Samsung E&A is expected to report strong Q2 results driven by Samsung Electronics semiconductor factory construction projects, despite delays in new chemical sector orders. Analyst consensus forecasts Q2 operating profit of 215.3 billion won, a 19.06% year-over-year increase, with revenue reaching 2.5334 trillion won, up 16.32% from the same period last year. The performance is attributed to captive demand from Samsung Electronics' semiconductor facility expansion, which offsets the absence of new Middle Eastern chemical project revenues in Q2. Samsung Electronics announced capital expenditure and R&D plans exceeding 110 trillion won this year, including three major semiconductor production capacity expansion projects.
Analyst Consensus Forecasts Q2 Operating Profit at 215.3 Billion Won
Yonhap Infomax compiled consensus estimates from 12 major Korean securities firms within the past month. The consensus projects Samsung E&A's Q2 consolidated operating profit at 215.3 billion won, representing a 19.06% increase compared to the same period last year. Q2 revenue is estimated at 2.5334 trillion won, up 16.32% year-over-year. The chemical division experienced delays in new order intake, preventing revenue recognition in Q2. No cost increases related to Middle Eastern uncertainties were identified during the quarter.
Samsung Electronics Semiconductor Projects Drive Revenue Growth
Captive orders from Samsung Electronics are filling the gap left by delayed new orders. According to Yugen Investment & Securities, Samsung E&A's Samsung Electronics-related revenue reached 3.4 trillion won in 2023, accounting for 32.4% of total revenue. Samsung E&A handles most processes excluding main fab construction. Revenue growth is expected to accelerate centered on the Pyeongtaek P5 project. Samsung Electronics resumed structural work on Pyeongtaek P5 this year and began early construction on P5 Fab2. Potential construction start for the US Taylor Fab2 facility also exists.
New Order Pipeline Includes Saudi Water Treatment and Chemical Projects
A 1 trillion won Saudi water treatment project is scheduled to materialize during Q2-Q3. Expected orders in the second half include the Saudi SAN-6 ammonia project, Qatar urea project, and Mexico Mexinol blue methanol project. The Middle Eastern LNG joint FEED (Front End Engineering Design) project, which had high order expectations, is now anticipated by early next year, with Final Investment Decision (FID) projected for after the first half of next year. Group company order results are observed to become more concrete in the second half compared to the first half.
Analysts Raise Target Prices on Semiconductor Capex Cycle
Target prices have been raised consecutively to reflect the semiconductor boom. IBK Investment & Securities raised Samsung E&A's target price from 35,000 won to 60,000 won last month, stating that EPC company stock prices react most strongly when the client's investment cycle opens. Kiwoom Securities increased its target price by 5,000 won to 72,000 won, citing expected second-half orders following the government's fab construction period reduction plan and Samsung Electronics' expansion plans. Mirae Asset Securities projected that Samsung E&A will exceed this year's new order guidance by more than 30%. Song Yu-rim, researcher at Hanwha Securities, noted the possibility of upward revision to the revenue guidance (10 trillion won) depending on the speed of advanced business revenue realization, and expected a clear quarterly earnings improvement trend given favorable margin levels.
FAQ
What is Samsung E&A's expected Q2 operating profit?
Analyst consensus forecasts Samsung E&A's Q2 consolidated operating profit at 215.3 billion won, a 19.06% increase year-over-year, with revenue estimated at 2.5334 trillion won, up 16.32% from the same period last year.
Why is Samsung E&A performing well despite new order delays?
Samsung E&A's performance is supported by captive demand from Samsung Electronics' semiconductor facility construction projects, including the Pyeongtaek P5 project and potential US Taylor Fab2 facility, offsetting delays in new Middle Eastern chemical sector orders.
What new orders are expected for Samsung E&A?
Expected orders include a 1 trillion won Saudi water treatment project during Q2-Q3, and second-half orders for the Saudi SAN-6 ammonia project, Qatar urea project, and Mexico Mexinol blue methanol project, with Middle Eastern LNG FEED decisions projected for after the first half of next year.
