Samsung SDI's Rebound Delayed... 2Q Results Also Weak [Click e-Stock]

Front-end Demand Remains Weak
Per-share Value Diluted by Rights Offering

There is analysis suggesting that a rebound in Samsung SDI's stock price remains unlikely in the near term. This is because demand in key markets in Europe and North America continues to be sluggish, leading to expectations that the company's second-quarter results this year will fall short of market expectations. In addition, the per-share value has been diluted due to a rights offering.

On June 19, KB Securities lowered its target price for Samsung SDI by 14.3% to 240,000 won for these reasons. The previous day's closing price was 169,200 won. The investment opinion of "Buy" was maintained.

KB Securities raised its estimate for Samsung SDI's operating profit next year from 20 billion won to 54.04 billion won, reflecting the U.S. government's Advanced Manufacturing Production Credit (AMPC). Nevertheless, the company predicted that this year's results would remain weak due to sluggish demand. Furthermore, it cited the dilution of per-share value following the completion of the rights offering and new share listing on June 13 as another factor holding back the stock price.

For the second quarter of this year, KB Securities forecast sales of 3.5 trillion won and an operating loss of 194 billion won. Compared to the same period last year, sales are expected to decline by 21.4%, and the company is projected to swing to a loss. While this would be an improvement from the worst results in the first quarter of this year (sales of 3.1768 trillion won and an operating loss of 543.5 billion won), it is still expected to fall short of market consensus.

In detail, small battery sales are projected to grow by 28% quarter-on-quarter, driven by the end of inventory adjustments for electric power tools and expanded sales of battery backup units (BBUs). The burden of fixed costs is also expected to decrease, leading to a significant improvement in profitability.

However, results for prismatic batteries for electric vehicles (EVs) are expected to remain weak. Although initial expectations were for 20-30% growth quarter-on-quarter, the growth rate is now expected to be in the single digits. The operating rate of StarPlus Energy (SPE), the U.S. joint venture between Samsung SDI and Stellantis, is expected to decline, resulting in AMPC receipts falling from 109.4 billion won in the first quarter to 73.3 billion won in the second quarter. In addition, a decline in the won-dollar exchange rate could also be a drag on performance.

Lee Changmin, a researcher at KB Securities, explained, "We estimate that Samsung SDI will return to quarterly profitability in the fourth quarter of 2025, when demand for prismatic EV batteries is expected to expand, especially in Europe, and quarterly results for energy storage systems (ESS) are expected to reach record highs."