[Click eStock] "Samsung SDI Expected to Rebound on ESS... Target Price Raised"

Target Price Raised from 240,000 Won to 400,000 Won

On October 29, KB Securities raised its target price for Samsung SDI from 240,000 won to 400,000 won, stating that energy storage systems (ESS) are expected to make a significant contribution to the company’s overall performance improvement in the future. The investment rating was maintained at 'Buy'.

Lee Changmin, a researcher at KB Securities, explained, “The reason for raising the target price is that we reflected in our earnings estimates the expansion of ESS sales and the impact of the Advanced Manufacturing Production Credit (AMPC), considering the explosive increase in demand driven by artificial intelligence (AI) and the Chinese export licensing system. As a result, we have revised the average operating margin for 2026 to 2030 upward from the previous 2.7% to 4.1%.”

For the third quarter of this year, Samsung SDI posted revenue of 3.05 trillion won, down 6% year-on-year, and an operating loss of 591.3 billion won, both falling short of the consensus (the average forecast by securities firms). Lee noted, “The electronics materials division achieved strong results (operating margin of 16.7%) centered on semiconductor materials, driven by robust demand for AI servers. The small battery division also saw a partial recovery in demand, mainly for cylindrical electric vehicle (EV) batteries and battery backup units (BBUs), resulting in a reduced deficit compared to the previous quarter.” He added, “In contrast, the ESS division swung to a loss due to higher U.S. tariffs, and the prismatic EV battery business also underperformed because of the suspension of operations at the SPE plant, a U.S. joint venture with Stellantis, limited recovery in sales to Europe, and delayed recognition of compensation for unmet minimum order quantities from key customers.”

Despite the challenging business environment for electric vehicles, ESS is seen as a key driver of Samsung SDI’s earnings rebound. This is because explosive growth in AI-related investment and the implementation of China’s export licensing system are expected to boost domestic companies’ ESS sales to North America. Lee stated, “In particular, Samsung SDI is preparing for an all-out push in ESS, so the benefit is expected to be substantial. By conservatively approaching the sluggish EV segment and converting all lines 2 to 4 of the SPE joint venture to ESS production, the company is projected to have an ESS production capacity of 30 gigawatt-hours (GWh) in the U.S. alone by the end of 2026.” He added, “Given the strong anticipated demand, a high utilization rate is expected, and when considering the AMPC benefit, ESS will make a significant contribution to the company’s overall performance improvement.”