SK Securities said on the 29th that despite a third-quarter loss that shocked results for Samsung SDI, a fourth-quarter rebound is possible and the energy storage system (ESS) business has earnings potential. It raised its target price to 400,000 won from 250,000 won and maintained a buy rating.
Samsung SDI posted an operating loss of 591.3 billion won in the third quarter, worse than a loss of 397.8 billion won in the previous quarter. It also fell short of the market consensus of 339.2 billion won.
The main reason for the deterioration in third-quarter results was that a one-off compensation payment was deferred to the next quarter. Weaker electric-vehicle demand at a North American client and intensified competition in the secondary-battery market, which lowered its share at major customers, also weighed on results.
Samsung SDI is expected to remain in the red after the fourth quarter, but the size of the loss is likely to narrow somewhat. The deferred compensation for EV batteries will be reflected, and as it begins production of ESS batteries, it is also set to recognize benefits from the advanced manufacturing production credit (AMPC).
Excluding the compensation and AMPC, the improvement in profitability will be limited, but over the long term, the strategy to shift to ESS is expected to keep narrowing losses. The Starplus North American joint venture is converting its production lines for ESS, with the transition likely to be completed by the end of next year.
Researcher Park Young-woo at SK Securities said, "If the ESS utilization rate reaches 100% and current prices hold, annual sales could be 9 trillion won and operating profit 450 billion won," while adding, "However, these figures are based on optimistic assumptions."