EV Battery Business to Enter Accelerated Growth Phase
The author is an analyst of NH Investment & Securities. He can be reached at j.ko@nhqv.com. -- Ed.
We advise paying attention to the growth potential of the EV battery market. Recently, governments around the globe have expressed their willingness to expand the EV market via a variety of EV support policies. Samsung SDI’s EV battery business is expected to enter the profit generation phase from 2H20. We continue to offer Samsung SDI as our sector top pick.
Maintain positive outlook
We raise our TP for Samsung SDI from W400,000 to W450,000 on a change in the base year for our EBITDA estimate for the EV battery sector from 2020 to 2021, given prospects for full-fledged EV market growth from 2021. We upwardly adjust our estimate for the operating value of Samsung SDI’s rechargeable battery division from W16.2tn to W19.1tn.
Growth prospects for the EV market can be summarized as follows: 1) aiming at widespread EV adoption, governments around the globe are strengthening their EV support policies; 2) the production of EV specific platforms is underway or about to begin at major automakers; and 3) related players are expanding their EV battery production capacities and working to improve their technological prowess. We forecast that EV battery demand (passenger car-basis) will increase from 118 GWh in 2020 to 262 GWh in 2021 to 435 GWh in 2022, with demand growth taking off in earnest from 2021.
At Samsung SDI, the sales portion of the EV battery business exceeds 30%, and the company is exploring new growth engines in this arena, including via intensive resource direction into strengthening its EV market dominance. Believing that the structural growth potential of the EV battery market is gradually increasing, we expect Samsung SDI’s long-term investment attractiveness to continue improving.
EV battery business to enter accelerated growth phase
We expect the sales portion of Samsung SDI’s EV battery business to widen from 33% in 2020 to 36% in 2021 to 42% in 2022, with operating income climbing from -W32.8bn in 2020 to W249.1bn in 2021 to W412.4bn in 2022. Of note, the firm’s EV battery earnings are forecast to enter the profit generation phase from 2H20. In addition, as rechargeable battery cost factor trends are anticipated to develop favorably going forward, sales growth at Samsung SDI should translate into significant operating leverage effects.