KB Securities Raises Target Price for Samsung Heavy Industries Despite Rising Costs
KB Securities announced on the 24th that, despite incurring costs of approximately 40 billion KRW following the resolution of wage and collective bargaining negotiations with Samsung Heavy Industries, the company exceeded expectations for its third-quarter operating profit. As a result, KB Securities raised its target price for Samsung Heavy Industries from 21,500 KRW to 25,000 KRW. However, they noted that compared to the previous days closing price of 23,900 KRW, the potential for further increase is limited to only 4.6%, maintaining a neutral investment rating.
Samsung Heavy Industries reported provisional figures for the third quarter, with sales reaching 2.6348 trillion KRW and an operating profit of 238.1 billion KRW. This marks an increase of 13.4% in sales and a staggering 98.6% in operating profit compared to the same period last year. The operating profit surpassed the consensus estimate collected just prior to the earnings announcement by 8.9%.
Jung Dong-ik, a researcher at KB Securities, explained that while costs associated with the labor negotiations were incurred, they were largely offset by a reduction in the use of contingency funds for certain projects and savings in trial operation costs. He noted improvements in profitability due to a decrease in the proportion of low-priced container ship contracts and an increase in the share of floating liquefied natural gas production, storage, and unloading facilities (FLNG) in the sales composition.
During a conference call explaining the third-quarter results, Samsung Heavy Industries disclosed that it has established a strategic partnership with the Biga Marine Group for maintenance, repair, and overhaul (MRO) services for U.S. Navy support vessels. Additionally, the company is in discussions with several local shipyards regarding various business plans, including the construction of commercial vessels. Jung expressed optimism that concrete results from these discussions could lead to expanded business opportunities in the United States.
Samsung Heavy Industries reported provisional figures for the third quarter, with sales reaching 2.6348 trillion KRW and an operating profit of 238.1 billion KRW. This marks an increase of 13.4% in sales and a staggering 98.6% in operating profit compared to the same period last year. The operating profit surpassed the consensus estimate collected just prior to the earnings announcement by 8.9%.
Jung Dong-ik, a researcher at KB Securities, explained that while costs associated with the labor negotiations were incurred, they were largely offset by a reduction in the use of contingency funds for certain projects and savings in trial operation costs. He noted improvements in profitability due to a decrease in the proportion of low-priced container ship contracts and an increase in the share of floating liquefied natural gas production, storage, and unloading facilities (FLNG) in the sales composition.
During a conference call explaining the third-quarter results, Samsung Heavy Industries disclosed that it has established a strategic partnership with the Biga Marine Group for maintenance, repair, and overhaul (MRO) services for U.S. Navy support vessels. Additionally, the company is in discussions with several local shipyards regarding various business plans, including the construction of commercial vessels. Jung expressed optimism that concrete results from these discussions could lead to expanded business opportunities in the United States.
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