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Equity Research Project – Global

Samsung SDI Equity Research Case

Project Background

Samsung SDI has achieved highest financial performance in 2018. Moreover, the markets for business segments which Samsung SDI operate are considered as promising, typically for ESS and EV business segemetns. In that, the equity research on Samsung SDI was conducted for the analysis.

  • Part 1. Investment Highlight
  • Part 2. Samsung SDI Industry Overview
  • Part 3. Samsung SDI Business Overview
  • Part 4. Financial Analysis
  • Part 5. Valuation Overview

Project Leaders

Song, Inn Hee

Finance Project Member
FCB Finance Institute

Concentration Area: Equity Research

Kim, Hyeon Sup

Finance Project Member
FCB Finance Institute

Concentration Area: Equity Research

Lee, Jae Seok

Finance Project Member

FCB Finance Institute

Concentration Area: Equity Research

Finance Project Portfolio

Part1. Investment Highlight

There has been more than 45% increase in Samsung SDI’s EV battery sales in 2018, and we are expecting 125.6% growth in sales by the end of 2019. Not only gradual but also consistent increase in the new EV battery sales seems somewhat promised. Moreover, It is by no surprise that there will be more electric cars manufactured in the near future as we estimate the demand for EV battery to have a steady growth of 67.5% each year from 2019 to 2023.

Part2. Samsung SDI Industry Overview

The overall size of the Rechargeable battery market is expected to dramatically grow as the demand for the batteries is soaring in diverse industries. In the EV sector major manufacturers have announced their plans of increasing productions of the number of vehicles that use an ample amount of batteries(PHEV/BEV) due to the Paris agreement . In the ESS sector because a great number of developing countries have plans of expanding fundamental infrastructures related to energy resources , the given sector is expected to grow in a rate of CAGR of 40%. Although the prospects of the Material market sector of Samsung SDI isn’t as high as the Battery market, the general consensus is that there is still room for development in the given field. The growth rate of the LCD market has decreased over the years, however the OLED market is forecasted to grow in a rate of 17.5% in the next 5 years. Hence, the materials related to the market such as Polarizers and EMCs are to be positively influenced by the growth. Lastly, although the growth of the memory sector is to decrease in the future in the Semi-conductor market, there is still expectations of growth in the non-memory sector. In that, the material market is also expected to grow in steady rates.

There were also rough moments for Samsung SDI in recent years. However, Samsung SDI still managed to meet the expectation for 4Q in 2018 as they have announced 2.478 trillion KRW for their 4Q18 revenue. Not only xEV and ESS batteries but also success in Cylindrical, polymer batteries strengthened firm’s value. The commercialization of the 5G and the foldable smartphone market might be able to increase the demand for small sized LIB as well in following years.

Part3. Samsung SDI Business Overview

Samsung SDI was founded in 1970 and currently operate its business through energy solution and electronic materials segments. According to recent announcement by Samsung SDI, it made 9153.8 billion KRW in total revenues as highest financial performance ever. Typically, its businesses on EV batteries and ESS under energy solution segment are expected to notably grow at a rapid pace.

Part4. Financial Analysis : Financial Performance Review of Samsung SDI 2018

For the 2018 performance review of Samsung SDI, that is used to historical data.
This analyzed issues that had a significant impact on each by each business sector. So, Based on these analysis data, the data were used to estimate future estimated sales, operating profit, and EBITDA.

Part5. Valuation Overview

Target Price is based on Discounted Cash Flow valuation assuming WACC as 9% and perpetual growth rate as 0.7% as well as using beta from Bloomberg. We recommend “BUY” for Samsung SDI stock, with suggesting target price of KRW 292,659.

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