[Click eStock] "Samsung SDI's Role in Medium and Large Batteries for Electric Vehicles Grows"

Full-Year Operating Profit Expected to Increase 61.9% Year-on-Year
Daishin Securities "Samsung SDI Target Price Maintained at 920,000 Won"

[Asia Economy Reporter Gong Byung-sun] There is a forecast that Samsung SDI's third-quarter operating profit may slightly fall short of market expectations (consensus). However, starting from the third quarter of this year, medium-to-large batteries used in electric vehicles (EVs) are expected to play a central role in profit growth.

On the 16th, Daishin Securities estimated Samsung SDI's third-quarter sales at 3.52 trillion KRW, a 14.1% increase compared to the same period last year, and operating profit at 321.1 billion KRW, a 20.1% increase over the same period. Both sales and operating profit are 3.57% and 8.49% below the respective consensus estimates of 3.6503 trillion KRW and 350.9 billion KRW.

The underperformance in sales of medium-to-large batteries for EVs is interpreted as the reason for the third-quarter earnings estimates falling short of consensus. This is because global automotive original equipment manufacturers (OEMs) also experienced production disruptions due to semiconductor chip supply shortages. Park Kang-ho, a researcher at Daishin Securities, explained, “The weakness in medium-to-large batteries was offset by small batteries and electronic materials, resulting in sales and profit growth.”

(Provided by Daishin Securities)

However, medium-to-large batteries for EVs are expected to drive Samsung SDI's growth going forward. After turning profitable in the second quarter, the EV medium-to-large battery segment has contributed to the expansion of Samsung SDI's overall sales and operating profit. The full-year operating profit is projected to increase by 61.9% year-on-year, with a 30.6% growth expected next year.

Samsung SDI is preparing additional investments in EV medium-to-large batteries to secure global customers in the US and Europe. Currently, Samsung SDI is reportedly pursuing additional EV-related facility investments in the US and strategic partnerships with automotive OEMs. Researcher Park said, “The profitability-focused strategy compared to competitors has established a foundation for high growth,” adding, “Although conservative facility investments have led to a discount in corporate valuation, this will gradually shift to a premium factor.”

The cylindrical battery segment among small batteries is also expected to see expanded EV-related sales. With the global economic recovery next year, sales of power tools are also expected to increase. The electronic materials segment will also contribute to growth with the expansion of the semiconductor and organic light-emitting diode (OLED) markets.

Accordingly, Daishin Securities maintained its investment opinion of ‘Buy’ on Samsung SDI with a target price of 920,000 KRW. The closing price on the previous day was 750,000 KRW.