it announced a KRW 87.3 billion program equal to about 30% of the two pre-merger companies' net profit, comprising roughly KRW 26.3 billion in cash dividends and KRW 60.9 billion in share buybacks and cancellation, with the buyback running for six months from February 10 via a trust contract (iNews24, February 6, 2026).

North America is the swing factor: management said it shelved a 5-6% price increase originally planned for the first quarter of 2026 after reviewing competitors' pricing, leaving the pace of tariff cost pass-through as a key determinant of second-half margins.

Valuation

PER

12.5×

PBR

1.4×

ROE

12.7%

EPS

₩11,212

BPS

₩102,445

Dividend per share

₩500

The first thing to weigh in reading valuation is that the January 2026 merger changed both the earnings base and the share count at once.

New shares were allotted to HD Hyundai Infracore holders, materially expanding shares outstanding, while Infracore's business was added to earnings, so simple per-share comparisons across the merger do not hold.

Over the most recent four quarters, from the third quarter of 2025 through the second quarter of 2026, net profit attributable to owners was KRW 420.4 billion, far above the annual net profit level of the pre-merger standalone entity.

As a result the reference frame for earnings-based multiples differs from the Japanese and global peer multiple ranges typically applied in the standalone era, while relative to net assets the shares trade at a premium.

Dividends sit within a policy of returning at least 30% of separate-basis net profit via dividends or share cancellation for fiscal 2024-2026, combining cash payouts with buybacks and cancellation, and on cash dividends alone the level does not stand out against sectors that lead on yield.

Ultimately the basis for the multiple rests on whether the roughly 10% quarterly operating margin seen in the first half of 2026 holds beyond the second half, which in turn depends on tariff pass-through and pricing on the new models.

PER, EPS, PBR and BPS are all calculated in-house (the same method as Naver and Toss) · Dividend yield = cash dividend per share from DART filings (supplemented by KRX) ÷ current price · As of 2026-09-04

Bull factors

A margin step-up confirmed in year one of the merger

On the pre-merger standalone basis, quarterly operating margins sat in the 3-5% range at 4.1% in the second quarter of 2025, 5.8% in the third and 3.5% in the fourth.

With merger effects included, the margin rose to 8.3% in the first quarter of 2026 and 10.2% in the second, which the company described as its first double-digit quarterly margin since the merged entity launched.

Management pointed to wider sales of next-generation models and region-specific core machines, price increases and lower promotion spending. That means the merger rationale of cost improvement through scale and production integration has been partly visible in the numbers.

Engine business widening into defense and power generation

Second-quarter 2026 engine revenue was KRW 386.1 billion, up 5% year on year, with a divisional operating margin of 15.3% versus 9.9% for construction equipment (company release, July 29, 2026). Growth drivers cited were expanded external sales of industrial engines and higher supply of defense engines for the K2 tank.

At the Gunsan new plant, whose expansion completes at end-October, defense engine capacity doubles and a 1,250-unit annual line for 1-3MW power generation engines is to be built. Management has set targets of KRW 2.5 trillion in engine revenue and an engine operating margin above 14% by 2030.

Regional diversification and an improved balance sheet

Per the company release, second-quarter 2026 revenue rose 29.9% in Latin America on mining equipment demand in Colombia and Peru and 51.4% in the Middle East and Africa on expanded supply to gold mining projects, with India up 22.1% and China up 14.1%.

A sales structure not reliant on North America alone can act as a buffer in the current tariff environment.

On the balance sheet, the debt-to-equity ratio fell from 106.8% in 2022 to 86.6% in 2025 and is being managed in the mid-to-high 80% area, while total equity rose from KRW 1.6673 trillion to KRW 1.9303 trillion over the same period.

Shareholder returns operate under a policy of returning at least 30% of separate-basis net profit via dividends or share cancellation.

Bear factors

North American tariffs and a shelved price increase

The company said it would shelve a 5-6% North American price increase originally planned for the first quarter of 2026 after reviewing competitors' pricing (Bloter, February 6, 2026).

In the same briefing it projected that North American demand recovery would be limited by intensifying price competition and tariff uncertainty, with 2026 demand of 116,000 units, down 2.5%. The longer tariff costs cannot be passed into prices, the more developed-market margins are squeezed.

North America is also a market with data center investment and manufacturing onshoring demand, so volume recovery and pricing policy could move in different directions.

Macro sensitivity of a cyclical industry

Construction equipment demand is a classic cycle business driven by interest rates, infrastructure budgets and commodity prices. Even on the pre-merger standalone basis the operating margin slid from 6.7% in 2023 to 4.5% in 2025, evidence that margins compress quickly when conditions turn.

In a June 2026 report, Hana Securities noted that Middle East geopolitical risk and macro variables such as growth and rates could affect second-half demand. The company itself flagged logistics and supply chain risk from a prolonged conflict as an item requiring response.

