Samsung SDI Earnings: Profitability Remained Weak as Lithium Price Decline Hit EV Battery Margin

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.