[Edaily Reporter kyoungeun kim ] Shinhan Investment Securities announced on the 30th that it is maintaining its “Buy” rating on SAMSUNG C&T CORPORATION(028260), noting that although the company’s second-quarter earnings significantly exceeded market expectations, its net asset value (NAV) discount has widened excessively. However, the firm lowered its target price from 520,000 won to 420,000 won to reflect factors such as a decline in the value of its listed equity holdings.
Eun Kyung-wan, a research analyst at Shinhan Investment Securities, said, “During the sharp stock market correction, the stock price fell more than the decline in the value of its equity holdings,” adding, “Considering the strengthening of core business competitiveness, the development of new businesses, and increased dividends, the discount rate is excessive.” The stock has upside potential of 47.1% compared to the previous day’s closing price (285,500 won).
Research Analyst Eun explained, “Amid the recent increase in SamsungElectronics’ stock price volatility, the stock has underperformed, causing the NAV discount rate to widen again to 62%.” He continued, “Given that earnings improvement centered on the construction sector is evident in the second half of the year, and investments in new businesses—such as energy (excluding nuclear power), data centers, and biotechnology—are continuing, the stock’s valuation appeal could come to the fore,” adding, “Expectations for increased dividends, driven by expanded shareholder returns from affiliates—including SamsungElectronics’ special dividend payment—remain valid.”
SAMSUNG C&T CORPORATION’s second-quarter revenue and operating profit were 12 trillion won and 1 trillion won, respectively, representing year-over-year increases of 19.7% and 37.1%, and significantly exceeding both Shinhan Investment Securities’ estimates and the market consensus. The improvement in company-wide performance was driven by the full-scale implementation of high-tech processes in the construction division and strong trading performance in the trading division.
By division, the Construction Division saw improvements in both revenue and profitability, driven by the full-scale launch of structural work on the P5 project in Pyeongtaek and favorable progress on overseas plant projects. Research Analyst [Name] predicted, “Considering the high-quality order backlog, the trend of improving performance is expected to accelerate as we move into the second half of the year.”
The Trading Division recorded an operating profit margin (OPM) of 3.0% by responding promptly to rising chemical and fertilizer prices and expanding sales of high-margin steel products. However, a slowdown in performance is expected in the third quarter due to declining market conditions for major products and the European Union’s (EU) implementation of import quotas on steel.
In the fashion division, sales growth for flagship and new brands continued; however, performance in the second half is expected to decline, given the recent slowdown in consumer sentiment. Within the Leisure and Food & Beverage segments, the Leisure segment posted disappointing results due to a dispersion of leisure demand, while the Food & Beverage segment achieved strong performance thanks to increased meal frequency and expanded distribution volumes of food ingredients. The Bio segment continued its sales growth, driven by full-capacity operations at Plants 1 through 4 and favorable exchange rate effects.