[Click eStock] "Samsung E&A, Excessive Stock Price Decline... Target Price Up"

On the 25th, LS Securities raised the target price for Samsung E&A by 7% to 30,000 KRW, stating that "the stock price decline has been excessive." The buy rating was also maintained. The closing price on the day remained the same as the previous day at 20,100 KRW.

Researcher Kim Seryeon of LS Securities explained, "The stock price decline was excessive due to Samsung Electronics' CAPEX (capital expenditure) reduction, sales contraction from the completion of large-scale sites at affiliates and chemical plants, and increased oil price volatility."

Researcher Kim added, "Based on the low point, the 12-month forward price-to-book ratio (PBR) was 0.7 times and the price-to-earnings ratio (PER) was 6 times, hitting the historical band's lower bound. Sales from the large Saudi Padihili site are expected to increase significantly, and additional overseas plant orders are anticipated this year. Along with overwhelmingly superior chemical margins compared to competitors, Samsung E&A has built a solid foundation for a performance turnaround next year, making it an attractive investment opportunity."

Recently, opportunities for orders from affiliates have emerged, such as the rebound in Samsung Electronics' stock price and the possibility of expanding Samsung Biologics' Plant 6. The stock price momentum is gradually recovering with a 2.5 trillion KRW order for the UAE's Taweelah methanol project at the beginning of the year and expectations for expanded orders related to energy transition through equity investments in hydrogen core technology companies.

Researcher Kim stated, "Saudi Arabia has announced an aggressive upstream investment policy aiming to become the world's third-largest natural gas producer by emphasizing energy security. Samsung E&A will expand its base based on successful project execution such as the Jafurah gas project." He added, "Despite increased oil price volatility and a slowdown in petrochemical order markets, gas investment expansion in the Middle East, including Saudi Arabia and Qatar, will maintain Samsung E&A's order pool."

However, the U.S. LNG (liquefied natural gas) liquefaction plant market is still at a potential stage for Samsung E&A. Researcher Kim said, "Samsung E&A's EPC (engineering, procurement, and construction) selection failed for the Texas Brownsville LNG project, for which FEED (front-end engineering design) was conducted, so there is no performance record yet in the U.S. LNG market." He added, "The recent increase in order backlog of the top U.S. LNG EPC company has caused production capacity (CAPA) issues, and the U.S.'s aggressive LNG project investment policy presents a clear opportunity in terms of the trickle-down effect. We expect the waves of the industry to rise."