[Click eStock] "Samsung SDI May Stumble in 1Q... But Volkswagen Will Eventually Reach Out"

1Q Performance Slows Compared to 4Q... Seasonal Off-Season Impact
Only Domestic Prismatic Battery Company Gains Attention, Rebound Expected
"Volkswagen's Only Option to Target US Market Is Samsung SDI"

[Asia Economy Reporter Minwoo Lee] Samsung SDI is expected to post somewhat sluggish results in the first quarter of this year due to entering the seasonal off-season. However, this is considered a temporary factor, and growth is possible from the second quarter onward, with the company also standing out as the only domestic prismatic battery manufacturer.

On the 30th, Yuanta Securities forecast that Samsung SDI would achieve consolidated sales of 3.019 trillion KRW and an operating profit of 152.8 billion KRW in the first quarter of this year. This represents increases of 25.9% and 181.3%, respectively, compared to the same period last year. However, these figures are down 7.1% and 37.9%, respectively, from the fourth quarter of last year. It is analyzed that the mid-to-large battery segment and electronic materials segment inevitably suffered performance damage due to entering the seasonal off-season. Accordingly, the expected timing for the mid-to-large battery segment to return to quarterly profitability is likely to be postponed until after the second quarter. Researcher Kwangjin Kim of Yuanta Securities explained, "Sales decreased as demand in the front-end market declined, and cost increases such as fixed costs and maritime freight affected the results. However, all these are temporary factors, and a rebound is possible from the second quarter of this year."

The fact that Samsung SDI is the only domestic prismatic battery manufacturer is also expected to become increasingly prominent. The biggest reason for the recent continued weakness in the domestic secondary battery sector stock prices is attributed to Volkswagen's Power Day event. Volkswagen Group, which ranked second in electric vehicle sales last year (420,000 units), announced battery internalization and the application of prismatic integrated batteries, which is analyzed as a clear negative for the domestic battery industry. However, this could be an opportunity for Samsung SDI. Researcher Kim said, "There is a sufficient possibility that Volkswagen's position, which had shrunk due to the application of the MEB platform, will be expanded again. A reevaluation is needed for Samsung SDI as the only domestic prismatic battery manufacturer."

The biggest reason for the expected expansion of its position is the U.S. market. Since the U.S. market, which led global electric vehicle demand with a 12% market share last year, cannot be abandoned, Volkswagen will also need new battery partners within the U.S. Researcher Kim stated, "Volkswagen's prismatic batteries will be fully applied starting in 2024 when the next-generation electric vehicle platform, the MPE platform, goes into mass production. Northvolt's production capacity is insufficient, and all additional expansion plans are concentrated in Europe. Considering that Chinese prismatic battery manufacturers are practically unlikely to invest in the U.S., the most realistic alternative is Samsung SDI alone."

Against this background, Yuanta Securities maintained a 'Buy' investment rating and a target price of 900,000 KRW for Samsung SDI. The closing price the previous day was 651,000 KRW. Researcher Kim explained, "Samsung SDI's new expansion in the U.S. this year is understood to be at the internal discussion stage, but there is sufficient incentive to decide. Considering the required time, a decision is likely within this year, and the medium- to long-term growth potential cannot be considered impaired."