samsung sdi (006400 ks) buy (i) / tp: w165,000...
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KOREA Tech/tech parts
Samsung SDI (006400 KS)
BUY (I) / TP: W165,000 (I)
Share price (won, Apr 6) 139,000
Paid-in capital (Wbn) 241
Market cap (Wbn) 6,333
BPS (won) 116,882
Net debt to equity (%) 6.7
Shares outstanding 47,176,237
Avg daily T/O (2M, Wbn) 64
Avg daily vol (2M, shrs) 454,094
52-week high (won) 201,000
52-week low (won) 100,000
Foreign ownership (%) 16.80
Major shareholders (%)
Samsung Electronics and others 20.6
Stock performance (%)
1M 3M 12M
Absolute 0.4 3.4 (18.7)
Relative (1.1) (6.1) (14.8)
Abs (US$) (0.2) 6.1 (22.7)
0
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100,000
150,000
200,000
250,000
Apr 2010 Apr 2011 Apr 2012
0
20
40
60
80
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140
SAMSUNG SDI CO.,LTD.(LHS)
Rel. to KOSPI(RHS)
(won) (%)
Source: Datastream
Apr 10, 2012
www.tys.co.kr/english TONGYANG Research
Company Report
Earnings momentum, long-term potential strong Earnings to keep improving thru 2013 on rising battery demand
IT demand is recovering amid rising demand for mobile devices, and we expect the battery market to surge accordingly. In particular, demand for high-capacity lithium polymer batteries, in which SDI has a competitive edge, is growing rapidly. We believe structural earnings recovery already started in 1Q.
Offers total energy solutions
With its solar cell and ESS businesses, SDI can offer total solutions in the set-up of renewable energy systems, putting it in a favorable position in terms of productivity and winning more clients. SDI’s long-term outlook as an energy play is very bright.
Financials sound
SDI had a net cash position of W25.3bn at end-2011. For now, there are no large capex plans and strong battery sales are expected to boost cash inflows. Ample liquidity should allow SDI to invest whenever it needs, helping it to develop outstanding technologies.
Initiate at BUY with target price of W165,000
Battery demand is robust on growth of smartphones, tablets, and ultrabooks.
SDI boasts strong earnings momentum and great long-term growth potential.
Forecasts and valuations (Wbn)
FY ends Dec 2010 2011E 2012E 2013E 2014E
Sales 5,124.3 5,443.9 5,990.6 5,835.4 6,010.4
Chg (% y-y) 3.5 6.2 10.0 -2.6 3.0
Reported OP 286.8 203.7 305.9 372.7 417.6
Adjusted OP* 234.2 110.0 255.9 318.7 360.6
NP, CI 356.1 320.1 365.6 423.5 452.1
EPS, CI (won) 7,761.7 7,026.4 8,025.0 9,295.4 9,923.3
Chg (% y-y) 63.4 -9.5 14.2 15.8 6.8
P/E (x) 20.3 22.1 16.8 14.5 13.6
P/B (x) 1.2 1.2 1.0 0.9 0.9
EV/EBITDA (x) 11.8 11.6 8.8 7.4 6.7
ROA (%) 5.0 4.3 4.6 5.1 5.2
ROE (%) 6.5 5.3 5.8 6.4 6.4
Note: * Adjusted OP = reported OP (K-IFRS) – other operating profit/loss. CI = controlling interest Source: TONGYANG Securities
Brian Park [email protected] +822-3770-3562
2 TONGYANG Securities Inc.
Samsung SDI (006400 KS)
Look far ahead Initiate at BUY with target price of W165,000
We initiate coverage of Samsung SDI at BUY with a target price of W165,000. We think its strength in the short term is earnings momentum, and in the long term, its strong growth potential.
