Samsung SDI strengthens earnings resilience through ESS despite EV weakness... “Hyosung Heavy Industries has no reason to be undervalued this much” [Stocktopia]

[Financial News] On the morning of October 14, we bring you a roundup of reports from major securities firms.
Analysts say Samsung SDI’s earnings resilience will improve on rapid growth in energy storage systems (ESS), even if profitability in its core electric vehicle (EV) business remains weak.
Hyosung Heavy Industries is expected to fall short of market expectations for its third-quarter results, but analysts say its new order growth is steep and its share-price discount relative to global peers is excessive. HMM’s recommendation was raised from Neutral to Buy, with analysts citing a stronger-than-expected earnings recovery despite governance uncertainty.
◆ Samsung SDI (006400)― Shinhan Investment Corp. / Researchers Lee Jin-myeong and Kim Myeong-ju
- Target price: 740,000 won (raised 19.4%, from 620,000 won) ᅵ Previous closing price: 560,000 won
- Rating: Buy (maintained)

Shinhan Investment Corp. raised its target price for Samsung SDI to 740,000 won, saying that while the company’s third-quarter earnings surprise was a one-off, ESS growth was not.
Researcher Lee Jin-myeong estimated third-quarter operating profit at 263.8 billion won, above the market consensus of 165.4 billion won. However, he said the results were “a one-off surprise from a termination settlement payment related to the end of its joint venture (JV) with US automaker General Motors (GM),” and analyzed that the core business margin would fall to -7%, widening the loss.
By contrast, ESS revenue was expected to reach 1.1 trillion won in the third quarter, up 39% from the previous quarter, on deferred domestic power-sector sales and increased shipments to the United States.

The researcher emphasized that “about 80% of US ESS production capacity (around 30 GWh in 2027) has been secured through orders through 2029, making stronger earnings resilience a valid expectation even if the EV recovery is slow.” 
※ Energy storage system (ESS)This is equipment that stores generated electricity in batteries and supplies it when needed. It is used to offset fluctuations in output from renewable energy sources such as solar and wind power, whose generation levels can vary considerably. Demand to stabilize power supplies for AI data centers has also been adding to demand recently.※ Battery backup unit (BBU)A backup battery that immediately supplies power to equipment such as servers in the event of a power outage or disruption to the electricity supply. As demand grows with the expansion of AI data centers, it is considered a new growth product for small-battery manufacturers.※ Advanced Manufacturing Production Tax Credit (AMPC)Under the US Inflation Reduction Act (IRA), this program provides tax credits in proportion to production volume to companies that manufacture batteries and other products in the United States. The credits are directly reflected in the operating profits of domestic battery makers running factories in the US.
◆ Hyosung Heavy Industries (298040)― Korea Investment & Securities / Researchers Jang Nam-hyun and Kim Tae-hee
- Target price: 4 million won (cut 13.0%, from 4.6 million won) ᅵ Previous closing price: 2,152,000 won
- Rating: Buy (maintained)
Korea Investment & Securities maintained its Buy rating while lowering its target price for Hyosung Heavy Industries to 4 million won, taking into account the gap with the current share price. The firm said the company’s order backlog and earnings growth foundation were becoming more solid, even though third-quarter results were expected to fall short of market expectations.
Researcher Jang Nam-hyun estimated third-quarter operating profit at 289.6 billion won, 8% below the consensus estimate of 314.9 billion won. Some deliveries were delayed due to geopolitical risks in the Middle East and requests from European and Asian customers, but he expected the delayed shipments to be recognized as revenue in the fourth quarter.
By contrast, third-quarter new orders were estimated at 2.5 trillion won or more. Regarding a high-voltage transformer supply contract signed with a US big tech company in September, Jang said, “The entities placing orders for high-voltage transformers are expanding from traditional utility companies to data center operators.” He therefore expected the company to exceed its annual order guidance of 12 trillion won.
The shares were considered excessively cheap compared with global peers. Based on estimated 2028 results, Hyosung Heavy Industries’ price-to-earnings ratio (PER) is 13.5 times, below even the low end of the range for global companies (17.9 times). Meanwhile, its 2025–2028 compound annual growth rate in earnings per share (EPS) is 41.8%, 12.5 percentage points above the industry average, the report said.
Jang emphasized that “even taking into account the broad decline in industry valuations, the discount to global peers is excessive,” adding that “this is the right time to buy by taking advantage of the excessive valuation gap relative to earnings growth.” 

◆ HMM (011200)― Shinhan Investment Corp. / Senior Researcher Choi Min-gi
- Target price: 26,000 won (raised 30.0%, from 20,000 won) ᅵ Previous closing price: 22,050 won
- Rating: Buy (upgraded from Neutral)
Shinhan Investment Corp. upgraded its rating on HMM from Neutral to Buy and set a target price of 26,000 won, saying that it was focusing on the stronger-than-expected earnings recovery despite governance uncertainty.
Senior Researcher Choi Min-gi noted that global container shipping companies’ share prices had risen after they raised their earnings guidance, but HMM’s response had been limited. He added that its earnings were “too good to dismiss over governance concerns.”
Third-quarter operating profit was estimated at 1.0042 trillion won, up 238% from a year earlier and 46% above consensus. The analysis said container freight rates had risen sharply as strong peak-season cargo volumes ahead of changes to US-China tariffs coincided with supply disruptions, including typhoons in China, congestion at Western ports, and bottlenecks at the Panama Canal.
However, the accelerating moves to return to the Suez Canal despite uncertainty in the Middle East were cited as a risk. The report said a key variable was whether shipping companies would adjust the pace of their return amid intensifying clashes between Houthi rebels and Saudi Arabia.
Senior Researcher Choi assessed that while excess container shipping capacity poses a risk to medium- and long-term results, the share price has not fully reflected the upward revision to near-term earnings expectations. He added that “the discount is expected to narrow, reflecting earnings improvement and scope for increased shareholder returns.” ※ Bunker fuelA heavy fuel oil used to power ships, it is one of the largest cost items for shipping companies. When its price rises, carriers pass some of the increase on to cargo owners through fuel surcharges. The report judged that the increase in freight rates exceeded the amount passed on through surcharges.※ Shipping capacityThis refers to the space available on ships to carry cargo, or, in other words, the supply capacity of the shipping market. An increase in newbuild deliveries can create excess capacity and push freight rates down, making it a key factor in the medium- and long-term performance of container shipping companies.※ Very Large Crude Carrier (VLCC)A large oil tanker with a deadweight capacity of 200,000 metric tons or more, used mainly to transport crude oil over long distances, such as from the Middle East to Asia.

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