[Into the Stocks] Electric Vehicle Battery Battle... Samsung SDI's 'Emperor Stock' Dream Hits a Snag

Samsung SDI's Stock Soars in a Year Due to Electric Vehicle Market Growth
Volkswagen's Battery Independence Declaration Causes Stock Plunge on 17th
"Battery Stocks Fell Last Tesla Day... Short-Term Rebound Expected"

[Image source=Yonhap News]

[Asia Economy Reporter Ji Yeon-jin] Volkswagen, the world's largest automaker, has declared independence in its electric vehicle battery production, shaking domestic electric vehicle battery manufacturers. Samsung SDI, which mainly produces the replacement batteries for Volkswagen, was initially considered a beneficiary of this declaration, but its stock price plummeted. Samsung SDI has experienced explosive growth over the past year due to the expansion of the electric vehicle market, with target stock prices exceeding 1 million KRW. As competition in the electric vehicle market is expected to intensify, attention is focused on Samsung SDI's stock price movement.

As of 1 PM on the 17th, Samsung SDI's stock price fell 5.59% from the previous day to 642,000 KRW. Initially, the company opened slightly higher at 680,000 KRW following news that it would be a target for Volkswagen's expanded electric vehicle battery supply, but it turned downward early in the session and widened its losses during the day. The previous day's short-selling transaction volume for Samsung SDI was estimated at 338.6 billion KRW, which is believed to have led to a flood of sell orders early in the trading session. Short selling is an investment technique where stocks are borrowed and sold when a price decline is expected, then repurchased at a lower price to realize a profit. In the domestic stock market, short selling has been banned until May 3rd due to the COVID-19 pandemic since last year, but market makers are allowed to engage in it.

◆ Volkswagen Shock, K-Battery Stocks 'Collapse' = The decline in Samsung SDI's stock price on this day was somewhat delayed compared to the sharp drop in domestic battery manufacturers' stock prices immediately following Volkswagen's declaration to replace its main electric vehicle batteries. Initially, the market expected Samsung SDI to be the sole beneficiary among domestic battery manufacturers from Volkswagen's announcement.

The background is as follows: electric vehicle batteries are broadly categorized by shape into prismatic, pouch, and cylindrical types. Prismatic batteries are mainly used by BMW and Mercedes-Benz, pouch batteries by GM and Hyundai, and cylindrical batteries primarily by Tesla. Volkswagen procured pouch batteries from LG Energy Solution and SK Innovation, and prismatic batteries from China's CATL and Samsung SDI. Although pouch batteries had a higher share, this announcement is expected to reverse that.

LG Energy Solution and SK Innovation's main products are pouch batteries, while China's CATL and Samsung SDI (642,000 -5.59%) focus on prismatic batteries, and Japan's Panasonic specializes in cylindrical batteries. Consequently, LG Chem (LG Energy Solution) and SK Innovation's stock prices fell 7.76% and 5.69%, respectively, the previous day. Samsung SDI's stock price fell only 0.87%. However, Volkswagen's battery strategy ultimately aims to increase in-house battery production, which dragged down Samsung SDI's stock price as well. Song Seon-jae, a researcher at Hana Financial Investment, analyzed, "The news that Volkswagen decided to apply integrated prismatic battery cells and increase the proportion of low-spec materials is a negative factor for Korean battery companies," adding, "The high multiples of the secondary battery sector are likely to be gradually eroded."

◆ Rapid Growth in Electric Vehicle Market... 158.47% Increase in One Year Sparks 'Emperor Stock' Expectations = Samsung SDI's stock price more than doubled since last year as the electric vehicle market expanded. Following the election of U.S. President Joe Biden, who promoted eco-friendly policies, battery manufacturers' stock prices soared. Samsung SDI traded around 300,000 KRW early last year but began a sharp rise from August after recovering from the COVID-19 crash. This was driven by clear improvements in the performance of electric vehicle companies, including Tesla. Samsung SDI's stock price reached 818,000 KRW last month, recording a 158.47% return from March last year to the day before.

The market expects the electric vehicle market expansion and Samsung SDI's battery division to return to profitability, with target stock prices exceeding 1 million KRW. Hyundai Motor Securities set a target price of 1 million KRW on the 16th, after Volkswagen's announcement. Hana Financial Investment had set a target price as high as 1.05 million KRW on the 10th.

Samsung SDI's Q4 results last year showed sales increased 15% year-on-year to 3.3 trillion KRW, and operating profit surged 1123% to 246.2 billion KRW. This year, sales are projected at 13.9 trillion KRW and operating profit at 1.1 trillion KRW, with electric vehicle battery profitability expected to turn positive.

◆ Intensifying Global Battery Competition, How Long Will the Stock Price Decline Last? = Samsung SDI CEO Jeon Young-hyun stated at the regular shareholders' meeting that the company will develop differentiated electric vehicle battery technologies in the mid-to-large battery business and expand key bases such as Hungary. Previously, Samsung SDI announced last month that it would invest about 1 trillion KRW to expand production capacity at its electric vehicle battery plant in Hungary.

Samsung SDI operates a 30GWh battery plant in G?d, northern Hungary. This facility produces batteries supplied to European automakers such as BMW and Volkswagen. With this expansion investment, the production capacity of the Hungary plant is expected to increase to the high 40GWh range.

The market expects Samsung SDI to expand its cylindrical battery production plant in Tianjin, China, targeting Tesla, the world's largest electric vehicle manufacturer. Tianjin is Samsung SDI's cylindrical battery production base. The 1865 (18mm diameter, 65mm height) and 2170 batteries produced by Samsung SDI are the same specifications as those installed in Tesla Model S and Model X, respectively. Researcher Song said, "Given the steep growth in electric vehicle battery demand, a sharp derating of battery manufacturers is unlikely," adding, "Especially Samsung SDI, which has clear trends in prismatic standardization and profitability improvement, is a valid buy on dips." Researcher Park Yeon-joo of Mirae Asset pointed out, "As the electric vehicle market expands, battery demand is growing faster than expected," and "The top battery companies dominating the global battery market have sufficient business opportunities. Although stock prices fell due to short-term uncertainties after Tesla's Battery Day last September, they recovered afterward due to improved industry conditions."

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