3Q Solid Samsung SDI... Growing Battery Expansion Potential

3Q Operating Profit Expected at 203.2 Billion KRW, Up 22.4% YoY
Strong European Electric Vehicle Market and Rising US Home ESS Demand Anticipated

[Asia Economy Reporter Minwoo Lee] Samsung SDI is expected to post solid results in the third quarter. This is attributed to the steady sales of electric vehicle (EV) batteries and small batteries as anticipated. Analysts predict continuous growth as demand for home batteries in the U.S. and EV sales in Europe increase.

According to financial information provider FnGuide on the 18th, Samsung SDI's third-quarter earnings consensus for this year stands at consolidated sales of 2.9411 trillion KRW and operating profit of 203.2 billion KRW, representing increases of 14.5% and 22.4% respectively compared to the same period last year. While EV batteries and small batteries performed well, energy storage systems (ESS) are expected to fall short of expectations due to delays in domestic order volumes. Nevertheless, polarizing film, which was anticipated to underperform, is expected to continue its growth compared to the previous quarter due to sustained strong demand for Chinese TV panels.

New demand is also expected to emerge, particularly for home batteries in the U.S. Analysts suggest that ongoing wildfires in California have increased instability in the power grid, potentially driving up demand for home ESS. Jang Jung-hoon, a researcher at Samsung Securities, explained, "Tesla, which produces the home ESS Powerwall, will inevitably have to expand production in response. Samsung SDI, which once supplied Tesla ESS, now has the potential to supply high-nickel-based small cylindrical batteries."

European EV sales remain exceptionally strong. Last month, Germany's EV sales reached 41,315 units, a 321% increase compared to the same period last year. The UK recorded 34,303 units, and France 17,878 units, representing increases of 158% and 322% respectively during the same period. Annual EV sales in Europe this year are projected to surge by 70% year-on-year to around 1 million units. Additionally, Samsung SDI has begun a second expansion of its European production base at its factory in Hungary. Upon completion, production capacity is expected to nearly double compared to the existing level.

Against this backdrop, Samsung Securities has maintained a target price of 600,000 KRW and a 'Buy' rating for Samsung SDI. Researcher Jang stated, "Fourth-quarter earnings are expected to benefit from growth in the upstream EV market and the anticipation of a quarterly operating profit turnaround for EV batteries. The potential for expanding the small cylindrical battery business for ESS and EV applications is likely to increase over time."