[Click eStock] "Samsung Engineering Achieved Strong Performance but Needs New Orders"

3Q Operating Profit 100.1 Billion Won... Beats Consensus by 25% 'Strong Performance'
New Orders Still Sluggish... Must Deliver Results in Mexico, Malaysia, Saudi Arabia, etc.

[Asia Economy Reporter Minwoo Lee] Samsung Engineering recorded earnings in the third quarter of this year that exceeded market consensus. However, since new order achievements are still far below the annual target, additional orders are urgently needed, according to analysis.

On the 30th, Yuanta Securities analyzed Samsung Engineering as follows. Samsung Engineering posted consolidated sales of 1.6032 trillion KRW and operating profit of 100.1 billion KRW in the third quarter of this year. Compared to the same period last year, sales decreased by 2.0% while operating profit increased by 0.4%. However, these results surpassed the consensus by 1.8% and 25.6%, respectively. Ki-ryong Kim, a researcher at Yuanta Securities, explained, "The growth in sales in the petrochemical sector, driven by new orders from 2017 to 2019, decreased by 4% year-on-year this quarter due to the impact of COVID-19. On the other hand, the petrochemical cost ratio improved compared to the previous quarter as a completion settlement profit of 15 billion KRW was reflected."

Although the performance was solid, the order achievement rate remains sluggish. Researcher Kim said, "The cumulative new orders in the third quarter this year were about 3 trillion KRW, which is less than 30% of the annual guidance of 10.5 trillion KRW. Practical order achievements are needed this year in Mexico Dos Bocas Refinery (estimated over 3 billion USD), Malaysia Sarawak (1 billion USD), and Saudi Arabia Jafurah (1.3 billion USD)." He added, "On the other hand, non-petrochemical orders, including group company volumes, recorded 2.6 trillion KRW cumulatively in the third quarter, which is expected to exceed last year's order performance of 2.8 trillion KRW."

Against this backdrop, Yuanta Securities maintained a 'Buy' investment opinion and a target price of 15,000 KRW for Samsung Engineering. The closing price on the previous day was 10,400 KRW. Researcher Kim analyzed, "While uncertainties continue in overall overseas orders and performance due to COVID-19 and low oil prices, the cost ratio trend in the petrochemical sector is a factor that can be expected to stabilize earnings. However, delays in petrochemical orders are still regrettable. Securing additional order pipelines and achieving practical order results are key."