“Samsung SDI Co., Ltd.: Earnings improvement to continue ... target price raised on order expectations”

[Financial News] On the 8th, DS Investment & Securities maintained its Buy rating on Samsung SDI Co., Ltd., saying that earnings improvement would continue on growth in energy storage systems (ESS) and a return to profitability for small batteries. It raised its target price from 840,000 won to 940,000 won.
DS Investment & Securities researcher Choi Tae-yong said, “Third-quarter revenue is expected to be 4 trillion won and operating profit 257.5 billion won, exceeding the earnings consensus of 131.8 billion won,” adding that “a settlement gain of about 150 billion won arising during the acquisition of a stake in Synergy Cells, its U.S. joint venture with GM, is expected to be reflected in the automotive segment.”
Choi said, “This appears to be a one-off gain related to the settlement of minimum purchase volumes,” and explained, “ESS revenue is expected to grow, including with the resumption of supply of deferred domestic volumes, while small batteries are expected to return to profitability as utilization rises, led by high-output products.”
Operating profit for the company as a whole, excluding the one-off settlement gain, was estimated at 107.5 billion won, and operating profit for the battery division at 63.7 billion won. These figures include the U.S. Advanced Manufacturing Production Credit (AMPC).
The firm expects increased U.S. ESS volumes to support results in the fourth quarter. Choi analyzed, “Whereas third-quarter growth was centered on deferred domestic volumes, U.S. volumes will be added in the fourth quarter,” citing “the Indiana lithium iron phosphate (LFP) line’s entry into mass production in October.”
He added, “In the fourth quarter, the battery division will also return to profitability, with operating profit of 27.5 billion won excluding AMPC,” and “the recovery of small batteries to profitability and ESS expansion will offset weakness in the automotive segment caused by a gap in BMW volumes.”
Revenue this year was forecast at 16 trillion won, with operating profit at 530.3 billion won. The full-year operating profit estimate was raised by 42%, reflecting the one-off settlement gain and fourth-quarter ESS guidance.
The firm also pointed to expectations for additional orders. Choi said, “Further discussions are under way on North American ESS following the existing long-term supply agreement,” and “in Europe, the goal is to secure orders this year for multiple prismatic-cell projects, including LFP.” 

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