[Click eStock] Samsung SDI 1Q Operating Profit Down 73% YoY... "Rebound with Electric Vehicle Batteries"

1Q Operating Profit Expected at 31.8 Billion KRW... "Minimal COVID Impact but Significant Off-Season Effect"
Short-Term Sales Decline Feared Due to Production Disruptions
Mid- to Long-Term Growth Possible with EV Battery Sales

[Asia Economy Reporter Minwoo Lee] Samsung SDI's first-quarter earnings have significantly declined compared to last year. As market demand centered on smartphones and TVs may temporarily plummet, it is analyzed that the company should aim for mid- to long-term growth through electric vehicle (EV) battery sales.

On the 30th, Daishin Securities forecasted that Samsung SDI would achieve sales of 2.3224 trillion KRW and an operating profit of 31.8 billion KRW in the first quarter of this year. Compared to the same period last year, sales are expected to decrease by 17.7%, and operating profit by 73.2%. Kangho Park, a researcher at Daishin Securities, explained, "The impact of the novel coronavirus (COVID-19) was minimal, but overall sales growth was negligible due to the off-season effect. The replacement demand for small batteries (cylindrical + polymer batteries) was delayed, and sales stagnated due to sluggish downstream industries. Additionally, sales of energy storage systems (ESS) are slow to recover orders due to domestic fire issues."

The short-term outlook is somewhat bleak. Considering that COVID-19 began spreading worldwide in early Q2 2020, market demand centered on smartphones and TVs is expected to temporarily plummet. Reflecting some production halts by automobile manufacturers, there is concern that EV-related sales may decline. It is pointed out that short-term performance decreases should be anticipated.

However, in the mid- to long-term, growth is expected to be driven by EV battery sales. As the global EV market expands, EV battery sales are estimated to increase by more than 48.1% compared to the previous year. Considering the progress of carbon dioxide regulations and the expansion of eco-friendly vehicles mainly in Europe, the increase and growth rate of EV battery sales are expected to be higher than those of other information technology (IT) companies. Daishin Securities forecasted that EV battery sales will grow 67% this year following a 75% increase last year, and 45% next year. Profitability is also expected to turn positive starting from Q4 this year and to remain positive annually from next year.

Researcher Park stated, "The EV battery strategy appears to focus on securing profitability rather than expanding market share through aggressive facility expansion. There are no difficulties in securing stable volumes in the early growth phase of electric vehicles, and by establishing stable yield and reliability, Samsung SDI will demonstrate high growth potential and profitability with differentiated competitiveness in the premium medium- and large-sized battery market."

For these reasons, Daishin Securities has issued a 'Buy' investment opinion on Samsung SDI. However, considering short-term performance, the target stock price was lowered by 3.6% to 280,000 KRW. The closing price the previous day was 248,000 KRW.

This content was produced with the assistance of AI translation services.