Samsung Securities has raised its target price for Samsung SDI from 550,000 won to 640,000 won, an increase of 16.4%, citing the visibility of expanded energy storage system (ESS) production capacity in North America and anticipated benefits from U.S. policies. The investment recommendation remains a 'buy.'
Jang Jeong-hoon, a researcher at Samsung Securities, stated, "For the third quarter, we expect sales of 4.1 trillion won and operating profit of 202.9 billion won, surpassing the market expectation of 125.1 billion won in operating profit. The small battery segment is projected to turn a quarterly profit due to strong sales of battery backup units (BBUs) and power tools, along with increased local shipments in the ESS sector in North America, aligning with previous forecasts."
He added, "Due to changes in the electric vehicle market, compensation for minimum purchase quantities from automaker clients is expected to be temporarily reflected, allowing the EV sector to also achieve profitability."
Jang particularly noted that the expansion of ESS production capacity is expected to accelerate following the dissolution of the North American battery joint venture with General Motors (GM). Last month, Samsung SDI ended its joint investment contract with GM and decided to operate independently, selling 13 million shares of Samsung Display (SDC) for 4.5 trillion won.
"As a result, the capacity expansion to meet North American ESS demand is expected to accelerate, increasing from 30 GWh this year to 50 GWh by 2028," he said.
The target price increase also reflects a reassessment of the value of Samsung Display shares. Jang noted that part of the SDC shares was sold without a discount to their book value, leading to a reassessment of the remaining share value at 9.1 trillion won. The after-tax cash inflow from the share sale is estimated at 3.3 trillion won.
Jang added, "The potential decision to expand North American ESS capacity in the second half of the year, along with the recent executive order signed by the U.S. President at the end of August to exclude Chinese equipment and components from the power grid, is expected to positively impact the stock price as detailed regulations are anticipated to be announced within the year."
* This article has been translated by AI.
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