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Performing well with further upside ahead

3Q26 preview: Likely to beat the consensus

For 3Q26, we expect Samsung E&A to report consolidated revenue of W2.74tr (+37.2% YoY) and operating profit of W256.8bn (+45.5% YoY), with the latter exceeding the current consensus (W235.2bn) by 9%. Despite concerns surrounding the Middle East conflict, the impact on major overseas projects, including the Fadhili project in Saudi Arabia, likely remained limited in the quarter (as in 2Q26). While the decline in the USD/KRW rate should inevitably be a drag on overseas earnings, the continued recognition of favorable profit adjustments should offset this impact. As Samsung E&A’s initiative to improve project execution through design optimization, automation, and modularization has repeatedly enhanced earnings, we believe such benefits can no longer be viewed as one-off gains. Revenue growth in the advanced tech and new energy businesses, driven primarily by projects for group affiliates, should also support operating profit by easing SG&A expense pressures.

Record-high orders expected in 2026

Cumulative new orders through 3Q26 should exceed the company’s full-year guidance of W12tr, supported by strong affiliate orders and the SAN-7 ammonia/fertilizer contract secured in 3Q26 (approximately W4.7tr on a consolidated basis). An upward revision to the full-year order guidance also remains possible. We forecast 2026 new orders at more than W17tr, which would mark the highest annual figure in the firm’s history. For several large-scale hydrocarbon projects expected to be awarded by year-end―including the Mexinol project in Mexico (US$2bn), the urea project in Qatar (US$2.5bn), and the Khafji gas project in Saudi Arabia (US$2bn)―we expect Samsung E&A to pursue a selective bidding strategy. Affiliate orders should continue to expand in 2H26, driven by finishing work at Samsung Electronics’ Pyeongtaek P4 project, structural work at P5, and the earlier-than-planned start of construction on P5 Fab 2.

Maintain Buy and raise TP to W72,000; our second-most preferred pick

We maintain our Buy rating on Samsung E&A and retain the stock as our second-most preferred pick in the construction sector. We raise our target price by 3% to W72,000 (from W70,000), reflecting our revised 2026F BPS estimate. Our target P/B is unchanged at 2.6x, in line with the average of four major global peers.

With overseas hydrocarbon orders set to expand and affiliate order intake remaining elevated, we expect earnings to remain on an upward trend over the medium to long term. We believe the company’s expanding project portfolio spanning LNG, water, and SAF, together with its capacity to invest in new businesses backed by around W3tr in net cash, provides a solid basis for sustainable growth.