Kiwoom Securities projected on October 19 that Samsung Heavy Industries will continue to improve profitability and secure orders despite unfavorable market conditions. However, reflecting concerns over a slowdown due to aggressive capacity expansion by Chinese shipbuilders, it lowered its target price from 42,000 won to 34,000 won, a decrease of about 19%. The investment rating remains 'buy.'
Lee Han-gyeol, a researcher at Kiwoom Securities, stated, "Samsung Heavy Industries' third-quarter revenue is expected to reach 3.16 trillion won, a 19.9% increase compared to the same period last year, with operating profit rising 43.4% to 341.3 billion won, aligning with market expectations."
He noted that the number of working days in the third quarter decreased by about 6% compared to the previous quarter, leading to a slight decline in revenue. However, he anticipates that the proportion of revenue from high-value ships ordered after 2024 will increase by about 5 percentage points, improving profitability. Consequently, the operating profit margin for the third quarter is estimated to rise by 0.7 percentage points to 10.8% compared to the previous quarter.
The order intake performance was also positively assessed. As of the end of September, Samsung Heavy Industries secured approximately $7.5 billion in orders in the commercial ship sector, exceeding its annual order target of $5.7 billion. Notably, it secured orders for 18 LNG carriers, covering most of its delivery slots through 2029.
In the offshore sector, the company secured two floating LNG production facilities (FLNG) in the first half of the year for a total of $4.4 billion and is currently in discussions for the Delfin FLNG unit 2 and Western FLNG orders. Lee expects strong demand for gas carriers and tankers to continue through next year.
He also identified the floating data center (FDC) as a growth driver. Samsung Heavy Industries is reportedly in discussions with U.S. data center developer M3 for a supply contract for two 50-megawatt FDCs, aiming for operation in the first half of 2028. Analysts suggest that once FDC construction begins, it could achieve higher profitability than conventional commercial ships.
However, Lee explained, "We adjusted the target price-earnings ratio (PER) from 20 times to 15 times to reflect concerns over a peak-out in the commercial ship market due to aggressive capacity expansion by Chinese shipbuilders." Applying an estimated earnings per share (EPS) of 2,266 won for 2028, the target price was lowered to 34,000 won.
* This article has been translated by AI.
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