Small-size/EV Battery Sales Robust
The author is an analyst of KB Securities. He can be reached at cm.lee@kbfg.com. -- Ed.
Maintain BUY, target price of KRW830,000
We maintain BUY and TP of KRW830,000 on Samsung SDI. Our DCF-derived TP is based on 8.84% WACC (9.96% COE; 2.84% after-tax COD; 1.12 104w adj. beta), implies 35.0x 12m fwd P/E, 3.47x P/B, 16.3x, EV/EBITDA and has 38.8% upside (vs. Apr 28 closing price).
1Q22 results beat market consensus on robust small-size/EV battery sales
1Q22 revenue/OP beat the market consensus, coming in at KRW4.05tn (+37% YoY)/KRW322.3bn (+142% YoY; 8.0% OPM).
(1) EV battery: Despite the semiconductor shortage, revenue rose 15% QoQ on brisk shipments of Gen 5 batteries (started 3Q21).
(2) ESS battery: Revenue fell QoQ on unfavorable seasonality; however, margins held steady on better sales mix of high value-added home/UPS-use products.
(3) Small-size battery: While sales of cylindrical batteries to EV/electric power tool makers remained solid, earnings from pouch batteries improved with the launch of a major customer’s flagship smartphone. (4) Electronic materials: Despite slowing downstream demand (i.e., LCD TV), revenue climbed QoQ on greater revenue contribution from high value-added materials used for large-size TVs.
Earnings to remain on the rise for two straight years
We expect a second straight year of earnings growth, with 2022 revenue/OP of KRW18.35tn (+35% YoY)/KRW1.65tn (+55% YoY; 9.0% OPM). External risks should persist (incl. client shutdowns amid Russia-Ukraine war; parts supply disruptions; China lockdowns), but growing demand for prismatic/cylindrical EV batteries from major customers should drive up company-wide earnings. In particular, robust sales of high-value-added Gen 5 batteries should be the major growth driver. Gen 5 batteries, of which the customer base is anticipated to expand starting 2H22, are forecast to account for 20% of Samsung SDI’s 2022 EV (prismatic) battery shipments (vs. ~10% in 4Q21).