Hanwha Investment & Securities announced on October 23 that Samsung E&A has exceeded market expectations with its third-quarter performance and is projected to sustain profit growth over the next two to three years. As a result, the firm raised its target price from 70,000 won to 84,000 won, an increase of 20%, while maintaining a 'buy' rating.
Song Yu-rim, an analyst at Hanwha Investment & Securities, stated, "Samsung E&A's third-quarter revenue reached 2.9 trillion won, and operating profit was 500.6 billion won, marking increases of 45.8% and 183.6%, respectively, compared to the same period last year." She noted that the company recorded an earnings surprise, significantly surpassing the market consensus of 252 billion won in operating profit.
The improvement in performance was driven by increased sales from affiliates and the recognition of one-time gains. Sales from affiliates rose more than expected, and approximately 100 billion won was recovered from the Saudi Yanbu power project. Additionally, incentives from clients and settlement profits from projects nearing completion contributed to a gross profit margin of 21.5% in the third quarter. However, the net profit was in line with market expectations due to bond call costs from the Bahrain BMP project.
On October 22, Samsung E&A also raised its annual performance outlook. The new order target was increased from 12 trillion won to 19 trillion won, while revenue expectations were raised from 10 trillion won to 11 trillion won. The operating profit forecast was also adjusted upward from 800 billion won to 1.4 trillion won, marking the largest figures in the company's history.
Song added, "We expect the operating profit margin in the fourth quarter to exceed 13%, surpassing the three-year average of 9.3%. Starting next year, we anticipate a sequential increase in sales from affiliates and the chemical engineering sector, which will enable a trend of profit growth."
The strengthening of shareholder return policies was also viewed positively. On October 22, Samsung E&A announced a plan to repurchase shares worth approximately 780 billion won. Of this amount, 90 billion won will be used for employee bonuses, while the remaining 690 billion won will be repurchased and subsequently canceled to enhance shareholder value.
Hanwha Investment & Securities raised its operating profit forecast for Samsung E&A from 1.12 trillion won to 1.404 trillion won, an increase of 38.7%. The forecast for next year's operating profit was also raised from 1.186 trillion won to 1.661 trillion won, a 40% increase.
Song emphasized, "It is still early to discuss the peak of performance, as we are just at the beginning of improvement. Finding such clear growth in an uncertain macroeconomic environment is challenging." She explained that the target price was raised by increasing the price-to-book ratio (PBR) applied to the estimated book value per share (BPS) for the next 12 months from 2.35 times to 2.6 times.
* This article has been translated by AI.
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