IBK Securities on June 17 rated Samsung C&T as a 'buy' and set a target price of 620,000 won, citing the potential for revaluation of its stake value and increased shareholder returns.
Analyst Jo Jeong-hyeon highlighted the rise in Samsung C&T's stake value and the likelihood of expanded shareholder returns as key investment points. Samsung C&T holds significant stakes in major affiliates of the Samsung Group, including Samsung Electronics, Samsung Life Insurance, and Samsung Biologics, which account for over 90% of its net asset value (NAV).
With the recent rise in stock prices of core affiliates like Samsung Electronics and Samsung Life Insurance, the potential for NAV revaluation of Samsung C&T has also increased.
Jo emphasized the importance of cash flow generated from these holdings translating into shareholder returns, rather than just the increase in stake value.
From 2026 to 2028, Samsung C&T plans to return 60% to 70% of its affiliate dividend income to shareholders and has raised its minimum dividend per share (DPS) to 2,500 won. Consequently, the increased dividends from Samsung Electronics and Samsung Life Insurance are expected to boost Samsung C&T's dividend income, which could further enhance its capacity for shareholder returns.
Jo stated, "The investment points for Samsung C&T lie not only in NAV revaluation but also in the structure where cash flow from its holdings translates into shareholder returns."
Samsung Electronics is identified as a key variable. The company plans to return 50% of its cumulative free cash flow (FCF) over three years from 2024 to 2026 and is set to implement regular dividends totaling 9.8 trillion won annually.
Samsung Electronics' FCF is projected to rise from 21.6 trillion won in 2024 to 37.8 trillion won in 2025, with significant improvements expected this year due to increased demand for AI semiconductors and rising memory prices. Additional shareholder returns could lead to increased dividend income for Samsung C&T and a reduction in NAV discount rates.
Jo remarked, "This is a period where revaluation of stake value, increased dividend income from affiliates, and recovery in core business due to the high-tech investment cycle can occur simultaneously. We anticipate a virtuous cycle where stake value lifts NAV and dividend income translates into resources for shareholder returns."
* This article has been translated by AI.
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