Company Reports

Samsung SDI’s March-quarter revenue and operating profit missed our expectations. While sales of medium and large batteries for electric vehicles, or EVs, recorded a single-digit year-on-year growth, on our estimate, demand for cylindrical batteries and energy storage system, or ESS, batteries stayed sluggish during the quarter. Operating margin declined across all major battery segments, as the drop in the lithium price negatively affected product pricing and profitability. We lower our 2024-28 revenue estimates by 7%-10% mainly due to a reduced outlook for EV battery and energy storage battery demand. To factor in margin weakness, we reduce our 2024-28 operating income forecasts by 8%-11%.

Samsung SDI is one of the major companies in the Samsung Group, and one of the top suppliers globally of lithium-ion rechargeable batteries. By leveraging its expertise in electronic materials, Samsung SDI has been supplying various materials and films for semiconductors, LCD and OLED panels, and rechargeable batteries to Samsung Electronics, which is the world’s largest consumer electronics and memory manufacturer.

Samsung SDI's fourth-quarter 2023 revenue and operating profit missed our expectations. On a full-year basis, revenue and operating profit fell short of our expectations by 3% and 11%, respectively. While sales of medium-size and large electric vehicle batteries recorded mild single-digit year-on-year growth in the fourth quarter, on our estimate, demand for cylindrical battery and energy storage battery sales were sluggish during the quarter. There were operating margin declines across all major battery segments as a decline in the lithium price hit product pricing and profitability. We revise our 2024-27 revenue estimates down by 3%-4% mainly due to the reduced outlook for EV battery demand. To factor in prolonged margin weakness, we reduce our 2024-27 operating income forecast by 4%-12%. We reduce our fair value estimate to KRW 596,200 from KRW 700,500, which corresponds to 27 times P/E and 8 times enterprise value/EBITDA on a 2024 basis.

Samsung SDI is one of the major companies in the Samsung Group, and one of the top suppliers globally of lithium-ion rechargeable batteries. By leveraging its expertise in electronic materials, Samsung SDI has been supplying various materials and films for semiconductors, LCD and OLED panels, and rechargeable batteries to Samsung Electronics, which is the world’s largest consumer electronics and memory manufacturer.

Samsung SDI’s sales for the September quarter were in line with Refinitiv consensus but operating profit missed by about 7%. Strong sales in medium and large electric vehicle, or EV, batteries and recovery of the electronic materials segment lifted top-line growth by 11% year over year and offset sluggish cylindrical battery and energy storage battery sales. We lower our 2023-27 revenue estimates by 2%-8% due to a reduced outlook for energy storage and power tool battery demand. To factor in a prolonged margin weakness in small-size battery sales and semiconductor materials, we reduce our 2023-27 operating income forecast by 3%-11%. We reduce our fair value estimate to KRW 700,500 from KRW 802,000, which corresponds to 23 times P/E and 9 times EV/EBITDA on a 2024 basis.

Samsung SDI is one of the major companies in the Samsung Group, and one of the top suppliers globally of lithium-ion rechargeable batteries. By leveraging its expertise in electronic materials, Samsung SDI has been supplying various materials and films for semiconductors, LCD and OLED panels, and rechargeable batteries to Samsung Electronics, which is the world’s largest consumer electronics and memory manufacturer.

In 2022, battery electric vehicles represented nearly 10% of global auto sales, up from a little less than 6% in 2021. Much of the growth occurred in China, which has been a leader in EV sales over the past decade. However, with national EV subsidies in China expiring in 2022 and far lower sales in the U.S. and Europe, the market questions if EV sales can continue to grow without subsides.

Samsung SDI’s sales for the June quarter were in line with the Refinitiv consensus, but operating profit slightly missed by about 3%. Strong sales in medium-size and large electric vehicle, or EV, batteries lifted top-line growth by 23% year over year and offset a sluggish electronic materials segment. To factor in a prolonged margin weakness in power tool battery sales and display and semiconductor materials, we reduce our 2023-2027 operating income forecast by 6%-14%. We reduce our fair value estimate to KRW 802,000 from KRW 835,000, which corresponds to 23 times P/E and 10 times EV/EBITDA on a 2024 basis.

Samsung SDI is one of the major companies in the Samsung Group, and one of the top suppliers globally of lithium-ion rechargeable batteries. By leveraging its expertise in electronic materials, Samsung SDI has been supplying various materials and films for semiconductors, LCD and OLED panels, and rechargeable batteries to Samsung Electronics, which is the world’s largest consumer electronics and memory manufacturer.

Samsung SDI’s March-quarter sales and operating profit were both in line with Refinitiv consensus. Strong sales in medium and large electric vehicle batteries lifted top-line growth of 32% year over year, offsetting a sluggish electronic materials segment. To factor in a prolonged weakness in power tool battery sales and display and semiconductor materials, we lower our 2023 revenue forecast by 4% and operating income by 7%. We slightly reduce our fair value estimate to KRW 835,000 from KRW 846,000, which corresponds to 29 times P/E and 12 times EV/EBITDA on a 2023 basis. We believe Samsung SDI’s shares are undervalued, as the margin expansion for EV batteries is not fully priced in.

Samsung SDI is one of the major companies in the Samsung Group, and one of the top suppliers globally of lithium-ion rechargeable batteries. By leveraging its expertise in electronic materials, Samsung SDI has been supplying various materials and films for semiconductors, LCD and OLED panels, and rechargeable batteries to Samsung Electronics, which is the world’s largest consumer electronics and memory manufacturer.

