Earnings and stock outlook for Samsung Engineering Co., the plant engineering arm of South Korea’s largest conglomerate Samsung Group have brightened on expectations that oil-producing countries would increase their facility investment following a rebound in international oil prices.

Fueled by optimism over its business prospects, Samsung Engineering shares hit a new 52-week high on Tuesday after soaring 31.1 percent since the first trading of this year on foreign and institutional buying. Its shares closed Wednesday at 13,300 won, down 1.48 percent, or 200 won, from the previous session, taking a breather after the recent winning streak.

In particular, hopes are high for a turnaround in its chemical business unit from the rebound in oil prices.

Samsung Engineering’s plant business consists of chemical and non-chemical units. Its chemical unit, which constructs oil and gas facilities, refinery plants and petrochemical plants, accounted for 48 percent of its total sales as of the third quarter in 2016, while non-chemical unit building power generation facility and semiconductor and pharmaceutical factories contributed 52 percent.

In the last few years when international oil prices had remained depressed, the company’s chemical unit had struggled from a plunge in oil-related facility investment across the world. Samsung Engineering registered 1.45 trillion won ($1.26 billion) in operating loss in 2015 and over 1 trillion won in 2013 as orders have remained extremely scarce. Reflecting concerns over its chemical unit performance, the company’s share price had remained in the doldrums.

But with a recovery in the international oil prices in the latest months, expectations have grown that the company’s share price that moves closely with the company’s order backlogs would pick up, Lee Kyung-ja, a researcher at Korea Investment said, adding the company’s order is largely affected by oil prices.

Market analysts expect that when the oil price exceeds $55 a barrel, its offshore oil projects and construction of refinery plants are also expected to pick up speed. The international oil prices including WTI crude and Brent crude, have lately surpassed $50 per barrel. Backed by the recent recovery in the oil price, Samsung Engineering successfully made a turnaround last year by posting 70.1 billion won in operating profit.

Samsung Engineering that heavily relies on plant orders from its sister companies is also expected to gain boon this year from its affiliate Samsung Display Co. that landed a deal to supply light-emitting diode (OLED) displays for Apple this year, a move that would require Samsung Display to expand production facility. Samsung Engineering that has earned orders of 2 trillion to 3 trillion won each year from Samsung affiliates received orders worth 1.9 trillion won from Samsung Display alone last year.

The Korean plant builder is also expected to benefit from Donald Trump administration’s drive to build energy infrastructure in the US taking cue from the recovery of the global oil prices.

According to brokerage houses, Samsung Engineering is forecast to record 161.2 billion won in operating profit this year, more than doubling from a year ago, on sales of 5.69 trillion won.

By Chung Woo-sung

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