- Published 2026.11.06 09:18
Unsecured bond rating raised from A to A+
Engine business buffers earnings volatility after Infracore merger
Key tests: macro risk response and dealer network integration synergies
HD Construction Equipment has obtained an A+ credit rating on its unsecured bonds. The upgrade reflects the engine business it acquired through the absorption merger with HD Hyundai Infracore in January this year, which has effectively offset demand volatility in the construction equipment market.
Korea Investors Service and Korea Ratings on Nov. 5 raised HD Construction Equipment's unsecured bond rating from A to A+. They also assigned a new A2+ rating to its commercial paper (CP), a short-term funding indicator, placing it near the highest tier.
The key driver behind the upgrade is the restructuring of its profit base through the merger. Previously, HD Construction Equipment and HD Hyundai Infracore competed in finished machinery under different brands, leaving them directly exposed to earnings shocks from global downturns. With the launch of the combined entity, industrial and power generation engines and aftermarket (AM) businesses were brought together, securing a cash generator to defend against external shocks.
The engine business has significantly lifted company-wide profitability. HD Construction Equipment's cumulative preliminary results for the first three quarters of this year showed consolidated revenue of 6.8305 trillion won (about $5 billion) and operating profit of 597.3 billion won (about $441 million), for an operating margin of 8.7%. That marks a clear improvement from the combined operating margins of the two companies before the merger, which stood at 5% in 2024 and 5.5% in 2025.
The engine division posted cumulative revenue of 1.1162 trillion won (about $824 million) through the third quarter, up 12.6% from a year earlier, with an operating margin of 14.5%. Expanding demand for industrial and emergency power generation drove the strong results. Following the completion of its new Gunsan plant in October, the company signed a 387.9 billion won (about $286 million) contract with U.S.-based Enchanted Rock to supply gas power generation engines, securing work through 2027–2028 and underpinning earnings sustainability.
The engine business's high profitability has served as a buffer against external uncertainty. In the third quarter, the construction equipment finished products division slowed due to logistics disruptions from the prolonged Middle East conflict and the stronger won. In the past, this would have eroded overall profitability, but parts internalization and the high-margin aftermarket segment defended company-wide cash flow, leading the impact to be assessed as a temporary external factor rather than a structural collapse in demand.
The financial structure has also stabilized on the back of solid cash flow. As of end-September, the consolidated debt-to-equity ratio was 85.5% and the debt-to-assets ratio was just 20.3%, while total borrowings stood at 1.7 times earnings before interest, taxes, depreciation and amortization (EBITDA). With annual EBITDA generation of around 1 trillion won (about $738 million), the company now has the capacity to cover annual funding needs of about 400 billion won (about $295 million), including future capital expenditures, without external borrowing.
Entering the A+ rating and securing the A2+ CP rating marks an important turning point in the funding market. In the construction equipment industry, where the capital-intensive nature of the business requires substantial working capital for orders and equipment replacement, a rating upgrade reduces the spread on corporate bond issuance and meaningfully lowers liquidity management costs.
Going forward, the key metric to watch is whether the company can maintain high profitability in the engine business while proving cost savings from global network integration in actual earnings. It must control overlapping marketing costs for the Hyundai and Develon brands and realize the benefits of dealer network integration centered on emerging markets to sustain its upgraded creditworthiness. Whether the growth of the newly added engine business can continue to offset macro risks such as stronger trade barriers after the U.S. presidential election or a prolonged global construction downturn will be the core test of its future strength.
(Dollar figures are approximate, converted automatically at 1,000 won = $0.738, the rate on Nov. 8, 2026.)
※ This article is an AI translation of the Korean original published by Korea Credit News; it was checked by automated quality guards and published by the English edition desk.
