Apple Moving Ahead with Development of Self-driving EV
The authors are analysts of Shinhan Investment Corp. They can be reached at johnsoh@shinhan.com and chank@shinhan.com, respectively. -- Ed.
Intensifying competition for EV supremacy is positive for Korean battery makers
Apple is highly likely to enter the market for self-driving electric cars for sustainable growth. The electric vehicle (EV) revolution in Germany will go into full swing when Tesla’s new Gigafactory Berlin starts production in 2H21. China is expected to extend strategic support to self-driving EVs for the advancement of its auto industry. Competition is heating up between the US, Germany, and China to gain supremacy in EVs.
Contemporary Amperex Technology (CATL) shares rallied sharply in December 2020, which is good news for Korea’s battery industry. Samsung SDI plans to upgrade the performance of batteries using high-nickel NCA (nickel-cobalt-aluminum) cathode and silicon-based anode materials. The company is also working to develop all-solid-state batteries to meet the needs of global automakers.
2021 operating profit forecast at KRW1.39tr (+78.1% YoY)
Samsung SDI is expected to have recorded operating profit of KRW354bn (+32.2% QoQ, +1,647.1% YoY) on sales of KRW3.64tr (+17.9% QoQ, +29.0% YoY) for 4Q20, topping the market consensus (KRW319.2bn). Earnings gains should have been attributable to: 1) 40% QoQ rise in EV battery sales; 2) growth of ESS battery sales from North America; and 3) brisk OLED materials business from a surge in iPhone sales.
For 2021, we forecast sales at KRW14.54tr (+24.4% YoY) and operating profit at KRW1.39tr (+78.1% YoY). Earnings growth will likely be driven by: 1) 49% YoY increase in EV battery sales; and 2) solid performance of semiconductor and OLED materials.
Retain BUY and raise target price by 11.9% to KRW750,000
We raise our target price for Samsung SDI by 11.9% to KRW750,000 on forecasts for: 1) EV battery sales of KRW10.3tr for 2024; 2) 78% YoY growth in operating profit to KRW1.39tr this year; and 2) performance upgrades of EV batteries and development of all-solid-state batteries.
Apple is reportedly moving ahead with the development of a self-driving EV, joining the race for EV leadership. Secondary battery stocks have gone up significantly, but investors are still betting on expectations for a new era of self-driving EVs. We believe that a revolutionary change in the auto industry will proceed at a faster pace going forward.