Despite poor Q1, SDI expecting solid 2020
Toyota-backed self-driving company Pony.ai demonstrates an autonomous electric vehicle delivery from local e-commerce platform Yamibuy in Irvine, Calif., April 28, during the coronavirus outbreak (COVID-19). Reuters-Yonhap
By Kim Yoo-chul
Despite Samsung SDI's “not-that-impressive” first-quarter results, senior fund managers said Sunday they will further strengthen their positions in the company given its expected positive business outlook.
“I would say although short-term headwinds remain, SDI's long-term electric vehicle (EV) focus is still intact,” a fund manager from a U.S.-based investment bank in Seoul said.
But the manager said the bank is yet to address coronavirus-related supply chain concerns after Samsung SDI's assessment on the outlook for its business in its first-quarter earnings announcement. SDI said it was expecting to see a “substantial impact” in the second quarter from the uncertainty brought on by COVID-19.
“But that doesn't mean we will lower our target on Samsung SDI,” he said, asking not to be identified as he wasn't officially authorized to speak to the media.
“It's no doubt that the second quarter should see some negative impact from the reversal of pulled-forward orders, with the operating loss possibly widening. However, the second half will see growth. We don't worry too much about SDI's expected 2020 performance.”
A fund manager at another U.S.-based investment bank predicted SDI's share price would reach 390,000 won by the end of this year, up from its Friday close of 286,000 won.
“EV battery demand will be good after the second quarter,” he said. “While SDI has been hit by weak demand for energy storage systems (ESS) in South Korea, we expect the second quarter will be much better as SDI is hoping to win more ESS orders in the United States.”
He also expects revenue from the company's electronic materials and small battery divisions will remain flattish this year.
The manager said SDI's order backlog for EV batteries would increase by $45 billion in 2020, a comparable amount to Panasonic. SDI's chief local rival LG Chem is aiming to expand its global share thanks to a new contract with Tesla, while SDI is pursuing profitability rather than market expansion.
“The electronic materials division will face challenges going forward,” the manager said. “But margins and profits will see a modest mix improvement thanks to increasing demand for OLED and semiconductor materials.”
SDI reported 2.39 trillion won in revenue for the three months to March 31, up 4.1 percent year-on-year. But operating profit in the period was down by 54.6 percent to 64.8 billion won.