EV Battery Sales to Reach 10 Tril. Won in 2024
The authors are analysts of Shinhan Investment Corp. They can be reached at johnsoh@shinhan.com and chank@shinhan.com, respectively. -- Ed.
3Q20 OP to exceed consensus at KRW233bn (+124.1% QoQ)
Samsung SDI is forecast to report operating profit of KRW233bn (+124.1% QoQ, +40.8% YoY) on sales of KRW3.04tr (+18.7% QoQ, +18.2% YoY) for 3Q20, topping the market consensus of KRW199bn. The company should post strong sales from mid/large-size batteries for EVs (KRW1tr, +41.5% QoQ) and energy storage systems (KRW338bn, +13.7% QoQ). We also expect improvement in earnings from small-size batteries and electronics materials thanks to new smartphone model releases by Samsung Electronics and Apple.
EV battery earnings will likely turn profitable on sales of KRW1.38tr (+37.2% QoQ) in 4Q20. This should drive up company-wide operating profit by 28.8% QoQ to KRW300bn.
EV battery sales to reach KRW10tr in 2024
Tesla’s new Gigafactory production facility in Berlin, Germany is slated to start production with an annual capacity of 500,000 units in July 2021. Gigafactory Berlin should reshape the European auto market, along with ongoing efforts to expand EV lineups at Volkswagen, BMW, and Mercedes-Benz.
Samsung SDI plans to launch Gen5 EV batteries in 2021. Using high-nickel NCA (nickel-cobalt-aluminum) cathode and silicon-based anode materials, Gen5 batteries offer more than 20% higher energy density and cost reduction benefits. The company’s EV battery sales should continue to grow sharply each year from KRW3.8tr in 2020 to KRW10tr in 2024.
Retain BUY and raise target price by 14% to KRW570,000
We raise our target price for Samsung SDI by 14% to KRW570,000 on forecasts for: 1) operating profit of KRW691bn (+49.5% YoY) in 2020; 2) launch of Gen5 batteries in 2021; and 3) EV battery sales of KRW10tr in 2024. Samsung SDI shares have been driven higher by the Tesla-led EV revolution, but their future performance should hinge on improvement in company earnings.