Industry Report

Construction Industry Outlook for 2025–2026:

• The construction sector is expected to be a key contributor to GDP growth over 2025–2026, with growth projected at 8% and 10% YoY, respectively. Growth is expected to be driven by residential construction and public investment, supported by improving real estate supply and 2026’s pivotal role in the 2026–2030 medium-term public investment cycle. Social housing supply is forecast to expand significantly, while major railway projects are expected to support public investment disbursement, which is projected to increase by 8% YoY in 2026.
• Construction contractors are expected to benefit from three main factors: (1) backlog at listed companies is projected to grow by 19%/15% YoY; (2) improved financial conditions of real estate developers are likely to reduce provisioning costs for construction firms; and (3) net profit from core operations of listed companies is forecast to increase by 10% and 9% YoY in 2025 and 2026, respectively.

CTD is our top pick in the construction sector, supported by:

• As a leading contractor, CTD is well positioned to benefit from a favorable sector outlook. Backlog is expected to grow by 24%/18% YoY, while net profit is forecast to increase by 47%/60% over 2025–2026, driven by construction and real estate segments.
• The company is currently trading at a P/B multiple of 0.9x, below the 1.1x level observed during the construction sector’s prior recovery phase.

Steel Industry Outlook for 2025–26:

• The steel industry is expected to maintain positive growth, supported by resilient domestic demand, while export conditions remain challenging. Domestic output is forecast to increase by 17% and 9% YoY, respectively, thanks to sustained housing supply and public investment disbursement, which is projected to grow by 6% and 8% YoY over 2025–2026.
• In addition, steel prices are expected to recover from 2026 onward, supported by rising demand and significantly reduced pressure from Chinese steel imports, aided by anti-dumping (AD) duties.
• Companies are expected to benefit from several supportive factors, including (1) robust domestic demand, (2) an improvement in gross margins amid recovering steel prices and easing coal and iron ore costs, and (3) industry net profit growth projected at 28% and 22% YoY, respectively.

We recommend HPG and HSG as our top picks:

• With strong positions in the domestic market, HPG and HSG are expected to benefit from steady demand and improving margins, supporting higher net profits in 2025–26.
• Furthermore, the 2026 forward P/E valuation remains below levels historically observed during prior recovery cycles of the steel industry.