[Click eStock] "Seonggwang Bend, Target Price Down Due to Decrease in Orders"

Shinhan Investment Corp. on the 15th downgraded the target price of Seonggwang Bend to 15,000 KRW, citing "the impact of estimated earnings per share (EPS) adjustment due to a decrease in orders." The buy rating was maintained.

On the same day, Dongheon Lee, a researcher at Shinhan Investment Corp., explained, "Seonggwang Bend's consolidated performance for Q4 last year showed sales of 63.4 billion KRW, down 4% compared to the same period last year. Operating profit decreased by 1% to 7.1 billion KRW," adding, "Sales stagnated due to a decline in orders. Operating profit reflected performance bonuses (3 billion KRW) and inventory asset allowances (1.4 billion KRW)."

The impact of weak orders in Q3 2022 and Q1 last year was reflected in sales. Researcher Lee noted, "Profitability also declined due to the decrease in sales. New orders in Q3 last year fell by 5% to 49.4 billion KRW," and pointed out, "Expected projects such as Shine, Qatar, and North America orders are being delayed." New orders on a consolidated basis for Q4 last year were sluggish at 60.7 billion KRW (-6%). For the entire last year, new orders amounted to 217.7 billion KRW (-22%), and the order backlog decreased to 69.9 billion KRW (-39%).

The industry outlook remains positive. Researcher Lee stated, "Domestic offshore plant volumes are increasing, and orders in petrochemicals and nuclear power are also expected. Samsung Heavy Industries' Floating Liquefied Natural Gas production facility (FLNG) may secure 1 to 2 units this year following the two units ordered last year," adding, "HD Hyundai Heavy Industries continues to secure offshore plant orders. Domestic construction companies are actively bidding for overseas plant projects due to the sluggish housing market."

Regarding nuclear power, he said, "Orders are expected for domestic Shin Hanul Units 3 and 4, and equipment for Egypt ordered by KEPCO last year. Government policies may expand domestic and international nuclear power orders." He added, "The stock price is at a comfortable level while waiting for delayed orders. If U.S. sanctions against China intensify, there could be a reflective benefit from low-priced Chinese products."