Samsung Heavy Industries: A High-Conviction Play in the LNG and Green Shipping Revolution

Samsung Heavy Industries (SHI) is emerging as a linchpin in the global energy transition, leveraging a $26.5 billion order backlog and a strategic pivot toward green shipping to position itself as a long-term investment powerhouse. With 84 LNG carriers under contract—86% of which are eco-friendly vessels—and a robust pipeline of floating LNG (FLNG) projects, SHI is capitalizing on surging demand for cleaner energy infrastructure and regulatory tailwinds. For investors seeking exposure to decarbonization and energy security, SHI's alignment with global megatrends and its technological leadership in ammonia and hydrogen technologies make it a compelling case study.

Order Backlog and Margin Expansion: A Foundation for Stability

SHI's order book for 2025 is a testament to its dominance in the LNG sector. The company has secured $3.3 billion in new orders for the first half of 2025 alone, representing 34% of its $9.8 billion annual target. This backlog includes high-margin projects such as the $3 billion QatarEnergy contract for 15 LNG carriers and a $637 million FLNG unit in Mozambique. These vessels, with capacities of 174,000 cubic meters, are scheduled for delivery by 2028, ensuring a stable revenue stream over the next three years.

The company's focus on eco-friendly vessels—such as ammonia and ethane carriers—has further amplified margins. LNG carrier prices have risen over 5% year-over-year, driven by the International Maritime Organization's (IMO) carbon tax and the EU's Carbon Border Adjustment Mechanism (CBAM), which are accelerating the scrapping of older ships. SHI's proprietary SENSE IV liquefaction technology, used in its FLNG projects, offers a 15–20% operating margin, significantly outpacing the 8–12% margins typical of traditional shipbuilding.

Green Shipping Innovation: A First-Mover Advantage

Beyond LNG carriers, SHI is pioneering the development of ammonia-powered ships, a critical step toward achieving the IMO's 2050 net-zero target. Partnering with Amogy, the company has validated ammonia-to-electrical power systems, with vessels expected to enter service by 2027. These ships, designed for European and Asian clients, align with the EU's CBAM and Japan's Green Innovation Strategy, positioning SHI as a first-mover in a projected $100 billion green shipping market.

SHI's green initiatives extend to hydrogen and ammonia production. The company is collaborating with Seaborg on floating nuclear power plants for Power-to-X (P2X) projects and has joined forces with SwitcH2 Offshore and CorPower Ocean to develop a 300,000-ton-per-year offshore ammonia production facility in Portugal. These projects underscore SHI's commitment to diversifying its energy portfolio and aligning with South Korea's 2050 carbon neutrality goals.

Financial Resilience and Strategic Execution

SHI's financial performance reinforces its investment appeal. In the first half of 2025, operating profit surged 56.7% year-over-year, while operating revenue grew 6.1%. The company projects a 2025 EBIT margin of 6.71%, up from 4.56% in 2024, driven by high-margin green projects and efficient order execution. With a $26.5 billion backlog sufficient to sustain operations for three years, SHI is insulated from short-term market volatility.

Investment Thesis: A Decarbonization Megatrend Play

SHI's long-term potential is anchored in three pillars:
1. Regulatory Tailwinds: The IMO's carbon tax and CBAM are accelerating demand for eco-friendly vessels, with SHI's ammonia and ethane carriers poised to capture a significant market share.
2. Technological Leadership: Proprietary technologies like SENSE IV and ammonia-to-electrical power systems provide a competitive edge in a sector transitioning toward decarbonization.
3. Diversified Order Book: A mix of LNG carriers, FLNG projects, and green energy infrastructure ensures steady cash flows and margin expansion.

While risks such as geopolitical delays and cyclical demand fluctuations exist, SHI's first-mover advantage in ammonia technology and its alignment with global energy transition goals mitigate these concerns. Analysts project SHI's net income to jump from 63.88 billion KRW in 2024 to 500.06 billion KRW in 2025, reflecting robust growth.

Conclusion: A High-Conviction Investment

Samsung Heavy Industries is not merely a shipbuilder but a cornerstone of the global energy transition. Its $26.5 billion order backlog, leadership in green shipping innovation, and strategic partnerships position it to capitalize on the $100 billion ammonia-powered vessel market and the broader LNG boom. For investors seeking exposure to decarbonization and energy security, SHI offers a compelling blend of margin expansion, regulatory alignment, and long-term growth potential. As the world pivots toward cleaner energy, SHI's ability to deliver high-margin, sustainable solutions makes it a high-conviction play in 2025 and beyond.