Shinyoung Securities said on Oct. 25 that it expects Samsung Heavy Industries’ operating profit to swell by more than 60 percent next year due to higher unit prices of ships. It raised its price target to 16,000 won from 15,000 won and issued a buy opinion. The Korean shipbuilder’s stock closed at 10,500 won on Oct. 24.

Samsung Heavy Industries’ consolidated sales hit 2.32 trillion in the third quarter, up 14.7 percent year on year and its operating profit 119.9 billion won, up 58 percent. Its operating margin remained unchanged at 5.2 percent from the previous quarter, which means that the shipbuilder did not show low seasonal profitability this year, unlike in other years.

Shinyoung Securities expects Samsung Heavy Industries to meet its full-year guidance of 9.7 trillion won in sales and 400 billion won in operating profit. “Of the US$9.7 billion in orders targeted for this year, US$7.2 billion is for merchant ships and Samsung Heavy Industries reached 75 percent of its order-taking goal in the third quarter,” said Um Kyung-ah, a researcher at Shinyoung Securities.

Especially beginning from 2025, effects from an increase in unit prices of ships is expected to be more noticeable than those from an increase in the number of ships built. “The average unit price of LNG carriers in 2025 is expected to increase by more than 5 percent compared to this year,” Um said. “Samsung Heavy Industries’ annual sales are projected to climb by 4.6 percent to 10.13 trillion won and its operating profit by 60.2 percent to 757 billion won in 2025.”

“Shipbuilders are yet undervalued by the market compared to a rise in their return on equity (ROE),” Um added. “Investors will be able to enjoy benefits from Samsung Heavy Industries’ strong performances by holding the shipbuilder’s stocks in 2025 when an improvement in earnings will be evident.”

Source: Business Korea