"Samsung SDI to recover earnings through ESS and small batteries; expansion of orders in North America and Europe draws attention": Mirae Asset Securities

[Financial News] Samsung SDI is expected to continue improving its performance in the second half of the year, driven by expansion of its energy storage system (ESS) business and a recovery in the profitability of small batteries. Orders for lithium iron phosphate (LFP) prismatic batteries targeting North American ESS customers and European automakers are seen as key to future growth.
Mirae Asset Securities estimated on the 15th that Samsung SDI's sales for the third quarter of this year would reach 3.95 trillion won, with operating profit at 302.3 billion won. These figures represent increases of 5% and 48%, respectively, from the previous quarter. Although one-off earnings related to major North American customers are expected to be reflected, analysts said the core business excluding those gains would also continue to recover.
ESS is one of the pillars of the earnings recovery. As domestic shipments that were partially delayed in the second quarter begin in earnest, ESS is expected to account for 31% of total sales in the third quarter, up 6 percentage points from the previous quarter. The start of operations at a North American ESS production line in the fourth quarter is also expected to support the recovery.
Demand recovery for battery backup units (BBUs) and power tools is supporting the small-battery business. Higher cylindrical battery shipments and improved profitability are expected to help the small-battery business turn to an operating profit in the third quarter. Mirae Asset Securities forecast Samsung SDI's annual operating profit at approximately 690 billion won this year.
The mid- to long-term challenge is to turn increased orders into actual supply. The report highlighted the possibility of additional contracts following the North American ESS order reported in August. It assessed that investment funds secured through the sale of a stake in Samsung Display would support capacity expansion and efforts to increase market share. Alongside order growth, stable operation of new production lines is expected to become increasingly important.
In Europe, automakers' efforts to reduce their reliance on Chinese-made batteries were identified as an opportunity. Kim Chuljoong, a researcher at Mirae Asset Securities, analyzed, "The detailed contents of the EU Industrial Acceleration Act are expected to be announced at the end of this month, after which expectations for LFP prismatic battery orders from European automakers will grow."
Meanwhile, Chinese battery manufacturers are also seeking entry into the U.S. market by supplying technology. According to industry sources, Ford is pursuing a project to produce LFP batteries and ESS in the United States using technology from Contemporary Amperex Technology (CATL). In effect, Chinese companies are joining the competition by supplying technology for local manufacturing, even without directly building factories there.
However, scrutiny from the U.S. government and Congress remains a variable. Sean Duffy, secretary of the United States Department of Transportation (DOT), recently criticized Ford's use of CATL technology. For Samsung SDI, securing local production capacity and price competitiveness, alongside monitoring policy changes concerning Chinese companies, is expected to be a key challenge in expanding its North American business.
[email protected] Kim Dong-ho Reporter