US and Germany Accelerate EV Shift
The authors are analysts of Shinhan Investment Corp. They can be reached at johnsoh@shinhan.com and chank@shinhan.com, respectively. -- Ed.
4Q20 OP to grow 26% QoQ to KRW337bn
Samsung SDI is expected to post operating profit of KRW337bn (+26.0% QoQ, +1,564.4% YoY) on sales of KRW3.61tr (+16.9% QoQ, +27.9% YoY) for 4Q20, exceeding the consensus estimate of KRW316.7bn.
Earnings growth should be propelled by: 1) 37.2% QoQ rise in EV battery sales; 2) 83.9% QoQ surge in ESS battery sales; and 3) stronger sales of OLED materials, including contribution from subsidiary Novaled.
US and Germany accelerate EV shift
Motors CEO Mary Barra declared in a letter to environmental leaders that the company would no longer support the Trump administration’s lawsuit against California setting its own fuel economy standards and invest more in EV development.
Tesla’s new Gigafactory facility in Berlin, Germany is slated to start production with an annual capacity of 500,000 units in 2H21. Gigafactory Berlin should drive German competitors (Volkswagen, Mercedes-Benz, BMW) to accelerate their shift to EVs.
2021OP to reach KRW1.28tr (+68% YoY)
For 2021, we forecast sales at KRW14.14tr (+21.4% YoY) and operating profit at KRW1.28tr (+68.4% YoY).
momentum should strengthen with: 1) EV battery sales climbing 40.2% YoY to KRW5.41tr; 2) small-size battery sales up 7.4% YoY to KRW4.16tr; and 3) sales of OLED materials rising YoY on an increase in small/mid-size OLED capacity utilization rate and ramp-up of QD OLED line at Samsung Display.
Retain BUY and raise target price by 17.5% to KRW670,000
We raise our target price for Samsung SDI by 17.5% to KRW670,000 in view of: 1) forecasts for strong EV battery sales (+40.2% YoY) in 2021; and 2) growing EV momentum in the US and Germany.
Tesla’s ramp-up of its Shanghai plant sparked a sharp share price rally in 2020. With Gigafactory Berlin set to start production in 2021, we expect increased EV competition among the US and German automakers to drive another share price rally for Samsung SDI.