GS E&C loses $230 mn market capitalization in one day

GS Engineering & Construction Co.'s stock price plummeted on Thursday in the aftermath of the underground parking lot collapse. Following the Minster of Land, Infrastructure and Transport (MOLIT)'s investigation into the collapse of an underground parking garage at GS E&C's Geomdan New City apartment complex in Incheon, South Korea, the company's stock price fell sharply as analysts speculated that GS E&C's announcement of a full reconstruction may have increased the company's cost burden.GS E&C closed at 14,520 won ($11.1) on Kospi, the main bourse in Korea, on June 6, down 3,510 won, or 19.47%, from the previous trading day. The stock fell to 14,440 won intraday, hitting a new 52-week low.GS E&C's market capitalization evaporated 304 billion won overnight to 1.24 trillion won, down from 1.54 trillion won the previous day. The MOLIT earlier announced that the roof of an underground parking garage at an apartment building GS E&C was constructing in Incheon collapsed in April due to total failure from design to quality control. According to the ministry's investigation, shear reinforcement bars were missing in the design of the accidental section of the underground parking lot, and additional shear reinforcement bars were used sparingly during the construction process. In its apology, GS E&C promised to completely reconstruct the entire the complex. "We deeply apologize for the anxiety felt by prospective tenants and the damage and hardship caused by the delay in moving in," GS E&C said in the apology, "We will completely reconstruct the entire Geomdan complex and provide all compensation for the delayed move-in."The accident occurred last April at the construction site of the apartment building, which was ordered by LH and constructed by GS E&C, where a 970㎡ roof structure of the underground parking lot collapsed.Although there were no casualties because it was nighttime, it was confirmed that shear reinforcement bars connecting the upper and lower reinforcing bars were missing in 30 out of 700 places on the roof layer, raising the anxiety of prospective tenants. In response to GS E&C's decision, securities firms lowered their price targets or investment opinions on GS E&C.Samsung Securities lowered its operating profit estimate for GS E&C by 39% to 401 billion won from the previous forecast, and cut its price target by 27% to 22,000 won.Korea Investment & Securities lowered its investment opinion from “buy” to “neutral” to reflect the impact of the accident. It previously had a price target of 30,000 won but did not provide one in this report.by Eun-Ji [email protected]