"Samsung SDI Should Be Revalued as a Power Infrastructure Stock" ... HAESUNG DS to Overcome Growth Constraints with a 190 Billion Won Expansion Investment [Stocktopia]

[Financial News] Here is a roundup of reports from major securities firms as of the morning of September 21.
Samsung SDI is expected to deliver an earnings surprise in the third quarter, driven by an improvement in ESS results. Analysts say it should be revalued as a power infrastructure company rather than being assessed primarily as an electric vehicle company.
KT&G's overseas tobacco business is growing both in scale and quality, supported by local production in Kazakhstan. The company is also expected to benefit from the announcement of a new shareholder return policy. For semiconductor component maker HAESUNG DS, a 190 billion won investment to expand package substrate production is seen as a turning point that could resolve the growth constraints that have weighed on its stock.
◆ Samsung SDI (006400)― iM Securities / Analysts Jung Won-seok and Park Jeong-ha
- Target price: 800,000 won (up 35.6%, from 590,000 won) | Previous close: 541,000 won
- Investment opinion: Buy (maintained)
iM Securities raised its target price for Samsung SDI to 800,000 won, saying the company is expected to post an earnings surprise in the third quarter, led by its ESS business.
Analysts Jung Won-seok and Park Jeong-ha expect third-quarter operating profit to reach 285 billion won, well above market expectations. The figure includes one-off gains, such as compensation payments from automakers that failed to meet minimum purchase volumes. However, even excluding those gains, ESS performance is clearly improving, they explained. Revenue growth is expected to accelerate further in the fourth quarter, when the company's lithium iron phosphate (LFP) production line in the United States begins full-scale operations.
Samsung SDI also drew attention after announcing last month that it would acquire the entire stake in Synergy Cells, which it established jointly with GM. The deal will give the company its first large-scale battery plant in North America under sole ownership. The analysts stated, "This decision is viewed as a strategic choice to seize business opportunities in the North American ESS market, which is growing faster than expected, by reorganizing the production structure in response to slowing U.S. EV demand."
They also noted, "The role of ESS is expanding beyond storage systems linked to renewable energy to become a key infrastructure component supporting the stable power supply of AIDCs." They concluded that Samsung SDI's stock "should be revalued to reflect the growth potential of the power infrastructure industry, moving beyond its previous EV-centered valuation."※ Energy storage system (ESS)An ESS stores electricity in batteries and supplies it when needed. It has traditionally been used to store electricity generated by solar and wind power, whose output is inconsistent. More recently, ESS units have become essential at AI data centers, which require a stable power supply around the clock.※ AI data center (AIDC)A computing facility that houses large-scale semiconductor systems needed for artificial intelligence processing. Because it consumes far more power than a conventional data center, an ESS and other power equipment play a critical role in ensuring an uninterrupted electricity supply.
◆ KT&G (033780)― Kiwoom Securities / Analyst Park Sang-jun
- Target price: 250,000 won (maintained) | Previous close: 172,000 won
- Investment opinion: Buy (maintained)
Kiwoom Securities maintained its 250,000-won target price and Buy recommendation for KT&G, saying the company's overseas tobacco business is achieving both quantitative and qualitative growth. Analyst Park Sang-jun prepared the report after personally visiting the company's production subsidiary in Kazakhstan from September 15 to 18.
Park pointed out, "KT&G's profit growth should not be attributed simply to currency exchange rates." He emphasized, "Although some of the profit increase may have come from the benefits of a strong dollar and the effects of price increases, it is important to note that the growth rate of operating profit in the overseas cigarette business has expanded to more than 50% since last year."
He added, "In Kazakhstan, where commercial production began in March last year, market share increased from 5.1% in 2022 to 9.6% last year." He said, "From 2022 through last year, the Kazakhstan sales subsidiary recorded remarkable qualitative growth, with average annual increases of 20% in volume, 70% in sales, and 90% in operating profit."
Approximately 40% of the Kazakhstan plant's output is exported to neighboring countries such as Russia and Kyrgyzstan. Starting this year, KT&G also plans to launch a direct heat-not-burn (HnB) tobacco business in the local market.
Park said, "As investments to diversify global production bases are completed, overseas tobacco profits and the capacity for shareholder returns are expected to grow steadily over the medium term." He added, "In the short term, the announcement of a new shareholder return policy focused on share buybacks and higher cash dividends is expected to provide positive momentum for the stock price."※ Heat-not-burn tobacco (HnB)A type of tobacco product in which tobacco leaves are heated with a dedicated device rather than burned, producing vapor that users inhale. Because tobacco consumption taxes account for a smaller share of the retail price than they do for conventional cigarettes, HnB products contribute more profit per unit.
◆ HAESUNG DS (195870)― Meritz Securities / Analyst Yang Seung-soo
- Target price: 77,000 won (up 10.0%, from 70,000 won) | Previous close: 57,500 won
- Investment opinion: Buy (maintained)
Meritz Securities raised its target price for HAESUNG DS to 77,000 won, saying the 190 billion won investment to expand package substrate production, announced by the company on September 18, could help overcome its previous growth constraints.
HAESUNG DS primarily makes lead frames, which connect semiconductor chips to circuit boards. Its second main business is the production of package substrates for memory semiconductors.
The key change is in the production method. HAESUNG DS has traditionally manufactured substrates through a reel-to-reel process, in which copper strips are wound onto reels and stamped continuously. The latest investment will establish a new line using a panel-based process that works with sheets and panels.
Analyst Yang Seung-soo said, "The existing reel-to-reel process has limitations in handling multilayer substrates with more than two layers, and this has acted as a factor behind the company's valuation discount in terms of its medium- to long-term growth potential." He added, "The investment in the panel process is expected to become a turning point that resolves the company's existing growth constraints by enabling an expanded product mix toward high-end package substrates and allowing it to address new demand."
He further stated, "We expect this investment announcement to serve as the catalyst for a full-scale re-rating of the company." The assessment is that the stock has ample room for revaluation as the gap between HAESUNG DS's undervaluation and that of domestic substrate makers and overseas lead-frame companies narrows.※ Lead frameA thin metal frame that holds a semiconductor chip in place and electrically connects it to external circuitry. It serves as the chip's "skeleton and legs" and is essential for automotive and server semiconductors.※ Package substrateA very thin circuit board that transmits signals between a semiconductor chip and the mainboard. A greater number of circuit layers allows it to accommodate more complex, high-performance semiconductors, making layer count a key measure of substrate sophistication.

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