iM Securities has analyzed that Samsung SDI needs a valuation reassessment as it expands its energy storage system (ESS) business, transitioning from a traditional electric vehicle (EV) battery manufacturer to a power infrastructure company. Consequently, the firm maintained its 'buy' rating and raised the target price to 800,000 won.
In a report on September 21, analyst Jeong Won-seok stated, "The expansion of renewable energy generation and the ramp-up of investments in artificial intelligence data centers (AIDC) in the U.S. are driving demand, while stricter supply chain regulations in China are creating a favorable business environment for domestic companies."
iM Securities forecasts that Samsung SDI's revenue for the third quarter of this year will reach 4.1 trillion won, marking a 33% increase year-on-year and an 8% increase from the previous quarter. Operating profit is expected to be 285 billion won, a significant turnaround from a loss in the same period last year and a 40% increase from the previous quarter, exceeding market expectations of 115.9 billion won.
Despite compensation for unmet minimum purchase volumes from automakers, improvements are anticipated in the core business, particularly centered around ESS. The third-quarter ESS revenue is projected to increase by approximately 32% from the previous quarter as supply for domestic central contract market projects ramps up. The increase is expected to accelerate further in the fourth quarter as production lines for lithium iron phosphate (LFP) batteries in the U.S. come online.
Sales of cylindrical batteries are expected to rise by about 6% from the previous quarter due to increased demand for battery backup units (BBU) for power tools and AIDC, with operating profit turning positive. Conversely, automotive battery sales are projected to decline by about 3% from the previous quarter due to inventory adjustments by major clients and reduced shipments from the U.S. SPE plant to Europe.
Notably, the complete acquisition of the 'SDI-GM Synergy Cells' stake, previously jointly owned with General Motors, is seen as a key factor for growth in the North American ESS market. Samsung SDI plans to transition this entity to sole ownership, establishing its first large-scale battery production base in North America.
Analyst Jeong noted, "With existing U.S. ESS orders alone, a significant portion of the planned production capacity through 2029 is already filled. Including projects under discussion, demand is expected to exceed production capacity starting in 2028."
He added, "By establishing a production line for ESS batteries at the Synergy Cells factory, production capacity is likely to gradually expand from the second half of 2028, leading to increased growth potential and visibility for North American ESS revenue post-2028 as additional capacity is secured through new orders."
iM Securities projects that Samsung SDI's operating profit will rise from approximately 600 billion won in 2026 to about 2.4 trillion won by 2028. The target price is calculated by applying a global average EV/EBITDA of 12.1 times to the expected EBITDA for 2028 and adding the value of Samsung Display shares.
Analyst Jeong emphasized, "The role of ESS is expanding beyond storage for renewable energy to become a key infrastructure supporting stable power supply for AIDC. Samsung SDI's valuation should be reassessed to reflect the growth potential of the power infrastructure industry, moving away from the traditional EV-centric evaluation."
* This article has been translated by AI.
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