[Click eStock] "Samsung SDI, Year-End Performance Rebound Unlikely... Target Price Down"

Target Price Revised Downward by 13% Compared to Previous Level

On the 31st, KB Securities downgraded the target price for Samsung SDI from 550,000 KRW to 480,000 KRW, citing that a performance rebound within the year is unlikely. The investment rating was maintained as 'Buy.'

Lee Chang-min, a researcher at KB Securities, explained, "The reason for lowering the target price is due to the reduced demand and worsening product mix from front-end customers such as European prismatic battery clients and American cylindrical battery clients, leading us to cut operating profit estimates for 2024 and 2025 by 32% and 27%, respectively. Samsung SDI has successfully defended its performance against competitors for a long time, but from the second quarter of this year, it has been confirmed that it cannot avoid the impact of weak front-end demand. A performance rebound within the year seems unlikely."

Samsung SDI's second-quarter results showed sales of 4.45 trillion KRW, down 24% year-on-year, and operating profit of 280.2 billion KRW, down 38%, missing consensus estimates (average securities firms' forecasts). The researcher said, "Despite a 20% increase in ESS (Energy Storage System) sales from orders for power ESS and over 100 billion KRW in compensation reflected due to under-delivery from small battery customers, the poor performance of medium-to-large and cylindrical batteries for electric vehicles (EVs) led to disappointing results. Due to the slowdown in front-end demand and an increase in the proportion of plug-in hybrid electric vehicles (PHEVs) with smaller battery capacity per vehicle, prismatic EV batteries are estimated to have seen a 30% decrease in sales volume (capacity basis)."

The third-quarter performance is also expected to be weak. The researcher estimated, "Third-quarter sales are expected to decline 26% year-on-year to 4.41 trillion KRW, with operating profit dropping 76% to 120.2 billion KRW, due to the disappearance of cylindrical battery compensation effects and further decreases in EV battery sales."

Profitability improvement is expected to be possible from 2025. The researcher added, "With a high possibility of a U.S. interest rate cut within the year, from 2025, the scale growth from the operation of the U.S. plant and the full effect of the Advanced Manufacturing Production Tax Credit (AMPC) are expected to lead to profitability improvements, which is a positive factor."

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