Company overview

Samsung Heavy Industries (SHI) is the shipbuilding and offshore arm of the Samsung conglomerate, and one of South Korea's "Big Three" shipbuilders alongside HD Hyundai Heavy Industries and Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering). Founded in 1974, SHI specialises in high-value vessels — liquefied natural gas (LNG) carriers, ultra-large container ships and drillships — and operates its primary yard in Geoje, on the southern coast of Korea.

Any discussion of SHI's efforts to improve shareholder value must begin with an uncomfortable history. Between 2015 and 2022, the company posted consecutive annual losses and raised capital through rights issues on three separate occasions, diluting existing shareholders each time. Dividends were suspended after 2014 and no share buybacks were conducted throughout that period. The return to profitability in 2023, coinciding with what many in the industry describe as a structural upcycle in global shipbuilding, has rekindled expectations of shareholder returns. Those expectations were further stoked by the South Korean government's "Corporate Value-up Programme", announced in early 2024, which encouraged listed companies — particularly those trading below book value — to present concrete plans for improving capital efficiency and investor returns.

SHI's price-to-book ratio (PBR) has languished below 1.0x for many years, a reflection of the capital-intensive nature of shipbuilding and the way in which order-book revenues are recognised over long construction cycles. Both management and investors broadly share the view that the company is structurally undervalued relative to its contracted earnings pipeline.

Business and financial performance

*Business structure*

SHI's operations divide into two main segments: commercial vessels and offshore facilities. The commercial segment — which accounts for the bulk of revenue — covers LNG carriers, container ships, very large crude carriers (VLCCs) and LPG tankers. The company is regarded as a global leader in LNG carrier construction by market share. The offshore segment includes drillships and floating production, storage and offloading (FPSO) units, though this business was severely damaged by the collapse in oil prices in 2015–16 and has remained a source of financial risk since.

SHI's competitive edge rests on two capabilities: LNG dual-fuel propulsion technology and smart-ship solutions. As demand for low-emission vessels grows in response to decarbonisation pressures, the company's positioning in this segment has been reappraised more favourably by the market.

*Financial results*

Year | Revenue (KRW bn) | Operating profit (KRW bn) | Net profit (KRW bn) | Notes

2018 | 6,723 | -354 | -410 | Continued offshore plant losses

2019 | 7,511 | -187 | -263 | Weak recovery in new orders

2020 | 6,890 | -512 | -622 | COVID-19 and drillship losses

2021 | 6,204 | -489 | -550 | Surge in steel plate costs

2022 | 7,042 | -126 | -211 | Approaching breakeven

2023 | 9,013 | 322 | 265 | First profit in seven years

2024 | ~10,500 | ~650 | ~520 | Profitability expanding (est.)

*2024 figures are provisional estimates and subject to revision pending official results.*

The return to profit in 2023 carries symbolic as well as financial significance. It came after accumulated losses of approximately KRW 5 trillion (roughly $3.8bn) since 2015. Industry analysts expect operating profit to expand further in 2025–27 as vessels ordered at today's higher prices are delivered.

The value-up timeline

*2015–2022: A decade of dilution*

This period constitutes the negative baseline against which all subsequent progress must be measured. To cover losses stemming from offshore plant contracts, SHI conducted three rights issues — in 2015, 2016 and 2021 — raising a combined total exceeding KRW 2 trillion. Existing shareholders bore the full brunt of dilution, dividends were eliminated entirely, and the share price fell more than 80% from its peak. The structural failures of this era — above all, the mispricing of risk in offshore projects — became the starting point for later value-up discussions.

*January 2023: Return to profit and renewed expectations*

In early 2023, SHI disclosed a sharp narrowing of its operating loss for 2022 and indicated that a return to full-year profitability was within reach. The share price rose more than 30% from the start of the year, and foreign investor ownership began to edge upwards.

*Second half of 2023: Record order backlog*

Through the second half of 2023, SHI secured a series of large LNG carrier orders from QatarEnergy and major European energy companies. By the end of the year, its order backlog had grown to approximately $37bn — equivalent to two to three years of revenue — providing an unusually high degree of earnings visibility for a business accustomed to cyclical uncertainty.

