Manager Jo Ki-joon focuses on Samsung E&A's growth potential in the Middle East and US markets and its utility capabilities.
Optical communication related stocks have recently shown strong gains, attracting market attention. Several stocks, including Bit & Electron, Daehan Optic Communication, and Sungho Electronics, are surging. However, Manager Jo Ki-joon pointed out that these stocks tend to move thematically, requiring caution due to high volatility. He advised approaching them primarily with short-term trading strategies.
Although the US is requesting Korea to codify the construction of 8 nuclear power plants, opinions suggest a cautious interpretation is needed. Manager Jo Ki-joon analyzed that this request might be for propaganda purposes to promote Korea's nuclear power investment plans ahead of the US mid-term elections. Citing the past failure of Toshiba's acquisition of Westinghouse, he emphasized the need for even greater caution in nuclear power-related investments. He suggested a wait-and-see approach for stocks currently classified as nuclear power theme stocks, such as Orbitech, KEPCO E&C, and Woojin.
Jusung Engineering is currently valued at 10 trillion won in market capitalization, raising concerns about overvaluation. However, positive outlooks from brokerage firms and the inflow of ETF passive funds are analyzed to be driving the stock price increase. ETF purchases related to Samsung Electronics and Hynix influenced the stock price, leading to a rise to the 200,000 won range, with short squeezes also contributing to some of the gains. Manager Jo Ki-joon stated that it is difficult to judge the valuation relative to earnings, and thus a wait-and-see approach would be advisable.
TCK is showing solid earnings, with an estimated operating profit of approximately 120 billion won this year. DB Hi-Tek also recorded operating profits of 63.7 billion won in Q1 and over 100 billion won in Q2, with total annual operating profits expected to exceed 400 billion won. Manager Jo Ki-joon recommended approaching these two companies from a buying perspective based on their performance.
In contrast to the wait-and-see opinion for nuclear power theme stocks like Orbitech, KEPCO E&C, and Woojin, it was emphasized that construction and industrial materials companies such as Daewoo E&C, Hyundai E&C, and Suseon Industries should be approached from a buying perspective. This represents a differentiated strategy of selectively investing in companies that possess actual order and execution capabilities for nuclear power-related projects.
Nearthlab, a defense drone-related stock, has recently garnered attention with a 10% surge. The reason this stock had previously traded sideways at 30,000 to 20,000 won, below its IPO price of 41,200 won, is analyzed to be due to the burden of one-month lock-up shares (overhang). Today, approximately 650,000 shares are being digested, with over 400,000 shares processed through Samsung Securities. Foreign investors are currently buying over 150,000 shares, leading to a long bullish candle. Nearthlab possesses global wind turbine inspection and anti-drone solution technologies.
Manager Jo Ki-joon suggested a target price of 42,000 won for Samsung E&A, emphasizing the investment opportunity.
YC experienced a short-term sharp decline due to foreign selling, despite its HBM inspection equipment order from Samsung Electronics amounting to 370 billion won. In the last month, foreign investors sold over 4 million shares, reducing their holding ratio from 8% to the 3% range. However, a rebound has occurred after a short-term correction, and institutional buying has led to a change of hands. Manager Jo Ki-joon expects the order momentum to continue despite this change of hands.
These countries are rich in natural gas reserves, and active investment in LNG-related infrastructure is anticipated. Additionally, the growing demand for combined cycle power generation facilities for data centers in the US will be a crucial growth driver for Samsung E&A. Thermal power generation has the advantage of shorter construction periods compared to nuclear power, and Samsung E&A also implements a shareholder return policy with a dividend yield of around 3%.
Particularly, if Korean companies expand their investments not only in Indonesia but also in the US, Samsung E&A is highly likely to secure related orders. Given that it is unlikely for projects invested in by Korean companies to award orders to companies from other countries, expectations for Samsung E&A's orders are growing even further. Orders for Saudi ammonia and methanol projects will also serve as a positive factor.
Samsung E&A plays a crucial role in supplying essential utilities within semiconductor processes. While Samsung C&T primarily handles site foundation work, exterior, and waterproofing, Samsung E&A's main responsibilities include installing substations, water and wastewater pipelines, and supplying refrigeration, steam, and compressed air, which are all vital utility facilities and equipment for semiconductor production. Manager Jo Ki-joon emphasized that Samsung E&A is, and must be, responsible for most of the semiconductor utility track.
Manager Jo Ki-joon suggested considering a purchase at the current level, setting a target price of 65,000 won and a stop-loss price of 35,000 won.
Answers come from the transcript, with the exact spot cited.
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