Samsung E&A CI.
Hyundai Motor Securities on the 8th said Samsung E&A(028050) is expected to beat its annual order target while posting results in line with market expectations for the third quarter of this year. It maintained a “buy” rating and raised its target price by 6.2% to 69,000 won from 65,000 won. The previous session’s closing price was 48,600 won.
Hyundai Motor Securities estimated Samsung E&A’s third-quarter consolidated revenue this year at 2.8069 trillion won, up 40.7% from a year earlier, and operating profit at 249.4 billion won (operating margin 8.9%), up 41.2%. That is in line with the market consensus (operating profit 248 billion won).
Shin Dong-hyeon, an analyst at Hyundai Motor Securities, said, “With additional new orders for large petrochemical projects in the Middle East, the annual order target is expected to be raised significantly,” and noted, “The additional order pipeline also remains solid, and continuing advanced-industry orders will drive expansion in earnings and multiples.”
In the petrochemical segment, large projects such as Saudi Fadhili (9 trillion won), Qatar Ras Laffan (4.4 trillion won), and Tajiz Methanol in the United Arab Emirates (UAE) (2.5 trillion won) are steadily supporting results, and the Saudi SAN-7 (4.7 trillion won) project ordered on Sept. 11 has been added, extending the top-line expansion.
The outlook for new orders is also bright. Samsung E&A raised its affiliate’s annual new order target to 7 trillion won at the second-quarter earnings release.
Shin said, “Orders for semiconductor plants aiming to start production in 2028–2030, including Pyeongtaek P5, Yongin National Industrial Complex, and Taylor Plant 2, are expected to flow into Samsung E&A’s orders over the next two to three years,” adding, “For affiliate projects, groundbreaking proceeds quickly and the construction period is relatively short, so there is a high likelihood that earnings recognition will overlap with the petrochemical project scale-up.”
Shin also judged the shares undervalued from a valuation perspective. In 2017–2018, when a recovery in Middle East orders and growth in non-petrochemical orders were captured together, return on equity (ROE) turned from a loss to a positive 6%, and the price-to-book ratio (PBR) traded at 1.63 to 3 times (average 2.3 times).
Shin said, “Currently, Samsung E&A is already steadily recording ROE of more than 13%, and even with momentum coexisting across segments, it is undervalued at 1.6 times 12-month forward PBR.”
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