[Click eStock] "Samsung Heavy Industries, Profit Turnaround Expected in 2023"

[Asia Economy Reporter Song Hwajeong] Daishin Securities maintained its investment opinion of 'market performance' and a target price of 5,600 KRW for Samsung Heavy Industries on the 11th, stating that although earnings improvement is slow, the company has sufficient resilience and is expected to return to profitability in 2023.

Samsung Heavy Industries improved its financial structure through a rights offering and reduced drillship backlog risk, but earnings improvement remains slow. Daishin Securities estimated that Samsung Heavy Industries recorded sales of 1.8113 trillion KRW in the fourth quarter of last year, a 9% increase compared to the same period the previous year, with an operating loss of 119.5 billion KRW. Lee Dongheon, a researcher at Daishin Securities, explained, "This sales figure is 3% higher than market consensus, but the operating loss has expanded. Sales improved due to seasonal peak demand and the recognition of deferred work from the third quarter, but operating profit was affected by one-time factors such as fixed cost burdens from low-price volume recognition, settlement costs from wage negotiations, and drillship maintenance expenses."

Last year's annual orders increased by 121% compared to the previous year, reaching 12.2 billion USD, and the volume of commercial ship orders alone is at peak historical levels. The order backlog based on sales secures more than two years, and profitability is expected to begin in 2023. After completing a capital reduction, the financial structure stabilized with a 1.28 trillion KRW rights offering, and the company appears to have sufficient resilience to endure slow earnings improvement, as the deficit is expected to narrow this year. The researcher added, "With the dock filled with delivery volumes until mid-2024, selective orders are possible this year due to rising ship prices, marking the start of a mid- to long-term growth trend from 2023. An additional positive factor is the potential reduction in competition if the European Union (EU) approves the corporate merger review."

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