[Click eStock] "Samsung E&A, Non-Petrochemical Concerns Already Priced In... Downside Solid, Buy Maintained"

Korea Investment & Securities stated on May 7 that concerns over the underperformance of Samsung E&A's non-petrochemical division have already been reflected in the current share price, making the downside solid. The firm maintained its 'Buy' investment rating and a target price of 33,000 won.

Kang Kyungtae and Nam Chaemin, analysts at Korea Investment & Securities, explained, "The 12-month forward P/B ratio is at a historical low." They added, "Market concerns about falling oil prices are also being addressed by order intake performance in the first quarter, which reached 3.3 trillion won (28% of the annual target)."

They predicted that it would be difficult for the non-petrochemical division to secure new orders and recover its top line in the near term. They said, "At the end of last year, the entire order backlog was recognized as revenue, and even new orders for the current year were immediately processed." They added, "Now, there are no urgent projects left, and future construction projects from group affiliates will be recognized as revenue at an average pace."

They further analyzed that the growth driver for Samsung E&A's top line lies in the petrochemical division. "With large-scale projects such as the 8 trillion won Saudi Fadhili project breaking ground in earnest, petrochemical revenue is expected to increase significantly from the second half of this year," they said. "Even if only the already secured projects proceed at a normal pace, the company can maintain and grow its top line at around 10 trillion won." They continued, "We expect 67.3% of the estimated consolidated revenue for 2026 (10.5 trillion won) to be generated from the petrochemical division, which would be the highest level since 2013."