Samsung E&A (028050), where Samsung Electronics Executive Chairman Jay Y. Lee recently met with employees during a visit to the United Arab Emirates, has drawn a wave of target price increases from brokerages after reporting earnings far above market expectations. Even excluding one-off gains, results beat estimates, and with an expanding order book and large-scale shareholder returns, expectations are building for a re-rating of the company.
Sixteen brokerages raised their target prices for Samsung E&A between the 22nd and the 23rd, according to the financial investment industry on the 23rd. KB Securities and IBK Investment & Securities lifted theirs to 81,000 won and 72,000 won respectively on the 22nd, followed by 14 others including NH Investment & Securities and Korea Investment & Securities on the 23rd.
NH Investment & Securities raised its target to 86,000 won from 80,000 won, and Shinhan Securities to 79,000 won from 68,000 won. Daishin Securities and Daol Investment & Securities lifted theirs to 75,000 won and 76,000 won respectively. All are well above the previous session's close of 55,400 won.
Samsung E&A said on the 22nd that third-quarter consolidated revenue rose 45.8% from a year earlier to 2.91 trillion won ($2 billion). Operating profit climbed 183.6% to 500.6 billion won, exceeding the market consensus of 252 billion won by 98.6%. The operating margin came in at 17.2%.
The results, nearly double market estimates, were driven in part by about 230 billion won in one-off gains, including roughly 100 billion won from the reversal of provisions on the Yanbu power project in Saudi Arabia, incentives from clients for design efficiency improvements, and settlement profits on completed projects. Park Young-do, an analyst at Daol Investment & Securities, said operating profit still beat market expectations at about 270 billion won even excluding those items. Moon Kyung-won, an analyst at Meritz Securities, classified the gains as one-off because it is difficult to be confident they will recur, but said they were closer to structural in nature, stemming from execution innovation and the use of artificial intelligence.
Orders are also expanding, led by large Middle East projects. Samsung E&A won 9.4 trillion won in orders in the third quarter alone, including the SAN-7 project in Saudi Arabia. Its order backlog stood at 27.2 trillion won, a record high. The company accordingly raised its new order target for this year to 19 trillion won from 12 trillion won and its revenue target to 11 trillion won from 10 trillion won. It lifted operating profit guidance by 75% to 1.4 trillion won from 800 billion won.
Group-level support for the Middle East business is also continuing. Lee visited the construction site of the Al Dhafra gas-fired power plant in Abu Dhabi, UAE, on the 21st. The site is being built by Samsung C&T in a consortium with a local construction company, and Lee discussed changes in the Middle East market, future business direction and plans to enter new businesses with executives from Samsung C&T and Samsung E&A. At a meeting with employees of the two companies, he heard about difficulties in carrying out overseas projects and thanked them for their work. Samsung E&A uses the UAE as its base for Middle East and Africa operations, running refining, gas and petrochemical plant businesses.
Brokerages expect affiliate investment and overseas orders to underpin earnings next year as well. NH Investment & Securities estimated that, assuming Samsung Electronics begins construction on an additional chip plant in 2027, annual orders of more than 7 trillion won are achievable even on conservative assumptions. Meritz Securities projected total orders of about 18 trillion won next year, reflecting an increase in inquiries for refining projects.
Expanded shareholder returns are another factor boosting the investment case. Samsung E&A decided on the 22nd to buy back 780 billion won worth of its own shares, separate from its existing dividend policy. Of that, 690 billion won worth will be cancelled, with the remaining 90 billion won to be used for employee bonuses. The shares slated for cancellation equal 7.4% of outstanding stock.
