Samsung SDI to Deliver Gen5 from Second Half... Expecting Profit Turnaround in Second Half

▲Samsung SDI booth set up at the Jeju International Electric Vehicle Expo. (Provided by Samsung SDI)

[Asia Economy Reporter Gong Byung-sun] Ebest Investment & Securities on the 29th raised the target price of Samsung SDI to 990,000 KRW, judging that despite the fourth-quarter earnings last year falling short of consensus, the investment attractiveness is high considering the annual profitability achievement of the EV-type large-sized battery Gen5.

Samsung SDI's fourth-quarter sales last year were about 3.3 trillion KRW, a 15.3% increase compared to the same period last year, but fell short of the market consensus sales of 3.5 trillion KRW. Operating profit also recorded about 246.2 billion KRW but was below the market consensus operating profit of 329.4 billion KRW.

Analyst Lee Wang-jin of Ebest Investment & Securities pointed out, "The causes of the consensus shortfall were the provision for a large-scale recall by customers, exchange rate decline, and the rollover of some volumes of energy storage system (ESS) and EV due to the expiration of the renewable energy certificate (REC) weighting."

Nevertheless, annual profitability of EV-type large-sized batteries is expected this year. After reaching the breakeven point in the first quarter, a full-scale profit turnaround is expected in the second half. The analyst explained, "From the second half, costs will be reduced by delivering high-nickel nickel-cobalt-aluminum (NCA)-based large-sized battery Gen5," adding, "It is also a positive factor that the proportion of the relatively profitable Gen3 series will expand from 45% to 70%."

The issue in the small battery division, which was a factor lowering valuation, is also expected to be resolved with the full-scale launch of cylindrical battery ESS and EV businesses. The analyst said, "The small battery division was limited to smartphones and power tools, but since the cylindrical battery business is getting on track from this year, major factors lowering valuation should also be offset."

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