Eugene Investment & Securities said on the 24th that Samsung E&A(028050) could achieve 1 trillion won in operating profit for the year after posting strong second-quarter results that beat market expectations. It maintained a "buy" rating and raised its target price 13.2% to 77,000 won from 68,000 won.
On a consolidation basis, Samsung E&A(028050)'s second-quarter revenue came to 2.6093 trillion won, up 19.8% from a year earlier, and operating profit surged 51.0% to 273.1 billion won. Revenue was in line with market estimates, but operating profit exceeded them.
By business segment, revenue in the petrochemicals segment was 1.0732 trillion won, down 17.8% from a year earlier. In contrast, the advanced industry segment and the New Energy segment posted 838 billion won and 698.1 billion won, up 42.2% and 146.3%, respectively. Revenue growth in renewable and eco-friendly project types, such as the ramp-up of semiconductor specialty work, the UAE Taziz methanol project, and the Malaysia SAF project, drove performance gains.
Companywide gross profit margin (GPM) was 15.8%, up 0.6 percentage point from the previous quarter, maintaining a solid trend. Gross profit margins by division were 14.9% for petrochemicals, 17.2% for advanced industry, and 15.5% for New Energy. Excluding one-off gains and currency effects, normalized gross profit margins were tallied at 9.6% for petrochemicals, 11.0% for advanced industry, and 12.9% for New Energy.
Eugene Investment & Securities analyzed that it is time to reassess Samsung E&A(028050)'s normalized margin rate. That is because Samsung E&A(028050) applies a conservative cost management approach that factors expected risks into costs in advance and, based on excellent project execution capability, has been repeatedly reversing contingency reserves.
Cumulative new orders in the second quarter were 7.6342 trillion won, achieving 63.6% of the annual order guidance (12 trillion won). Cumulative revenue was 4.8767 trillion won, or 48.8% of guidance (10 trillion won), and cumulative operating profit was 461.3 billion won, or 57.7% of guidance (800 billion won).
In the second half of this year, a large-order pipeline is in the queue, including SAN-7 ammonia ($3.5 billion), Qatar urea ($2.5 billion), and Mexico Mexinol ($2.0 billion). Considering the expansion of group-company investment centered on Samsung Electronics as well, it assessed a high likelihood of upward revision to the annual performance guidance.
Ryu Tae-hwan, an analyst at Eugene Investment & Securities, said, "As geopolitical uncertainty persists, a cautious approach is needed for orders and revenue from Middle East petrochemical projects," but added, "Given the sharp increase in captive volumes and the reassessment of normalized margins, achieving 1 trillion won in operating profit for the full year looks attainable."
Eugene Investment & Securities' 2026 full-year outlook for Samsung E&A(028050) is revenue of 10.7421 trillion won and operating profit of 1.0013 trillion won. This is well above the company's guidance (revenue 10 trillion won, operating profit 800 billion won).
Ryu added, "The increase in captive volumes driven by Samsung Electronics' expansion of semiconductor investment will support medium- to long-term performance on the back of strong earnings visibility," and "Starting with Pyeongtaek P5, since it is self-performing all EPC (engineering, procurement and construction) processes for ultrapure water (UPW), attention is also warranted on expansion into industrial water and water treatment businesses based on its ultrapure water technology."