Samsung Heavy Industries to Prove Its Worth Starting in Q2 After Long Wait [Weekend Money]

Production Expansion from Q2
Full-Scale Reflection of Overseas Orders

Samsung Heavy Industries, which has been relatively quiet, is expected to show signs of recovery starting from the second quarter of this year. The effects of restarting its second dock and subcontracted production at China's PaxOcean are projected to begin in earnest from the second quarter. Additionally, new orders for high-value, eco-friendly vessels such as FLNG (Floating Liquefied Natural Gas production facilities) are expected to materialize from next year, leading analysts to predict smooth sailing ahead.

Against this backdrop, Daishin Securities raised its target price for Samsung Heavy Industries by 11.1%, from 36,000 won to 40,000 won, while maintaining its 'Buy' investment recommendation.

For the first quarter of this year, Daishin Securities estimates sales of 3.0805 trillion won and operating profit of 316.1 billion won. These figures represent increases of 23.5% and 156.8%, respectively, compared to the same period last year. Daishin Securities expects a full-fledged improvement in Samsung Heavy Industries' performance, as the benefits from restarting the second dock and production input at China's PaxOcean will be reflected from the second quarter. The second dock is allocated for high-margin vessels such as Very Large Ethane Carriers (VLEC) and shuttle tankers, contributing to profitability.

The outlook remains positive. The company is simultaneously working on projects for Malaysia's ZNLG, Canada's Cedar, and Italy's Coral. New FLNG orders are expected to start contributing to results from next year. Although the 6 trillion won U.S. Delfin FLNG project has seen some delays, the goal is to sign a contract within the first half of this year. Negotiations for an order for the Canadian Western FLNG are underway and are expected to conclude in the fourth quarter. With robust demand for FLNG, Samsung Heavy Industries is expected to steadily build up its order backlog.

The shuttle tanker business is also progressing smoothly. The ongoing conflict between the United States and Iran has driven up oil tanker rates, creating favorable demand conditions. Since only Samsung Heavy Industries and China's Wison Shipyard build shuttle tankers globally, competition is relatively less intense.

Furthermore, U.S. projects are considered a positive factor. The company is pursuing a next-generation military support vessel project with NASSCO in the United States. It also plans to undertake maintenance, repair, and overhaul (MRO) work for U.S. Navy vessels in partnership with U.S. company Vigor Marine. Daishin Securities researcher Lee Jinhee commented, "With collaboration among various local businesses in the U.S., expansion of U.S. operations is anticipated. In particular, if legislative amendments related to U.S. military vessels are realized alongside tangible results, further portfolio diversification will become possible."

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