Mirae Asset Securities logo

Tough base of comparison persists, but investment case remains intact

2Q25 preview: OP to beat consensus by 6%

For 2Q25, we expect Samsung E&A to report consolidated revenue of W2.3tr (-14% YoY) and operating profit of W170.6bn (-35% YoY), with the latter figure beating the consensus (W161.9bn) by 6%. Hydrocarbon revenue likely continued YoY growth due to progress in major overseas projects, but non-hydrocarbon revenue likely declined YoY due to reduced orders from affiliates. We estimate consolidated operating profit fell more than 30% YoY, hurt by an unfavorable base (stemming from one-off gains in 2Q24) and a reduced contribution from FEED-to-EPC projects. Management is guiding 2025 operating profit at W700bn, down 28% from the previous year.

High order backlog and expectations for recovery in non-hydrocarbon orders

Despite the lull in non-hydrocarbon orders, the company’s order backlog remains at a historically high level (above W20tr) due to major hydrocarbon orders secured last year (including the Fadhili gas plant project in Saudi Arabia). Recent developments―such as the resumption of investment by Samsung Electronics and the start of construction on Samsung Biologics’ Plant 6―have also fueled expectations for a recovery in the non-hydrocarbon segment, contributing to the stock’s recent gains.

In the hydrocarbon segment, the San VI blue ammonia project in Saudi Arabia (US$3.5bn) and the US FEED-to-EPC blue ammonia project (US$0.5bn), which were initially expected to be awarded in 1H25, have been delayed to 2H25. Additional orders for a number of Middle East hydrocarbon projects are expected to be awarded by year-end, including the Qatar NGL-5 project (US$3.5bn), the Kuwait KOC gas project (US$2bn), the UAE Shah gas project (US$1.5bn), and the Ta’ziz project (US$3bn).

Maintain Buy and lift TP by 23% to W32,000

We maintain our Buy rating on Samsung E&A and lift our target price by 23% to W32,000 (from W26,000), as we revised up our target P/B from 1.1x to 1.3x. This adjustment reflects a reduction in the discount we applied in our valuation (factoring in the stock’s ROE relative to the average of global peers).

Earnings expectations for 2025 remain muted due to a tough YoY base and management’s conservative guidance. However, from 2H25, we expect investor attention to gradually shift toward the firm’s improving order flow, strengthened shareholder returns, and the potential for an earnings rebound in 2026. As of end-1H25, the company’s net cash stands at around W3tr.