FCB 금융학회

Equity Research Project – Global

SAMSUNG SDI Equity Research Report Case

Project Background

The rechargeable battery industry has been growing since the BoT (Battery of Things) trend emerged. The global rechargeable battery demand will increase from 142 GWh in ’18 to 1261 Gwh in ‘23. Higher energy density and cheaper expense are the reasons why the rechargeable battery industry is spotlighted. Upstream industries of the rechargeable market are IT devices industry, Electric Vehicle industry and Energy Storage System industry. Especially, the EV industry is the potential leader of the market. The UN and advanced countries’ environmental policies restrict production of the internal combustion engine automobiles and the EVs are the most suitable substitute. SAMSUNG SDI has significant market share in the rechargeable battery industry and this report estimates the SAMSUNG SDI’s growth by reflecting the growth of the industries.

    • Part 1. Industry Overview – Medium rechargeable battery industry
    • Part 2. Company Overview – Samsung SDI business
    • Part 3. Company Overview – Financial Analysis
    • Part 4. Valuation Analysis – DCF Valuation & Sensitivity Analysis
    • Part 5. Valuation Analysis – Relative Valuation

Project Leaders

Hoe, Tae Young

Finance Project Member
FCB Finance Institute

Concentration Area: Equity Research

증명사진.jpg

Lee, Kyoung Taek

Finance Project Member
FCB Finance Institute

Concentration Area: Equity Research

Han, Sang Hoon

Finance Project Member
FCB Finance Institute

Concentration Area: Equity Research

Finance Project Portfolio

Part1. Industry Overview – Medium rechargeable battery industry

The global EV demand is leading growth of the RB market. The Volkswagen Group launched the MEB(Modular Electric Drive Kit) project that targets 6.4M EV production and invests 50B Euro in EV batteries. The EV battery suppliers of the MED project, SAMSUNG SDI, LG Chemistry and CATL will supply the batteries until ‘20. The Volkswagen Group’s announcement of decreasing the cost of the EV batteries will not increase the sales of the supplier companies in significant level. However, the big suppliers of the ESS companies, SAMSUNG SDI and LG Chemistry are expected to invest the revenue from the ESS business into the medium RB business. According to the Chinese Government’s 2017 announcement, the EV production guidance to ‘20 is 2M. In addition, the upcoming NEV Credit system of forcing automobile companies to produce EV will increase the growth of the EV market. Lastly, the commercialization of the ‘Last Mile Delivery’ E-Truck gives growing expectation in the medium RB market.

Part2. Company Ovewview – Samsung SDI Buisness

Let me introduce Samsung sdi Business. Samsung SDI was jointly established by Samsung Group and japanese electronics maker NEC in 1970. The company currently supplies more than 50% of its total sales to batteries and supplies electronic materials such as polarizers, which are used in semiconductors and display panels. In business, It is divided into the energy solution business, which produces and sells small batteries, mid- and large-sized batteries, and the electronic materials business, which produces and sells semiconductors and display materials.

Total revenue was 9584 billion KRW in 2018 through two business segments; Energy solution segment(67.6%), Electronic materials segment(32.4%) in last year. SDI is also a global supplier of secondary batteries. According to SNE Research, SDI shipped rechargeable battery for the electric vehicle to 6.0 gigawatts. It is the fifth largest in the world rechargeable batteries market for electric vehicles and has a market share of 5.5%. SDI’s future prospects are bright if we consider that the secondary battery market will evolve into a form of oligopoly that has the same high technology as the semiconductor market.

Part3. Company Overview – Financial Analysis

Samsung SDI’s revenues are not necessarily in line with EBITDA and operating profit. Since Samsung SDI generates sales to other IT companies, it is affected by the results of other markets. Samsung Galaxy mobile phone, which are Samsung SDI’s key customers, are affecting SDI’s operating profit. The share price of Samsung SDI is the same. The time when the share price fell sharply was influenced by iPhone sales. Samsung SDI’s financial position is influenced by other companies, which is reflected in stock prices. The same is true for rechargeable batteries, the company’s flagship business. Parts such as secondary batteries and electronic materials are influenced by other industries that utilize them.

Part4. Valuation Analysis – DCF Valuation & Sensitivity Analysis

Based on the assumptions and estimations, the SAMSUNG SDI is expected to have a significant growth in the RB businesses. Reflecting the huge growth of the medium RB market, the SAMSUNG SDI will have the fast growth in the medium RB business. The large RB business follows and the small RB business takes the third in the total sales. The COGS is expected to grow reflecting the growth and decline of the five main raw materials of the RB, that are Manganese, Cobalt, Lithium, Aluminum, and Nickel. Based on the DCF Valuation modeling, the SAMSUNG SDI has 36% upside with the target price of KRW 310,056./span>

Part5. Valuation Analysis – Relative Valuation

The most noteworthy portion of Samsung SDI’s relative valuation is the PBR. Samsung SDI’s PBR is the lowest among peers. The lower the PBR, the lower the value of the company. However, Samsung SDI’s low PBR could be attributed to its extremely high CAPEX investment forecast for future rechargeable battery demand. Especially, in the IT industry where inventory obsolescence is fast, an increase in CAPEX investment of companies can be seen as a commitment to sales. This can be a positive signal.

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