Hana Securities said on the 8th that Samsung C&T has entered a historically undervalued range due to a sharp rise in the value of its subsidiaries' equity. It maintained a Buy rating and raised the target price 8.3% to 650,000 won from 600,000 won. The previous session's closing price was 460,500 won.
Kim Seung-jun, an analyst at Hana Securities, said, "Despite the recent rise in Samsung C&T's share price, the valuation is still inexpensive," and noted, "Based on the current market consensus, the price-to-book ratio (PBR) is 1.4 times, but this does not reflect the equity value increase driven by the recent gains in Samsung Electronics and Samsung Life Insurance."
Compared with the end of the first quarter, Samsung Electronics and Samsung Life Insurance have each jumped about 160,000 won and 200,000 won. Considering the number of shares Samsung C&T holds, Kim estimated that the increase in the two affiliates' equity value alone amounts to about 5.58 trillion won (Samsung Electronics 4.8 trillion won, Samsung Life Insurance 780 billion won).
Kim said, "Reflecting this, Samsung C&T's effective key controlling equity is about 10.6 trillion won, which is double the current consensus of 5.2 trillion won," adding, "If this value is applied, the effective PBR is only 0.7 times."
He added, "This is markedly lower not only than major holding companies such as SK (1.4 times) and Doosan (18.7 times), but also compared with large construction peers such as Hyundai Engineering & Construction (1.7 times) and Daewoo Engineering & Construction (2.4 times)."
Kim forecast that Samsung C&T will begin delivering substantive results in the large nuclear power and small modular reactor (SMR) markets in the second half of this year. In the third quarter, it is scheduled to participate in the bid for the selection of a Team Korea builder in Vietnam, and next month Samsung C&T is likely to come into the spotlight in large U.S.-related nuclear and SMR agenda items.
Kim expects momentum to continue into next year, with the award of a large nuclear project in Romania in the fourth quarter and European SMR orders next year lined up.
Its core construction business is also maintaining solid revenue growth as Samsung Electronics accelerates semiconductor investments. Large semiconductor projects are underway, including the Pyeongtaek P4 and P5 plants and the Taylor Fab 1 in the United States. Growth in housing orders under the Raemian brand and the push for a U.S. solar independent power producer (IPP) operation were also cited as valuation premium factors.
Hana Securities estimates Samsung C&T's consolidated revenue this year at 44.2437 trillion won, up 8.6% from a year earlier, and operating profit at 3.5275 trillion won, up 7.1%. Kim predicted that the construction and bio divisions will drive overall earnings growth.