US Prismatic Battery Production Will Fuel Electrification And Renewables

Key Takeaways

• Accelerated battery production capacity and technical leadership position SDI to outpace rivals in EV, AI, and energy storage markets, driving outsized revenue and margin growth.
  
• Expansion into advanced electronic materials and aggressive global investment create new high-margin revenue streams and cost advantages, supporting long-term earnings power.
  
• Persistent overexpansion, rising costs, competitive pressures, client concentration, and slow tech commercialization threaten margins, profitability, and long-term financial stability.

Catalysts

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

• Analyst consensus emphasizes the expansion of U.S. prismatic battery production as a market share story, but this may be significantly understated since SDI's accelerated capacity ramp, high-yield U.S. operations and strong positioning in both the Stellantis and GM JVs allow it to absorb surging EV and policy-driven demand faster than peers, setting up outsized revenue and margin upside as U.S. electrification accelerates through the decade.
  
• Where the consensus sees cylindrical 46-phi battery production as a revenue growth driver, the extraordinary pace of new applications-particularly the rapid ramp in AI-driven battery backup units, hybrid EVs and robotics-could propel both top-line and margin growth much more sharply than expected as SDI leverages technical leadership to command premium ASPs and penetrate adjacent high-growth markets.
  
• SDI's aggressive and counter-cyclical global CapEx-expanding in Hungary and pushing forward on multiple battery chemistries-uniquely positions the company to dominate in the next upcycle, enabling market share gains and scale-driven cost advantages while competitors risk falling behind, supporting structural improvements in long-term operating margins and earnings power.
  
• The company's strategic shift into advanced electronic materials for AI semiconductors and OLEDs is already yielding higher-value, higher-margin revenue streams; as adoption of AI, next-gen chips and foldable displays accelerates worldwide, SDI's materials business can become a transformative margin and earnings growth engine, underappreciated by the market today.
  
• Policy-driven demand for decarbonization, rapidly expanding renewable energy storage, and grid AI infrastructure buildout vastly increase the urgency for high-performance ESS batteries, where SDI's proven technology, flexible manufacturing and early customer lock-in suggest sustained multi-year revenue and margin growth well above current expectations.

Samsung SDI Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Samsung SDI compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Samsung SDI's revenue will grow by 27.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 0.3% today to 9.5% in 3 years time.
• The bullish analysts expect earnings to reach ₩2931.6 billion (and earnings per share of ₩37696.32) by about July 2028, up from ₩42.8 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 12.7x on those 2028 earnings, down from 339.7x today. This future PE is lower than the current PE for the KR Electronic industry at 14.9x.
• 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 8.91%, as per the Simply Wall St company report.

Samsung SDI Future Earnings Per Share Growth

Risks

• Continued aggressive capital expenditures and capacity expansion, even amid current low utilization rates and industry-wide demand uncertainties, may result in underutilized assets and higher fixed costs, which could pressure net margins and earnings for several years.
  
• Ongoing geopolitical trade tensions, especially regarding tariffs and overseas production, are increasing costs for key raw materials and finished batteries, while also heightening demand volatility in the US and Europe, threatening revenue stability and profit margins.
  
• Intensifying competition from global battery makers and emerging new entrants, combined with customers destocking and slow EV adoption in some regions, may force Samsung SDI to lower prices, eroding gross margins and impacting overall profitability.
  
• Heavy reliance on a small number of large automotive and ESS clients exposes Samsung SDI to significant customer concentration risk; weakened performance or shifts in purchasing strategies by these key clients could sharply reduce revenue and create earnings volatility.
  
• Slow progress or execution risks in bringing new battery technologies-such as solid-state batteries-to mass production could result in escalating R&D and capex spending with insufficient return, negatively affecting net profits and long-term competitiveness.

Valuation

• The assumed bullish price target for Samsung SDI is ₩342323.01, which represents two standard deviations above the consensus price target of ₩234737.5. This valuation is based on what can be assumed as the expectations of Samsung SDI's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• 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 bullish analysts, you'd need to believe that by 2028, revenues will be ₩30937.6 billion, earnings will come to ₩2931.6 billion, and it would be trading on a PE ratio of 12.7x, assuming you use a discount rate of 8.9%.
• Given the current share price of ₩184600.0, the bullish analyst price target of ₩342323.01 is 46.1% higher.
• 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.