Earnings to Trend Upwards from 2021
The author is an analyst of NH Investment & Securities. He can be reached at j.ko@nhqv.com. -- Ed.
Samsung SDI is expected to expand backed by the EV/ESS market growth. The firm has preemptively carried out production capacity ramp-up in the regions where EV demand is rising, and it boasts a high share of the ESS market. As such, it stands to benefit greatly from EV/ESS market growth.
Raise expectations
We raise our TP for Samsung SDI from W510,000 to W600,000, reflecting a 13% upward revision in 2021F OP as the firm is expected to enjoy strong growth at its EV/ESS battery business and maintain a high M/S. Samsung SDI’s main growth driver is its EV battery business. Given its high exposure to the European market, the firm stands well situated to benefit from European EV market growth. While the market is expanding, there are few new entrants to the rechargeable battery market. While some companies last year announced intentions to secure production capacity in Europe, their plans appear to have made no progress. Accordingly, competition in the European rechargeable battery market is unlikely to heat up any time soon, a factor which should boost the growth prospects for Samsung SDI, a firm with high exposure to the European market.
An additional growth driver in place is the company’s ESS rechargeable battery business. With the significance of renewable energy growing as a means to reduce GHG emissions, the use of PV and wind power should expand, leading to greater ESS installation. As the number-one player in the ESS rechargeable battery market, Samsung SDI stands to benefit from this ESS market growth.
Earnings to trend upwards from 2021
On a consolidated basis, we forecast 2021 sales of W14.0tn (+22% y-y) and OP of W1.29tn (+75% y-y), mainly driven by Samsung SDI’s EV/ESS battery business (ie, its mid/large-sized battery unit). The sales portion for this arm is projected to jump from 41% in 2020 to 47% in 2021 and 53% in 2022, with operating income positioned to swing from operating losses of W56.5bn in 2020 to OP of W328.7bn in 2021 and W515.3bn in 2022.