Samsung SDI is expected to undergo a reevaluation of its corporate value due to an increased preference for prismatic and cylindrical batteries, along with improved visibility in energy storage system (ESS) orders.
On September 15, NH Investment & Securities maintained a 'Buy' rating on Samsung SDI and raised its target price by 22% to 730,000 won. This adjustment reflects an upward revision of ESS performance forecasts, considering the improved visibility of orders and the anticipated enhancement of profitability from the small battery mix by 2027.
Jumin Woo, a researcher at NH Investment & Securities, stated, "The growing preference for prismatic and cylindrical batteries among upstream customers is enhancing order competitiveness. Additionally, leveraging the stake in affiliate Samsung Display allows for timely responses to market demand, which is a structural factor for reevaluation."
With the visibility of orders from the energy storage system improving, NH Investment & Securities projected an annual order volume of 10 GWh for ESS. This is expected to generate approximately 1.1 trillion won in revenue and around 540 billion won in operating profit. For 2027, the operating profit margin forecast was raised from 5% to 6% to reflect the improved small battery mix.
The discount rate was also lowered from 20% to 10% to account for new production capacity in the U.S. and improved visibility in ESS orders. Consequently, the 12-month forward EV/EBITDA valuation discount compared to LG Energy Solution, which had persisted for four years, is now considered resolved.
The researcher added, "With the European Industrial Acceleration Act (IAA) confirmed and the launch of space data centers beginning in early 2027, further reevaluation can be anticipated."
For the third quarter, Samsung SDI's performance is expected to significantly exceed market expectations due to the inclusion of one-time compensation. The company's third-quarter revenue is estimated at 3.9 trillion won, a 30% increase from the same period last year, with an operating profit of approximately 260.3 billion won. This is above the market consensus of 4 trillion won in revenue and 107 billion won in operating profit.
The receipt of about 150 billion won in compensation due to the liquidation of the GM joint venture is a major factor contributing to the increase in operating profit. However, the performance burden in the electric vehicle sector is expected to continue due to a sharp slowdown in EV sales caused by inventory adjustments of older models following the launch of new BMW vehicles.
In the third quarter, segment revenues are projected to show a 6% decrease in EVs compared to the previous quarter, while ESS is expected to increase by 38% and small batteries by 6%. The operating profit margins are anticipated to be 3% for EVs, 13% for ESS, and 2% for small batteries.
* This article has been translated by AI.
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