[Click eStock] Steady 4Q Earnings for Samsung Engineering, Stable Growth Expected This Year

4Q Operating Profit Expected at 87.3 Billion KRW... 31% Increase YoY
Numerous New Orders Last Year... Stable Cash Flow Expected This Year

[Asia Economy Reporter Minwoo Lee] Samsung Engineering is expected to record an operating profit of 87.3 billion KRW in the fourth quarter of last year, marking a 30.9% increase compared to the same period the previous year. It is anticipated to continue a stable growth trend this year as well.

On the 22nd, Meritz Securities forecast that Samsung Engineering would achieve consolidated sales of 1.7077 trillion KRW and an operating profit of 87.3 billion KRW in the fourth quarter of last year. While sales decreased by 2.7% compared to the same period last year, operating profit increased by 30.9%. These figures also align with the market consensus compiled by financial information provider FnGuide, which projected sales of 1.6987 trillion KRW and operating profit of 83 billion KRW.

After securing orders worth 3 trillion KRW up to the third quarter of last year, Samsung Engineering is expected to have added approximately 5 trillion KRW in orders in the fourth quarter, totaling around 8 trillion KRW for the year. From the first to third quarters, orders included the Algeria refinery plant (total 4.3 trillion KRW, with Samsung Engineering's share about 1.9 trillion KRW, jointly secured with Spain's Tecnicas Reunidas, construction period 52 months) and Samsung Electronics' Pyeongtaek semiconductor plant (880 billion KRW). In the fourth quarter, orders included Mexico Dos Bocas (3.3 trillion KRW, construction period 39 months), Malaysia Sarawak (1.2 trillion KRW, construction period 34 months), and Biologics (780 billion KRW).

However, the order for the Jafra gas plant was canceled due to financial difficulties at Saudi Arabia's Aramco. Samsung Engineering is preparing for the Lotte Chemical LINE project (out of 4 billion USD, Samsung Engineering's share is 2.4 billion USD, bidding with Indonesian local company Tripatra) and the UAE Hail & Ghasa project (three packages to be bid, total 8 billion USD, Samsung Engineering's share 4.5 billion USD, in collaboration with Pertofac).

With these new orders, profit growth is expected to continue this year. Hyungryul Park, a researcher at Meritz Securities, stated, "Last year, the stable cost ratio was maintained at 89%?91% in the petrochemical sector and 88%?90% in the non-petrochemical sector, and this trend is expected to continue this year. Continuous operating cash flow generation is expanding net cash, and considering the new orders increased in 2020, stable operating profit growth is possible going forward."

Based on these factors, Meritz Securities maintained a 'Buy' rating on Samsung Engineering and raised the target stock price to 16,000 KRW. The closing price the previous day was 13,500 KRW.