- Published 2026.11.05 13:34
Korea Investors Service upgrades unsecured bond rating to A+
Cumulative operating margin reaches 8.7% with engine division integration
Needs to prove logistics recovery and new engine mass production stabilization
Korea Investors Service said on Nov. 5 that it upgraded HD Construction Equipment's unsecured bond credit rating from A to A+ and assigned a stable rating outlook. The upgrade reflects improved business stability and significantly better financial metrics after the company absorbed the former HD Hyundai Infracore in January 2026 and integrated its highly profitable engine division. The commercial paper (CP) rating was also newly assigned at A2+.
The biggest driver behind the upgrade is the portfolio diversification effect achieved by scaling up through the merger. A standalone construction equipment business is highly volatile depending on external conditions such as construction cycles in major export markets or mining development demand. But the merger expanded the global sales network to North America, Europe, China and emerging markets. As a result, the company's global construction equipment market share rose to 2.3%, ranking 15th in the industry.
The newly integrated engine division in particular has served as a strong profitability buffer. Based on HD Construction Equipment's preliminary cumulative results for the first three quarters of this year, revenue reached 6.8305 trillion won (about $5 billion) and operating profit came to 597.3 billion won (about $441 million). The cumulative operating margin hit 8.7%, far exceeding the 5.5% simple combined operating margin of the two companies last year before the merger.
The engine division, the key driver of the earnings improvement, achieved a cumulative operating margin of 14.5% in the first three quarters of this year, helped by growing demand for power infrastructure such as data centers and distributed power generation in North America. In October, the company signed a 387.9 billion won (about $286 million) gas power generation engine supply contract with Enchanted Rock of the United States, securing part of its volume for 2027 through 2028 in advance. Backed by stronger cash generation, the debt ratio fell to 85.5% on a preliminary basis as of the end of September, and the reliance on borrowings stood at 20.3%, reflecting a sound financial structure.
However, external volatility remains a limitation. The construction equipment product division posted strong results through the first half, but profitability slowed somewhat in the third quarter due to logistics disruptions from the prolonged Middle East war and the stronger won. Product demand itself has not structurally weakened, but uncontrollable exogenous variables such as logistics chaos are directly hurting earnings. With continued production facility investment planned, including expansions at the Incheon and Gunsan plants, securing stable cash flow is essential.
To maintain the upgraded credit rating and prove its earnings capacity, HD Construction Equipment must clear several remaining hurdles. The timing of normalization of logistics networks in the Middle East and Africa, which have been blocked by geopolitical crises, and whether profitability recovers in the construction equipment division are expected to serve as key evaluation indicators. In addition, whether the company can secure additional orders to support the increased engine production capacity from large-scale plant expansions and quickly stabilize the production yield of new engines will be major points to watch.
(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.
