New Galaxy to lift Samsung SDI

By Kim Yoo-chul

Upcoming smartphones by Samsung Electronics will help Samsung SDI increase is business thanks to the expanded use of polymer type batteries, a global market research firm said, Thursday.

The Samsung Unpacked event at New York’s Lincoln Center kicks off at midnight, Friday (KST) and will mark the debut of the company’s Galaxy Note 5 and Galaxy 6 Edge Plus.

Bernstein Research said it expects more future high-end models to adopt a polymer battery starting with the two newest phone models.

“The latest mid-end A-series models have already adopted polymer as well, hinting at further rollout of polymer type batteries across Samsung's smartphone portfolio. Based on these assumptions we believe SDI's small battery margin can eventually recover to a 5 percent operating profit margin,” it wrote in its report to top clients.

Bernstein said as polymer is more widely adopted across Samsung’s smartphones going forward, there is more room for SDI’s small battery margin to recover as polymer capacity utilization improves.

“Much of the miss in small batteries is directly due to the low utilization of polymer caused by the lower than expected sales of Galaxy S6 and A-series. As more Samsung phones move to polymer the utilization issue will be resolved,” it said.

SDI’s profits are in sync with Samsung Electronics as the latter is the biggest client for SDI for small-sized batteries. Hit by disappointing S6 sales, SDI, Samsung’s battery unit, reported lackluster performance during the second quarter of this year.

Bernstein remained positive about SDI’s business outlook in the near future citing its efforts to win large battery orders for electric vehicles by major carmakers.

“While still loss-making, the large battery business for electric vehicles and energy storage systems continues to grow as predicted and shows particularly exciting signs with new cars including a plug-in hybrid BMW X5 and new customers such as Volkswagen and Jaguar Land Rover expected to ramp up soon,” said the report.

According to the report, SDI announced its production expansion plans ahead of schedule. “We think further good news for large batteries will be a key catalyst for the stock,” it said.

“Overall we are encouraged by many auto OEMs' interest in developing their electric vehicle portfolio; BMW, for whom SDI has supplied lithium batteries for all the existing electric vehicles, has announced that it will eventually offer ‘plug-in hybrid versions of all its core brand models,’” it added.

Based on a lower margin outlook for small batteries, however, Bernstein lowered its target price to 160,000 won.