[Click eStock] Samsung C&T, Stock Price Linked to Equity Value 'Target Price Downgrade'

[Asia Economy Reporter Lee Seon-ae] Shinhan Investment Corp. lowered the target price of Samsung C&T from 170,000 KRW to 160,000 KRW, a 5.8% decrease, on the 2nd. This decision was based on the judgment that more emphasis should be placed on confirming meaningful results related to investments rather than dividends. However, considering the expectations for investment activities and price attractiveness, the buy rating was maintained.

Samsung C&T's fourth-quarter sales reached 10.6 trillion KRW, up 9.0% year-on-year, and operating profit increased by 93.8% to 634.2 billion KRW, generally meeting market expectations. Although profitability in construction and trading sectors slowed due to unfavorable business conditions, the strong performance of the fashion and bio divisions, which entered their peak season, partially offset the burden.

It is forecasted that in 2023, Samsung C&T will achieve sales of 40.4 trillion KRW and orders of 13.8 trillion KRW. Eun Kyung-wan, a researcher at Shinhan Investment Corp., analyzed, "A slight decrease in scale is inevitable due to the economic downturn, but based on a diversified business portfolio, the current profitability level appears maintainable."

Samsung C&T announced a dividend of 2,300 KRW per share and the cancellation of 0.7% of treasury shares acquired during the merger process of Samsung C&T and Cheil Industries. Along with this, the company stated it will finalize the next shareholder return policy soon to communicate with the market.

Researcher Eun said, "Currently, the basic principle is to redistribute 60-70% of dividend income from affiliates, deciding annually considering dividend resources and business environment," adding, "Considering the negative business conditions of Samsung Electronics, which accounts for the largest portion of dividend resources, the next shareholder return policy is likely to be maintained at the current level." He continued, "Unlike in the past, the need to retain internal capital has increased due to active new business investments in eco-friendly energy, bio, and healthcare sectors," and emphasized, "In the same context, more attention should be paid to confirming meaningful results related to investments rather than dividends."

Since expectations for performance and dividends are not high, the stock price is likely to move linked to the listed equity value for the time being. Researcher Eun explained, "Ultimately, the key is whether the approximately 60% discount rate on net asset value (NAV) can be reduced, and we are looking for clues in investment activities," adding, "Based on this, we maintain the buy rating, but slightly lowered the target price reflecting changes in the value of held shares, adjustments in 2023 earnings estimates, and an increase in net borrowings."