Samsung Heavy Industries: Powering the Energy Transition with a $26.5 Billion Order Backlog and Margin Expansion

Samsung Heavy Industries (SHI) is emerging as a pivotal player in the global energy transition, leveraging a $26.5 billion order backlog and a strategic focus on high-margin liquefied natural gas (LNG) and offshore construction projects. As the world scrambles to replace Russian oil and gas with cleaner alternatives, SHI's recent $637 million (KRW1.96 trillion) floating LNG (FLNG) contract in Mozambique and a series of mid-sized vessel deals signal robust near-term cash flow visibility and a path to long-term leadership in decarbonization-driven infrastructure.

A $2.5 Billion FLNG Catalyst in Mozambique

The Mozambique FLNG project, part of the Coral Norte gas field, is a cornerstone of SHI's 2025 strategy. This preliminary agreement, signed with a European shipping company, could expand to $2.5 billion if finalized. The project is critical for Mozambique's ambition to become a regional LNG hub, with the Coral Norte field expected to produce 3.55 million tons of LNG annually by 2028. For SHI, the contract represents 8.8% of its 2023 revenue and aligns with its goal to secure one to two offshore facility contracts annually.

The project's strategic relevance is amplified by SHI's proprietary SENSE IV liquefaction technology, which challenges the dominance of U.S. and European firms in FLNG systems. This technological edge, combined with the project's scale, positions SHI to capture higher margins in a sector where offshore facilities typically yield 15–20% operating margins compared to 8–12% for traditional shipbuilding.

Mid-Sized Vessel Deals: Fueling Order Growth and Margin Resilience

SHI's order backlog is being bolstered by mid-sized LNG carrier contracts, such as the $261 million vessel for an Oceania-based client. This order, part of SHI's 84-vessel LNG carrier backlog ($19.1 billion), underscores its dominance in a segment where demand is surging. The company has already secured $3.3 billion in 2025 orders, representing 34% of its $9.8 billion annual target, and its order backlog of $26.5 billion as of June 2025 ensures operations at full capacity for three years.

The shift toward eco-friendly vessels—such as ammonia and ethane carriers—is also driving margin expansion. These high-value projects now account for 86% of SHI's 2025 orders, with LNG carrier prices rising over 5% year-over-year. This trend is supported by regulatory tailwinds, including the International Maritime Organization's (IMO) carbon tax, which is accelerating the scrapping of older vessels and redirecting demand toward greener alternatives.

Decarbonization as a Strategic Differentiator

SHI's long-term success hinges on its leadership in decarbonization. The company is commercializing ammonia-powered ships, a critical technology for achieving the IMO's 2050 net-zero target. Partnering with Amogy, SHI is developing ammonia-to-electrical power systems validated by Lloyd's Register, positioning itself as a first-mover in a $100 billion market. These vessels, expected to enter service by 2027, will cater to European and Asian clients seeking compliance with the EU's Carbon Border Adjustment Mechanism (CBAM) and Japan's Green Innovation Strategy.

Beyond vessels, SHI is decarbonizing its own operations by transitioning to renewable energy and improving energy efficiency by 5–10%. These initiatives align with South Korea's national climate goals and strengthen SHI's ESG credentials, a key factor for investors prioritizing sustainability.

Investment Implications: A High-Conviction Play on Energy Transition

SHI's accelerating order backlog, margin expansion, and decarbonization strategy present a compelling investment case. With $3.3 billion in 2025 orders already secured and the potential for $2.5 billion in FLNG revenue, the company is well-positioned to exceed its $9.8 billion target. Financial metrics reinforce this optimism: SHI's EBIT margin is projected to rise from 4.56% in 2024 to 6.71% in 2025, while its net income is expected to jump from 63.88 billion KRW to 500.06 billion KRW.

For investors, SHI offers exposure to two megatrends—energy transition and decarbonization—through a company with unmatchable technical expertise and global project execution. Risks include geopolitical delays in offshore projects and cyclical fluctuations in shipbuilding demand, but SHI's diversified order book and first-mover advantage in ammonia technology mitigate these concerns.

Conclusion: Building a Legacy in the LNG Era

Samsung Heavy Industries is not just a shipbuilder; it is a cornerstone of the global energy transition. By securing high-margin FLNG projects, innovating in green technology, and aligning with regulatory trends, SHI is cementing its role as a leader in the LNG and offshore construction boom. For investors seeking a high-conviction play on decarbonization and energy security, SHI's $26.5 billion order backlog and margin expansion trajectory make it an irrefutable choice.

The energy transition is no longer a distant horizon—it is here, and SHI is sailing full steam ahead.