[Click eStock] "Samsung SDI, EV Battery Turns Profitable"... Target Price Up 70%

[Asia Economy Reporter Ji Yeon-jin] KB Securities announced on the 8th that it has raised the target price of Samsung SDI from 560,000 KRW to 950,000 KRW, a 70% increase, while maintaining a buy rating.

Lee Chang-min, an analyst at KB Securities, stated, "As the European electric vehicle market showed faster growth than market expectations in the second half of last year, Samsung SDI's medium-to-large battery production capacity and operating profit estimates CAGR (Compound Annual Growth Rate) for 2020-2029 have been revised upward from 18% and 17% to 25% and 25%, respectively," adding, "This is because the 3-month average yield of the 30-year government bond rose from 1.6% to 1.77%, leading to the permanent growth rate being adjusted to the same figure."

Samsung SDI's Q4 performance recorded sales of 3.3 trillion KRW, a 15% increase year-on-year, and operating profit surged 1123% to 246.2 billion KRW. However, the average quarterly exchange rate fell 5.8% compared to Q3, limiting top-line growth, and due to a surge in maritime cargo volume, some EV battery export volumes were deferred, resulting in performance below market expectations. The recall due to concerns over EV battery fires from customers also contributed, with related provisions set aside. Excluding these provisions, Q4 EV battery profitability is estimated to have achieved a profit.

This year, Samsung SDI is expected to mark the first year of EV battery profitability turnaround. Samsung SDI's performance this year is forecasted with sales increasing 23% year-on-year to 13.9 trillion KRW and operating profit rising 61% to 1.1 trillion KRW. The analyst said, "The EV battery division is expected to achieve profitability for the first time on an annual basis," and predicted, "The operating profit ratio of EV batteries is also expected to expand from -15% in 2020 to 50% by 2025."

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