MERITZ Securities said on the 3rd that the weakness of the dollar will positively impact the performance of Samsung Heavy Industries. It analyzes that profits of hundreds of billions of won from previously signed foreign currency transaction contracts will help cover losses from some contract cancellations.
Samsung Heavy Industries is expected to have a second-quarter revenue of 2.778 trillion won and an operating profit of 174.6 billion won. This reflects increases of 9.7% and 33.6%, respectively, compared to the same period last year. If the estimated operating profit margin of 6.3% is accurate, it is expected to exceed market expectations.
MERITZ Securities also assessed that Samsung Heavy Industries' second-quarter newbuilding price index increased by 7.2% compared to the same period last year and by 2.9% compared to the previous quarter. Increased working days and the commencement of the Canada Cedar Floating Liquefied Natural Gas (FLNG) project are factors positively impacting performance.
Baeg Ki-yeon, a researcher at MERITZ Securities, noted, "The Cedar FLNG has begun real sales earlier than expected," adding, "The subsequent construction of the Coral Sul 2 FLNG is slated to begin in early next year, with visibility for orders of the Delfin FLNG expected in the second half of the year."
Outside of operations, the exchange rate is expected to have a positive impact. Although the dollar exchange rate has recently declined, Samsung Heavy Industries appears to have made an estimated profit of 265.1 billion won through forward exchange contracts. A forward exchange contract is a type of foreign currency transaction, promising to exchange currencies at a predetermined exchange rate.
Baeg noted, "There are concerns about a provision for ordering materials due to the cancellation of the contract with the Russian Zvezda shipyard related to the forward exchange contract, but the likelihood of exceeding the estimated profit from the forward exchange contract is low."
MERITZ Securities has raised the target stock price for Samsung Heavy Industries from the previous 22,000 won to 24,000 won, maintaining the investment opinion of 'buy.'