Kiwoom Securities on the 2nd maintained its "Buy" rating on Samsung E&A, saying orders for the Samsung Electronics P6 project are expected in the second half, and raised its target price to 72,000 won from 69,000 won.
Shin Dae-hyun, a Kiwoom Securities researcher, said, "Samsung E&A's second-quarter operating profit will meet the market consensus," adding, "Considering the government's plan to shorten fab construction periods and Samsung Electronics' expansion plan, P6 orders are expected in the second half."
First, Shin projected Samsung E&A's second-quarter operating profit at 210.8 billion won, in line with the market expectation of 217.7 billion won. Shin analyzed, "There were expense increases due to alternative routes at some Middle East sites, but they appear to have been covered within contingencies, so there should be no impact on margins."
By segment, the petrochemical segment is expected to see a rebound in sales on the back of higher progress rates at the Fadhili site. However, from the third quarter, sales declines at the Ras Laffan and BGCC sites are seen as inevitable. In contrast, the advanced industry and new energy segments are projected to continue gradual growth as sales from the Samsung Electronics P5 structural work, Malaysia SAF, and the Taziz methanol project, among others, begin in earnest.
Shin also assessed that order momentum in the second half is sufficient. Shin said, "The government has announced plans to shorten the construction period for semiconductor fabs already planned in the capital area," adding, "In line with the possibility, raised early this year, that Samsung Electronics' P6 could break ground within the year, it is a situation where P6 orders can be expected in the second half." In addition, with a second fab in the southwest region and a second Taylor fab under discussion, Shin saw that if the semiconductor cycle continues, advanced industry orders will continue over the medium to long term.
Shin added, "In the petrochemical and new energy segments as well, a variety of projects are in the queue, including Saudi SAN6 gray ammonia, Khafji gas, a Qatar urea (UREA) plant, Pacifico Mexinol green methanol, UAE Falcon PLA, INPEX LNG, Mexico Ursus Energy LNG FEED, and Middle East reconstruction."
Shin continued, "Considering the ample pipeline in the petrochemical and new energy segments and even the Middle East reconstruction business, both this year and next year are expected to see high levels of new orders," adding, "There is additional room for the share price to rise."