ESS Growth Strengthens Order Competitiveness; Samsung SDI Target Price Raised

[Financial News] NH Investment & Securities raised Samsung SDI’s target price by 22%, from KRW 600,000 to KRW 730,000, reflecting expanded energy storage system (ESS) orders and stronger battery-order competitiveness. The brokerage maintained its “Buy” rating.
Joo Min-woo, an analyst at NH Investment & Securities, said on the 15th, "Order competitiveness is improving as downstream customers increasingly prefer prismatic and cylindrical batteries." He added, "The ability to use its stake in affiliate Samsung Display as a source of funds and respond promptly to market demand is also a structural re-rating factor."
The analyst particularly forecast strong growth in the ESS business. Samsung SDI’s ESS shipments are expected to rise from 12 GWh last year to 21 GWh this year and 34 GWh next year. Over the same period, ESS revenue is projected to increase from KRW 2.973 trillion to KRW 4.74 trillion and KRW 7.034 trillion, respectively.
Joo said, "We raised our ESS forecasts to reflect the improved visibility of Sungrow orders." He explained, "Annual orders totaling 10 GWh correspond to KRW 1.1 trillion in revenue and KRW 540 billion in operating profit." For small batteries, he also raised the projected operating margin from 5% to 6%, reflecting an improved product mix next year.
Accordingly, earnings are also expected to continue improving. Samsung SDI’s revenue this year is projected at KRW 16.278 trillion, up 22.7% from the previous year, while operating profit is expected to reach KRW 832 billion, marking a return to profitability. Next year’s operating profit is forecast at KRW 1.806 trillion, an increase of 117% from this year.
Third- and fourth-quarter earnings are expected to significantly exceed market expectations. Revenue is projected at KRW 3.958 trillion and operating profit at KRW 260.3 billion, more than double the market forecast of KRW 107 billion for operating profit. The main reason is the inclusion of approximately KRW 150 billion in compensation related to the liquidation of the GM joint venture.
However, sales of batteries for electric vehicles were still assessed as sluggish. Joo explained, "Sales are slowing sharply as inventory adjustments for older models follow the launch of new BMW vehicles." He added, "The Hyundai Ioniq 3 and the Kia EV2 need to offset this weakness, but they are not yet sufficient." He further forecast, "Additional re-rating could be possible if the EU Industrial Acceleration Act is finalized and additional electric-vehicle orders are secured."

[email protected] Bae Han-geul Reporter