[Click e-Stock] "Samsung SDI Faces Ongoing External Challenges... Target Price Lowered"

Target Price Lowered from 250,000 Won to 230,000 Won

On July 17, Shinhan Investment Corp. reported that the challenging external environment for Samsung SDI is persisting and lowered its target price from 250,000 won to 230,000 won. The investment opinion remains 'Buy'.

Researcher Lee Jinmyung stated, "The target price was reduced by 12% compared to the previous estimate, reflecting downward revisions in earnings forecasts." He explained, "Despite strong electric vehicle sales, European shipments from January to May fell by 12% year-on-year, and North American shipments also declined slightly despite new plant operations, indicating continued sluggishness. For the second half of the year, losses are expected to persist due to the early termination of the U.S. electric vehicle tax credit and lower market share resulting from the increased adoption of low-cost batteries in Europe."

Samsung SDI's second-quarter results this year are expected to fall short of market expectations. Lee forecasted, "Second-quarter operating loss is projected at 285.5 billion won, below the consensus (the average forecast by securities firms)." He added, "Revenue from the mid-to-large battery segment is expected to be 2.1 trillion won, down 3% from the previous quarter, with an operating loss of 233.5 billion won. For electric vehicle (EV) batteries, revenue is likely to decrease due to slow recovery following inventory adjustments by European clients and lower utilization rates at the Stellantis joint venture in the U.S., leading to a larger operating loss." For small batteries, revenue is expected to increase by 26% to 957.7 billion won, and the operating loss is expected to narrow to 72.3 billion won. Lee explained, "Cylindrical batteries are expected to show a gradual recovery due to inventory buildup for power tools and the expansion of new applications, while pouch batteries are expected to benefit from seasonal demand."

He also assessed that the possibility of further earnings deterioration is limited. Lee said, "Given robust North American energy storage system (ESS) demand, the review of converting some lines at the Stellantis joint venture to ESS, and the expansion of new applications for small batteries, the potential for additional deterioration is limited." He added, "Despite weak performance this year, considering the bottoming out of European shipments in the first quarter, expectations for orders in the second half, and increased contribution from ESS results, expectations for a recovery next year remain valid."