Samsung SDI share hits record high
By Lee Min-hyung
The stock price of Samsung SDI is setting records on expectations for its recovering battery business.
The battery affiliate of Samsung Group closed at an all-time high of 220,500 won ($195.65) on Monday, up 6,000 won or 2.8 percent from the previous trading day.
The improved valuation is noteworthy as it comes only a year after the company suffered a high-profile crisis following the Galaxy Note 7 recall over its battery faults. Shares of Samsung SDI reached last year’s record low of 89,300 won on Oct. 26 in the aftermath of the unprecedented handset recall. Last year, the company reported an operating loss of 926.3 billion won.
But analysts said the company is on track for a rapid earnings recovery and the momentum will continue for at least a few more quarters.
They attributed the growth to a surging demand for its small lithium-ion battery products and stabilizing mid-to-large battery business.
“Samsung SDI is estimated to report 29.7 billion won in operating profit during the July-September period, up 444 percent from the previous quarter, driven by its small polymer battery business,” Korea Investment & Securities analyst Park Ki-heung said.
“Samsung SDI holds a dominant market share for batteries used in major flagship smartphones, and the small battery unit is expected to report a 43 percent growth in its sales during the same period from the previous quarter.”
The small battery business is the firm’s major cash cow, taking up more than 46 percent in its annual sales.
He said the company is rapidly expanding its overseas sales channels after adopting the so-called eight-point battery safety check to prevent the recurrence of the Note 7 debacle.
The analyst remained optimistic for the firm’s short-term outlook, as its mid-to-large battery business expects a recovery in the third quarter.
“With the energy storage system (ESS) business reaching a peak season, SDI’s mid-to-large battery business will likely reduce a deficit in operating loss in the same period,” the analyst said.
Starting from the latter half of 2018, the mid-to-large battery unit will gain growth momentum, as the firm’s electric vehicle (EV) battery plant in Hungary will start operation in the first quarter of the year, according to the analyst.
“Samsung SDI will report an estimated 2018 operating profit of 525.3 billion won, backed by a possible turnaround of the mid-to-large battery unit,” he said.
Daishin Securities also maintained a rosy outlook on the company, revising up its target share price to 240,000 won.
“Samsung Electronics is also enhancing competitiveness for its auto-parts business, which will generate synergy when Samsung SDI attracts orders from global carmakers,” he said.
Carmakers here and abroad are also increasing their EV lineups, and this is another key factor for SDI’s improved valuation, according to the analyst.