Expect Samsung SDI, Ecopro BM Stocks to Perform Well
The author is an analyst of KB Securities. He can be reached at cm.lee@kbfg.com. -- Ed.
Announcement of joint venture with Stellantis, investment in U.S. battery plant
— On May 25, Samsung SDI announced plans to establish a JV with Stellantis, the world’s fourth largest automaker, and invest in a new battery plant in the U.S. The announcement confirmed finalized details of the JV first reported by the media in October 2021. Samsung SDI, which supplies EV batteries to Stellantis’s Jeep, will build a joint EV battery module plant with Stellantis in Kokomo, Indiana, where Stellantis produces automotive parts. Samsung SDI will own 51% of the JV. Investments will begin in August 2022 and end in August 2025, with the plant requiring a total of USD2.5bn, of which Samsung SDI will provide USD1.29bn (Yonhap News, May 25).
New plant’s annual output capacity may reach 33GWh
— According to Yonhap News (May 25), Samsung SDI will begin construction of a new U.S. battery plant within the year (production expected to start in 1Q25). The plant will mainly produce Gen 6 prismatic batteries used in EVs and may add cylindrical battery lines in the future. Its annual output capacity is estimated at 23GWh, but could be increased to 33GWh by 2026 considering that the media report states that Samsung SDI’s investment may increase to USD1.57bn if Stellantis and Samsung SDI reach agreement. Samsung SDI’s mid-/large-size battery capacity is expected to jump from 40GWh at end-2021 to 52GWh by end-2022 and 100GWh by end-2025, propelling mid-/large-size battery revenue to KRW17tn in 2025 (vs. KRW6tn in 2012).
Expect Samsung SDI, Ecopro BM stocks to perform well
— We expect the JV to have a positive impact on the stocks of Samsung SDI and Ecopro BM.
(1) The main appeal of Samsung SDI has been its selective order intake, which ensured steady sales and high profit margins. In contrast, the stock’s main weakness has been the company’s more conservative stance on expanding output capacity compared to that of other battery manufacturers. The JV, however, should provide mid-/long-term growth momentum. It will allow Samsung SDI to gain ground in its mainstay market of Europe (i.e., EV battery shipments to BMW/VW from Hungary plant). Also, it will allow for Samsung SDI to make further headway into the U.S. market, where the company has significant room for expansion (only 4% of market share in 2021 vs. 9% worldwide, 14% in China, 26% in Germany) and geopolitical issues limit advances by Chinese competitors.
(2) Ecopro BM stands to benefit, as it is Samsung SDI’s sole supplier of cathodes. The company is also Samsung SDI’s sole supplier of high-nickel NCA cathode material via Ecopro EM, which is a JV between Ecopro BM and Samsung SDI. We believe Ecopro BM should see rapid earnings growth, as the addition of Samsung SDI’s new U.S. plant will increase the company’s demand for cathode material.