Hyosung Heavy shares end down 6% due to shoddy construction scandal

A land ministry official inspects a collapsed underground parking lot of an apartment complex in Incheon, May 2. Yonhap

By Lee Kyung-min

Shares of Hyosung Heavy Industries plunged 5.67 percent to a low of 164,600 won ($128), Tuesday, after the only growth-driving listed affiliate of Hyosung Group was found on the list of local construction firms that neglected to install rebar before concrete mix was applied inside the underground parking lots of apartments.

The stock price soared in the previous session by the intraday upper limit of 30 percent, underpinned by better-than-expected second-quarter earnings. Four major local brokerages had revised up the price target outlook to a range of between 180,000 won and 190,000 won.

However, according to The Korea Exchange (KRX), Hyosung Heavy traded at 163,400 won per share at around 2:34 p.m., Tuesday, down from the starting price of 174,700 won. It had plummeted to 160,100 won at around 11 a.m.

Propelling the sharp drop was a rapid deterioration in investor sentiment, sparked by Minister of Land, Infrastructure and Transport Won Hee-ryong, with the full backing of President Yun Suk Yoel, vowing stern measures against builders under suspicion of shoddy construction.

The land ministry said Monday that 15 of 91 apartment complexes had no rebar-supported structures in their underground parking lots.

The construction of 91 apartment complexes was commissioned by state-run Korea Land and Housing Corp. (LH), but the ministry said 300 privately built apartment complexes are believed to have a similar issue. The ministry will inspect the complexes in question by the end of this month.

Of 112 pillars of 606 apartments built by Hyosung Heavy in Sunwoon, Gwangju, 37.7 percent reportedly lack rebars.Residents are scheduled to move in starting April 2025.

Hyosung Heavy generated 367.7 billion won in sales from construction projects in the first quarter, accounting for 39 percent of total revenues. The firm's first-quarter profit was 21.9 billion won.

Sales in the second quarter reached 1.12 trillion won, up 21.2 percent from a year ago. Operating profit stood at 85.7 billion won, up 103.6 percent from a year earlier.