[Click e-Stocks] "SAMSUNG E&A Poised for Valuation Step-Up... Target Price Raised"

31.5% Increase from Previous Target

On February 24, KB Securities raised its target price for SAMSUNG E&A by 31.5% from the previous level to 48,000 won, while maintaining its "Buy" investment rating.

In a report released that day, Jang Moonjun, an analyst at KB Securities, said of SAMSUNG E&A, "We expect a clear valuation step-up to be possible within this year," adding, "Following Hyundai Engineering & Construction, we present SAMSUNG E&A as another top pick of KB Securities."

Analyst Jang reviewed the share price trend of SAMSUNG E&A since March 2020 and analyzed that, based on the 12-month forward price-to-book ratio (P/B), the stock traded around 1.4 times, with strong-share-price phases at 1.9 to 2.2 times P/B and weak-share-price phases at 0.7 to 0.8 times P/B. He explained, "Although the share price rose rapidly after the fourth-quarter results announcement last year, it has only now recovered to the average valuation level of around 1.3 times P/B on a 12-month forward basis."

He also highlighted SAMSUNG E&A's declaration that it will move beyond being a Middle East and petrochemical player to become a global energy company. SAMSUNG E&A announced that it will redefine its existing "petrochemical/non-petrochemical" business division into "petrochemical/advanced industry/new energy." The new energy segment will consist of LNG, clean energy, and Eco (water treatment), and the company plans to grow this segment from 19% of total pre-tax net profit to more than 50% by 2030.

In line with this, analyst Jang cited water-treatment solution companies such as Xylem and Ecolab as industry competitors in the water-treatment area within the new energy segment. Regarding the LNG field, he said, "With the Indonesian INPEX LNG order, we expect both market entry and expansion into new regions and business areas through additional orders," adding, "If this happens, SAMSUNG E&A, which has been delivering higher and more stable profit margins than major LNG EPC companies such as Technip Energies and JGC, will gain a key catalyst to command a higher valuation than these companies."