Samsung Heavy Industries Sailing Ahead with Shipbuilding [Click e-Stock]

Ship Prices Expected to Rise This Year
Profitability Set to Improve

Samsung Heavy Industries delivered solid results in the fourth quarter of last year. Although the performance slightly fell short of market expectations, analysts note that the company continues to perform well, particularly with a focus on LNG carriers.

On February 2, Yuanta Securities raised its target price for Samsung Heavy Industries to 36,000 won, up 5.9%, and maintained its "Buy" recommendation, citing this background. The closing price on the previous trading day was 29,450 won.

In the fourth quarter of last year, Samsung Heavy Industries reported sales of 2.8279 trillion won and operating profit of 296.2 billion won. These figures represent increases of 5.1% and 70.0%, respectively, compared to the same period the previous year. However, they fell short of market forecasts, which anticipated sales of 2.91 trillion won and operating profit of 307 billion won. This shortfall is attributed to one-off bonus expenses related to strong annual earnings.

This year, the company is expected to secure orders for more than 80 to 100 LNG carriers worldwide. Rising ship prices are anticipated, as China's LNG carrier construction slots are fully booked and this year's LNG carrier orders are largely coming from the United States. For container ships, the company plans to respond to some demand for eco-friendly orders, and for tankers, it will focus on securing highly profitable projects.

However, the company has drawn a clear line regarding the defense sector. While it is attempting to achieve defense-related results in the United States by 2027, significant growth in the short term remains a distant goal. The possibility of utilizing idle docks for MRO (maintenance, repair, and operations) business is reportedly under review.

Of this year's new order target of 13.9 billion dollars, 8.2 billion dollars (3.2 billion dollars in carried-over orders from last year plus a new target of 5 billion dollars for two FLNG units this year) is allocated to the offshore segment. The merchant ship segment alone is estimated at 5.7 billion dollars.

Yongmin Kim, a researcher at Yuanta Securities, stated, "By strengthening the offshore segment with in-house personnel through overseas shipyard collaboration and outsourcing merchant ship (tanker) construction, the company will expand its offshore production capacity without additional facility investment. As the sales share of the Kakar orders secured in 2022 declines and the share of container ship orders secured in 2023-2024 increases, the overall profit margin of the merchant ship segment is expected to improve further."