[Click eStock] "Samsung Engineering, Rising Expectations for This Year's Order Performance - Buy Timing"

Korea Investment & Securities maintained a buy rating on Samsung Engineering on the 5th, stating that considering this year's order performance, it is the right time to buy. The target price was maintained at 38,000 KRW.

Regarding the reason for maintaining the buy rating and target price, Kyungtae Kang, a researcher at Korea Investment & Securities, said, "The target price was calculated by applying a 12-month forward book value per share (BPS) of 21,019 KRW and a target price-to-book ratio (P/B) of 1.82 times," adding, "With the recent stock price decline reaching a strong valuation support level, it is time to actively buy while looking at this year's order performance."

Korea Investment & Securities estimated Samsung Engineering's annual sales this year at 10.7913 trillion KRW and operating profit at 744.3 billion KRW. The nearly 20% decrease in operating profit is due to the assumption that the one-time settlement gain of about 100 billion KRW recorded in the second quarter of last year will not occur this year, and that the construction margin in the non-chemical sector will decline by 1.1 percentage points (p).

Researcher Kyungtae Kang stated, "Since the order backlog fell below 10 trillion KRW at the end of last year, chemical sector sales are expected to decrease by 5.9% compared to last year," and added, "As the Mexico DBNR is scheduled for completion in February this year, considering the overall construction mix after completion, it will be difficult to achieve a double-digit construction margin (estimated at 9.1%)."

Although the earnings outlook is not bright, there is great expectation for orders that will drive future operating profit growth. Researcher Kyungtae Kang said, "Since Samsung Engineering has secured a large order pool (23.4 trillion KRW), the chemical order target will be set higher than last year's target," and "It is expected that about 9 trillion KRW, approximately 40% of the order pool, will be actually ordered this year."

Accordingly, chemical sales are expected to increase and margins to improve from 2025, when the construction of orders received this year begins.