Following Samsung SDI’s December quarter results, we maintain our fair value estimate at KRW 846,000. Fourth-quarter sales were in line with our expectations, but operating margin missed our forecasts due to some one-off costs at its energy saving system battery division. Taking these factors into account, we keep our 2023 revenue forecast largely unchanged but slightly lower our operating income assumption by 4%. Looking ahead, while many applications, especially consumer electronics products, suffer from the weaker-than-expected demand and prolonged inventory correction, Samsung SDI is highly likely to achieve incremental growth driven by the robust electric vehicle, or EV, demand. We believe that South Korean battery suppliers like Samsung SDI will benefit from the executive order through market share expansion in the U.S. in the midterm. We believe Samsung SDI’s shares are undervalued as the margin expansion for EV batteries is not fully priced in. Our fair value estimate of KRW 846,000 corresponds to 25.7 times P/E and 14.1 times EV/EBITDA on a 2023 basis.

Samsung SDI is one of the major companies in the Samsung Group, and one of the top suppliers globally of lithium-ion rechargeable batteries. By leveraging its expertise in electronic materials, Samsung SDI has been supplying various materials and films for semiconductors, LCD and OLED panels, and rechargeable batteries to Samsung Electronics, which is the world’s largest consumer electronics and memory manufacturer.

We remain optimistic on Samsung SDI’s battery business outlook and margin expansion. While we believe Samsung SDI will maintain its leading position in the automotive rechargeable battery industry, we revise down our operating margin assumptions for its mid-size to large battery division on the prolonged lithium price spike and potential price competition in European and U.S. markets with Chinese players expanding overseas. As a result, we reduce our 2023-24 operating profit forecast by 6%-8%. Our new fair value estimate of KRW 846,000 from KRW 930,000 corresponds to 25 times 2023 price/earnings. With this note, we transfer analyst coverage of Samsung SDI.

Samsung SDI is one of the major companies in the Samsung Group, and one of the top suppliers globally of lithium-ion rechargeable batteries. By leveraging its expertise in electronic materials, Samsung SDI has been supplying various materials and films for semiconductors, LCD and OLED panels, and rechargeable batteries to Samsung Electronics, which is the world’s largest consumer electronics and memory manufacturer.

Following the upbeat September quarter results, we raise Samsung SDI’s fair value estimate to KRW 930,000 from KRW 760,000. While many applications, especially consumer electronics products, suffer from the weaker-than-expected demand and prolonged inventory correction, Samsung SDI is highly likely to achieve incremental growth driven by the robust electric vehicle, or EV, demand. Not only did sales exceed our expectations, but operating margin expansion was above our forecasts due to favorable currency movements, a better product mix, and the pass-through of increasing material costs underpinned by the tight supply. Taking these factors into account, we raised our 2023 revenue forecast by 8.7% and revised our operating margin assumption to 10.6% from 9.6% previously. Although Samsung SDI’s share price increased more than 10% after the numbers were reported, we still believe its shares are undervalued as the margin expansion is not fully priced in. Our new fair value estimate of KRW 930,000 corresponds to 26.5 times P/E and 14.5 times EV/EBITDA on a 2023 basis.

Samsung SDI is one of the major companies in Samsung Group, and one of the global top suppliers of lithium-ion rechargeable batteries. By leveraging its expertise in electronic materials, Samsung SDI has been supplying various materials and films for semiconductors, LCD and OLED panels, and rechargeable batteries to Samsung Electronics, which is the world’s largest consumer electronics and memory manufacturer.

Samsung SDI’s June quarter results were above our expectations, driven by solid electric vehicle, or EV, demand. We estimate that sales for EVs accounted for approximately half of li-ion battery sales, which is up from 46% in the previous quarter and 42% in the previous year. Although we expect revenue for pouch batteries and polarizer film—which are more sensitive to the economic slowdown—to stagnate for the next few quarters, stronger-than-expected demand for cylindrical batteries for autos and solid ramp-up of Gen-5 batteries should offset the shortfall. We thus raise Samsung SDI’s operating income forecasts for 2022 and 2023 from KRW 1.62 trillion and KRW 2.1 trillion to KRW 1.65 trillion and KRW 2.2 trillion, respectively, and our fair value estimate is slightly lifted from KRW 740,000 to KRW 760,000, which corresponds to 24 times 2023 price/earnings. We believe that Samsung SDI’s shares are undervalued.

Samsung SDI is one of the major companies in Samsung Group, and one of the global top suppliers of lithium-ion rechargeable batteries. By leveraging its expertise in electronic materials, Samsung SDI has been supplying various materials and films for semiconductors, LCD and OLED panels, and rechargeable batteries to Samsung Electronics, which is the world’s largest consumer electronics and memory manufacturer.

We slightly lift Samsung SDI’s fair value estimate to KRW 740,000 from KRW 720,000, as we raise our revenue growth forecasts for cylindrical batteries and electronic materials, while we broadly maintain our growth assumptions for large-sized EV batteries. Driven by the robust demand for power tools, micromobility, and electric vehicles, we expect the tight supply of cylindrical batteries will continue, and as one of the top suppliers, Samsung SDI possesses enough production capacity and expertise in higher energy density, which gives the company sufficient pricing power to protect its margins. We also lifted our revenue growth assumptions for the electronics materials segment based on the better demand outlook for large premium TVs and semiconductors. As a result, our midterm annual revenue growth assumptions for cylindrical batteries and electronic materials are lifted to 13.0% and 4.8% from 12.1% and 1.8%, respectively.