NH Investment & Securities said on the 15th that for Samsung SDI(006400), securing new production capacity (CAPA) in the United States and greater visibility for energy storage system (ESS) orders are expected. It maintained a "Buy" investment opinion and raised the target price by 22% to 730,000 won from the previous 600,000 won.
Joo Min-woo, an NH Investment & Securities researcher, said, "Reflecting heightened visibility for orders from Sungrow, we raised the annual ESS outlook to 10 gigawatt-hours (GWh), and assuming an improved small-battery mix next year, we lifted the margin to 6% from 5%," and noted, "With the securing of new U.S. capacity and expanded ESS order visibility, we also reduced the discount rate to 10% from the previous 20%."
The researcher analyzed that the valuation discount with LG Energy Solution(373220) that had persisted for the past four years has been resolved. This is because order competitiveness has strengthened due to front-end customers' preference for prismatic and cylindrical batteries, and timely response to market demand is possible by using equity in the affiliate Samsung Display as funding. The researcher added that additional re-rating can also be expected early next year when the European Industrial Acceleration Act (IAA) is finalized and the launch of space data centers begins.
This year's third-quarter earnings are expected to far exceed market expectations (consensus) with one-off gains reflected. NH Investment & Securities estimates Samsung SDI's third-quarter revenue at 3.9 trillion won, up 30% from a year earlier, and operating profit at 260.3 billion won (operating margin 6.6%), well above the market consensus (revenue 4 trillion won, operating profit 107 billion won).
Receipt of compensation (estimated at about 150 billion won) following the liquidation of the GM joint venture is cited as the main factor predicting earnings growth. However, achieving the second-half operating rate target (70%) at the Europe plant appears difficult. Excluding the one-off compensation, EV battery sales are slowing sharply due to inventory adjustments of older models following the launch of new BMW models, and the entries of the Hyundai Ioniq 3 and Kia EV2 alone are insufficient to fully offset this.
The researcher said, "By contrast, the small-battery sector is expected to swing to profit thanks to expanded sales centered on BBU and power tools and an improved product mix," and predicted, "The ESS sector will post strong growth as carryover volumes are reflected."