Although Samsung Heavy Industries' guidance for this year fell short of market expectations, securities firms maintained their 'buy' ratings on June 6. Some raised their target prices. They paid more attention to Samsung Heavy Industries' solid position in the floating liquefied natural gas production, storage, and unloading facilities (FLNG) market.
Samsung Heavy Industries set its guidance at 10.5 trillion won in sales and 630 billion won in operating profit for this year. This figure indicates that the operating profit is nearly 20% below market expectations. Securities research analysts noted that while Samsung Heavy Industries took a conservative approach to its guidance, it recorded results exceeding guidance in both 2023 and 2024, suggesting that profitability may improve further.
Han Seung-han, a research analyst at SK Securities, said, “Samsung Heavy Industries is expected to show a performance improvement trend as its shipbuilding prices rise and marine sector sales expand, achieving performance targets for three consecutive years.”
▲ Kiwoom Securities 17,000 won → 19,000 won ▲ SK Securities 16,000 won → 17,000 won ▲ Samsung Securities 14,000 won → 16,200 won, all raised their target prices for Samsung Heavy Industries. MERITZ Securities maintained the highest target price of 22,000 won among all of Samsung Heavy Industries' target prices.
Samsung Heavy Industries reflected not only its guidance but also a derivative loss of 744 billion won due to the contract cancellation at the Zvezda shipyard in Russia in its financial statements for the fourth quarter of last year.
Despite these unfavorable factors, the biggest reason securities firms remain optimistic about Samsung Heavy Industries' performance is FLNG. FLNG refers to complex offshore facilities capable of extracting and refining natural gas at sea and then converting it into liquefied natural gas (LNG) for storage and unloading. It is also known as an LNG factory on the sea. Samsung Heavy Industries has shown strengths in the FLNG market.
Particularly, the U.S. government's decision to blacklist the WISON shipyard, the only place in China building FLNG, presents an opportunity for Samsung Heavy Industries to strengthen its market dominance. Bae Gi-yeon from MERITZ Securities noted, “Due to U.S. sanctions on WISON, Samsung Heavy Industries has enhanced visibility for orders in the entire FLNG pipeline, including the U.S. Delfin FLNG units 1 to 4, Canada's Western FLNG, and those in Africa, Mexico, and Suriname.”
Han Young-soo, a research analyst at Samsung Securities, also said, “Samsung Heavy Industries' FLNG is likely to benefit from the expansion of U.S. LNG exports and sanctions on Chinese shipbuilders, suggesting that if there’re corrections in the stock price due to performance and guidance, it would be wise to use it as a buying opportunity.”