Time still needed to verify merger synergies

Because the merger materially expanded shares outstanding, whether profit growth translates fully into per-share value requires separate verification.

Sell-side commentary has also argued that confirming business synergies will take time, given that the two companies retain separate brands and product development integration had partly preceded the merger (Samsung Securities, July 1, 2025).

What has been observed so far is two quarters of combined earnings; a normalized full-year result under the merged structure has not yet been disclosed. Engine division investment is also expanding, including a planned KRW 155.8 billion for 2026, so the pace of payback is another item to watch.

Risk factors

Trade and policy

United States tariffs directly affect North American pricing and cost structure. The company said it shelved a planned increase in light of competitors' responses, while Hana Securities projected in a June 2026 report that tariff burdens would gradually be offset by cumulative price increases.

Changes in tariff rates and scope, and shifts in competitors' pricing, could determine the direction of margins. Domestic machinery industry outlooks also identified tariff risk on United States trade as a key downside factor for 2026.

Geopolitics and supply chain

The Middle East and Africa was a growth region with second-quarter 2026 revenue up 51.4%, and it is also where geopolitical risk is concentrated. The company said it will keep pursuing emerging markets while managing logistics and supply chain risk from a prolonged conflict.

Mining equipment demand is tied to metal prices, so a correction in commodity prices could shake Latin American and African demand as well. Currency swings add earnings volatility given the heavy weight of overseas production and sales.

Competition and capital spending

Chinese makers are rapidly expanding exports to Africa and Southeast Asia alongside a domestic recovery, which could intensify price competition in emerging markets (Newspim, July 8, 2026).

The company is responding with a heavier mix of mid-to-large and mining machines and higher in-house engine content, but a scale gap with the leaders remains. KRW 116.8 billion has been invested in the Gunsan new plant, with power generation and defense engine production ramping from October 2026 into 2027 and beyond. If utilization and orders for the new facilities do not fill as planned, fixed cost pressure could increase.

What to watch next

Late October 2026
Check whether the Gunsan plant expansion completes and defense engine production starts on schedule. Key items are whether K2 tank engine capacity doubles to 240 units a year and whether progress on the power generation line is disclosed alongside it.
Late October to early November 2026
Third-quarter 2026 results. This is the point to check whether the 10.2% operating margin posted in the second quarter holds and whether the company is on track for full-year guidance of KRW 8.7-9.0 trillion in revenue and a 5-7% operating margin.
Fourth quarter of 2026
North American pricing policy and the impact of next-generation models. Whether the 5-6% increase shelved in the first quarter is revived, and how much the new models launched sequentially in Korea and North America through October contribute to sales, will shape developed-market margins.
January 2027
Scheduled start of mass production for the 37-liter class large power generation engine. Whether the pilot supply and order activity with major customers that the company said it would run during 2026 converts into actual contracts is the first checkpoint for entry into the data center power generation market.
Early February 2027
Full-year 2026 results and the shareholder return package. Worth checking are the merged entity's first complete annual earnings, the size of cash dividends and buyback-and-cancellation under the policy of returning at least 30% of separate-basis net profit, and whether 2027 revenue and margin targets are presented.

Overall view

HD Construction Equipment was reshaped into Korea's only listed manufacturer of large construction equipment after absorbing HD Hyundai Infracore in January 2026, and it is now in its first year with both an altered earnings base and share count.

On the pre-merger standalone audited numbers, the operating margin narrowed from 6.7% in 2023 to 4.5% in 2025 and operating cash flow shrank from KRW 318.2 billion in 2023 to KRW 166.0 billion in 2025.

By contrast, in the first and second quarters of 2026 with the merger reflected, revenue was KRW 2.3049 trillion and KRW 2.4342 trillion and operating profit KRW 190.7 billion and KRW 248.9 billion, lifting the margin from 8.3% to 10.2%.

The bullish case rests on integration synergies and an improved product and regional mix, an engine business widening into defense and power generation, and a balance sheet where the debt-to-equity ratio fell from 106.8% in 2022 to 86.6% in 2025.

The bearish case rests on the shelved North American price increase and tariff uncertainty, the margin volatility inherent to a cyclical industry, the larger share count from merger issuance, and synergies not yet tested over a full year.

The calendar to watch runs from the end-October completion of the Gunsan plant expansion and the start of defense engine production, to whether margins hold in third-quarter results, to the January 2027 start of 37-liter power generation engine production, and on to the first complete annual results and shareholder return package in early 2027. This report is for information purposes and contains no buy or sell opinion and no target price.

Sources

Korea Exchange (KRX) — Prices · Market Cap · Volume
FSS electronic disclosure system (DART) — Financial statements · Dividend filings

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Report written 2026-09-05 · Data as of 2026-09-04

This content is AI analysis of market data and web search results, provided for information only. It is not a solicitation or recommendation to invest. Investment decisions and their consequences are the investor's own responsibility. Data may be delayed or contain errors.