Local Battery Expansion Will Open Broader Market Opportunities

Key Takeaways

• Expansion of U.S. production and diverse technology investments support margin recovery, revenue growth, and improved product differentiation in energy storage and EV markets.
  
• Broadening into multiple end markets and strong ESS demand reduce dependence on auto OEMs, smoothing revenue volatility and strengthening long-term growth prospects.
  
• Heavy reliance on EV batteries, localization hurdles, and technological lag expose Samsung SDI to rising profitability, market share, and margin risks amid shifting global dynamics.

Catalysts

Manufactures and sells batteries in South Korea, Europe, China, North America, Southeast Asia, and internationally.

• Samsung SDI's ramp-up of local battery and ESS production in the U.S. (leveraging the StarPlus Energy lines) is expected to offset tariff-related margin pressure and capitalize on accelerated growth in the U.S. energy storage and EV markets, likely supporting both future revenue growth and margin recovery.
  
• Increasing order pipeline for prismatic LFP batteries and high-performance cylindrical cells (including for premium and entry-level EVs in Europe and the U.S.) positions the company to capture structurally rising global electrification demand, driving long-term revenue and earnings visibility.
  
• Diversification into broader end markets-such as HEVs, UAM, commercial EVs, AI server backup, and power tools-mitigates over-reliance on large automotive OEMs and expands the company's addressable market, which should smooth revenue volatility and enhance multi-year top-line growth.
  
• Sustained investment in advanced battery technologies (including tabless designs, No-Thermal Propagation, multiple chemistries, and high-power solutions) is expected to enable higher ASPs, support product differentiation, and gradually improve operating margins as the technology mix shifts toward more value-added applications.
  
• Structural tailwinds in the stationary storage market (ESS), fueled by renewables growth and rising power needs from AI data centers, combined with Samsung SDI's expanding domestic and international ESS contract wins, are set to drive upward momentum in both revenue and net earnings over the medium to long term.

Samsung SDI Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Samsung SDI's revenue will grow by 14.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.3% today to 7.1% in 3 years time.
• Analysts expect earnings to reach ₩1581.9 billion (and earnings per share of ₩22989.28) by about August 2028, up from ₩42.8 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting ₩2365.5 billion in earnings, and the most bearish expecting ₩632.9 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.1x on those 2028 earnings, down from 401.1x today. This future PE is greater than the current PE for the KR Electronic industry at 15.1x.
• Analysts expect the number of shares outstanding to grow by 2.2% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.94%, as per the Simply Wall St company report.

Samsung SDI Future Earnings Per Share Growth

Risks

• Samsung SDI's heavy reliance on EV batteries, and its relatively late entry into the U.S. and lower-cost "volume/entry" EV segments, has led to slower sales growth and a lag in securing a more diversified customer base compared to peers, increasing risk to revenue and market share over the long term.
  
• Persistent and recently intensified U.S. tariffs on Korean battery exports, coupled with the need for local production to qualify for incentives and avoid tariffs, are placing significant pressure on operating margins and complicating market expansion, likely suppressing profitability until localization is fully achieved.
  
• The company's income statement evidences sustained operating losses (Q2 net loss amid top-line decline), which, given the macroeconomic environment, EV demand weakness, and ongoing required high capital expenditures (particularly for new U.S. and European lines), may compress near
• to mid-term net earnings and strain financial stability.
  
• Rapid demand shifts toward alternative battery chemistries (such as LFP) and lower-cost products are forcing Samsung SDI to play technological catch-up against more established competitors in the mass segment, creating execution risk and raising the possibility of eroded gross margins if product commoditization accelerates.
  
• The ongoing risk of supply chain localization pressures, regulatory uncertainties (like IRA revisions), and potential for more aggressive competition from Chinese manufacturers threaten Samsung SDI's long-term ability to maintain price premiums and consistent raw material access, which could negatively affect both revenue growth and net margins.

Valuation

• The analysts have a consensus price target of ₩234595.133 for Samsung SDI based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₩440565.0, and the most bearish reporting a price target of just ₩135000.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₩22288.6 billion, earnings will come to ₩1581.9 billion, and it would be trading on a PE ratio of 16.1x, assuming you use a discount rate of 8.9%.
  
• Given the current share price of ₩218000.0, the analyst price target of ₩234595.13 is 7.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.