*February 2024: Government value-up programme*

The announcement of the Korean Financial Services Commission's Corporate Value-up Programme brought SHI into sharp focus. With its PBR at roughly 0.8–0.9x at the time, the company was squarely among the cohort of sub-book-value firms the government was targeting. Brokerages began to rank SHI as one of the primary beneficiaries of the programme within the shipbuilding sector.

*Mid-2024: Dividend reinstatement under consideration*

At investor relations events during 2024, SHI's management indicated that it was reviewing the possibility of resuming dividends once profitability had stabilised. No specific payout ratio or share cancellation plan was disclosed, though the company acknowledged that internal discussions on a medium-term shareholder return policy were under way. Several brokerages flagged 2025–26 as the most likely window for a dividend restart.

*Late 2024: Lagging on formal disclosure*

When the Korea Exchange launched a dedicated value-up disclosure platform and encouraged voluntary filings, SHI's absence drew notice. Hanwha Ocean had already published a proactive shareholder return plan; HD Hyundai Heavy Industries had similarly outlined dividend intentions in advance. SHI's continued "under review" posture, against this backdrop, attracted mild but pointed criticism from parts of the investment community.

Challenges and assessment

*Outstanding challenges*

Analysts identify four structural issues that SHI must address if it is to translate improved earnings into a genuine re-rating.

Dividend reinstatement — timing and credibility. Seven years without a dividend has eroded trust. Simply restarting payments will not suffice; investors are pressing for an explicit medium-term shareholder return framework, including a target payout ratio.

Buybacks and share cancellations. SHI's holdings of treasury shares are minimal. Compared with its peers, the company is seen as lagging on proactive capital management.

Offshore legacy risk. Unbilled receivables related to drillship and FPSO contracts remain a potential source of future write-downs. Until this uncertainty is resolved, the market is unlikely to award a meaningful valuation premium.

Governance. SHI sits on the periphery of the Samsung group's complex ownership structure — anchored by Samsung C&T, Samsung Electronics and Samsung SDI. Calls for stronger independent board oversight and expanded minority shareholder rights will persist regardless of the shipbuilding cycle.

*Overall assessment*

SHI finds itself at an unusual intersection: a structural upcycle in its core business coinciding with an externally driven push for capital returns. Its $37bn order backlog — a record — provides the most robust near-term earnings floor in the company's history. Its LNG-heavy, low-emission vessel portfolio offers a credible basis for a long-term valuation premium, and its balance sheet is improving rapidly after years of haemorrhaging cash.

Against that, the absence of a concrete shareholder return commitment, the lingering memory of three dilutive capital raises, and unresolved offshore-segment risks collectively prevent the market from fully pricing in the recovery. The industry consensus is that 2025–26 will be the decisive test: whether SHI can match its financial rehabilitation with a shareholder return policy that is specific, sustainable and communicated clearly.

Key metrics summary

Year | Dividend (KRW/share) | Buybacks | Operating profit (KRW bn) | PBR (x) | Notes

2018 | 0 | None | -354 | 0.5–0.6 | Dividends suspended

2019 | 0 | None | -187 | 0.6–0.7 | Early order recovery

2020 | 0 | None | -512 | 0.4–0.5 | COVID-19; heavy losses

2021 | 0 | None | -489 | 0.6–0.7 | Rights issue conducted

2022 | 0 | None | -126 | 0.7–0.8 | Losses narrowing

2023 | 0 | None | 322 | 0.8–0.9 | First profitable year since 2016

2024 | TBC | Under review | ~650 | ~1.0 | Value-up pressure intensifying (est.)

*PBR ranges reflect intra-year trading bands and may differ from official year-end figures. The 2024 dividend decision is expected to be confirmed at the 2025 annual general meeting.*

Summary: SHI returned to profit in 2023 for the first time in seven years, and enters the next phase with a record order backlog of approximately $37bn. Whether it can translate that financial recovery into a credible, long-term shareholder return policy — and finally close the gap between its book value and its market price — will determine whether the value-up story becomes reality or remains aspiration.