[Click eStock] Samsung Heavy Industries, Ongoing Drillship Risks

[Asia Economy Reporter Hwang Junho] Daishin Securities maintained the target price of Samsung Heavy Industries at 6,500 KRW on the 3rd. It also forecasted a stock price fluctuation of -10% to 10% compared to the market return over the next six months.

Samsung Heavy Industries continued to face risks related to Brazilian drillships in the fourth quarter of last year. The sales revenue for Q4 last year recorded 1.6653 trillion KRW, down 23% compared to the same period the previous year. Operating profit turned positive at 2.6 billion KRW. This performance exceeded market expectations.

The operating profit was influenced by a reversal of PDC arbitration provisions amounting to 134 billion KRW, a provision for repairs of SK LNG ship cargo tanks of 35 billion KRW, and a provision related to oil tankers ordered in the second half of 2020 of 33 billion KRW. Excluding one-time factors, the net operating loss was 63.4 billion KRW. Non-operating expenses included a provision for Brazilian drillship liabilities of 123 billion KRW and an impairment loss on assets at the Geoje shipyard of 102.5 billion KRW, resulting in a net loss of 261.2 billion KRW for the period.

New orders in 2020 amounted to 5.5 billion USD, achieving 65% of the initial target of 8.4 billion USD. Compared to the target for merchant ships, 93% was achieved. The order target for this year is 7.8 billion USD, with 4.6 billion USD for merchant ships and 3.2 billion USD for offshore projects.

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