[Click eStock] "Samsung Heavy Industries, Ongoing Offshore Plant Risks... Target Price Down"

[Asia Economy Reporter Song Hwajeong] NH Investment & Securities on the 9th lowered the target price of Samsung Heavy Industries from 6,700 KRW to 6,200 KRW, reflecting provisions due to the loss in the lawsuit related to the Stena drilling rig. The investment opinion was maintained at 'Hold.'

Choi Jinmyung, a researcher at NH Investment & Securities, explained, "The new target price was calculated by maintaining the existing target price-to-book ratio (PBR) of 1.1 times, but considering the change in this year's estimated book value per share (BPS) from 6,105 KRW to 5,662 KRW," adding, "The main reason for the further downward revision of the estimate is the reflection of an additional provision of 287.7 billion KRW following the announcement of the loss in the Stena-related lawsuit yesterday."

Samsung Heavy Industries announced that the London arbitration tribunal ruled the 2017 termination notice of the semi-submersible drilling rig construction contract with Stena as lawful, deciding that Samsung Heavy Industries must return a total of 463.2 billion KRW, including advance payments and accrued interest received.

It is analyzed that the marine plant risk continues. Samsung Heavy Industries recorded sales of 1.6653 trillion KRW and an operating loss of 285.1 billion KRW in the fourth quarter of last year. Researcher Choi said, "Even excluding one-time losses (-221.7 billion KRW), the recurring operating margin is -3.8%, indicating that chronic deficits have not been resolved," adding, "The company has recorded losses for six consecutive years, and the possibility of turning a profit in the short term is unclear, which is a challenge to overcome." He further noted, "In particular, during the process of setting this year's order targets, the company indicated an expansion of the marine plant proportion again, but the fact that additional costs are occurring in the drilling rigs ordered in 2013 is a concern from an investment perspective."