Thanks to a recovery in IT demand worldwide, SDI’s sales should continue to improve until at least 2013. In 1Q12, its utilization ratio and sales both rose as setmakers began restocking inventories. From 2Q, we expect upbeat component demand as setmakers roll out a string of new models. In particular, we expect notebook PC demand to rise this year, which should boost battery sales until 2H. All in all, earnings momentum looks strong.
From a long-term perspective, SDI has big growth potential as an energy play. Its product portfolios now include not only the small lithium-ion batteries used in tech devices, but also for machine tools, “eBike,” and automobiles. It is also working to tap into energy supply systems (ESS) and doing R&D for thin-film solar cells. With the product portfolio including lithium-ion batteries, ESS, and solar cells, SDI should be able to offer total energy solutions based on renewable energy, and this why we are bullish about its long-term growth outlook.
We derive our target price using a sum-of-the-parts valuation. The operational value of the battery business is based on the average peer EV/EBITDA and SDI’s 2012 EBITDA. We used LG Chem, Panasonic, and Sony as peers. Although SDI is the number-one producer of small lithium-ion batteries in the world, we did not apply a valuation premium to SDI since these peers also have outstanding technology. Also, we only reflected the value of the battery business, as the PDP and CRT businesses are in decline and the solar cell business will likely take time to make money.
For non-operating value, we looked at the value of SMD, listed securities, and non-listed securities (we calculated SMD’s value separately given that it accounts for a large portion of SDI’s affiliate income). Since SMD is likely to be merged into Samsung Display, our calculation assumes that both have already merged. Meanwhile, we only reflected the book value of SBL, given its negligible earnings. We also applied a 35% discount to non-business value to reflect volatility in the value of listed securities and the lack of a clear basis to value the unlisted securities.
TONGYANG Securities Inc. 3
Company Report
Fair valuation based on sum-of-the-parts valuation (Wbn)
Operational value of battery division (1) 3,774
EBITDA 597 2012E
Target multiple (x) 6.8 2012E average peer EV/EBITDA
Premium (%) 0
Parent company ownership (%) 93
Operational value of “other” (2) 0
EBITDA 170 2012E
Target multiple (x) 0.0
Premium (%) 0
Parent company ownership (%) 93
Non-operating value (3) 3,674
SMD value 3,140 Post-merger value
Investment securities, listed 1,775 Market cap
Investment securities, unlisted 737 2011 book value
Discount (%) 35 Given volatile value of listed securities and lack of valuation basis for unlisted securities
Net cash (4) 171
Net cash 178 2012E
Parent company ownership (%) 96
Shareholders’ equity (1 + 2 + 3 + 4) 7,619
Common share portion (%) 98.8
Shareholder’s value of common shares 7,524
Common shares outstanding (‘000) 45,558
Target price (won) 165,000
Current price (won) 139,000
Upside potential (%) 19
Note: Peers in battery business taken as LG Chem, Panasonic, and Sony Source: TONGYANG Securities
4 TONGYANG Securities Inc.
Samsung SDI (006400 KS)
Post-merger SMD worth W3.14tn to SDI
Since SMD will likely merge with Samsung Display, we calculated SDI’s investment value in SMD assuming that SMD had already been merged into Samsung Display. First, we calculated Samsung Display and SMD’s enterprise value per share and arrived at a merger ratio of 1 Samsung Display:0.802447 SMD. We estimated the number of outstanding shares assuming that SMD is merged into Samsung Display.
Taken together, SDI should end up with a 12.8% stake in post-merger SMD worth W3.14tn. This means that a post-merger SMD is worth almost the same to SDI as a pre-merger SMD. Initially, there were concerns that the merger would considerably lessen SMD’s value as an affiliate due to Samsung Display’s low profitability. However, Samsung Display’s profitability has improved since Samsung Corning Precision Materials became its consolidated affiliate. As such, a merger between SMD and Samsung Display should have limited impact on SDI’s affiliate value.
Table 2. Affilaite value: SMD
Samsung Display SMD Post-merger
entity
Asset value
Asset value/shr (won) (1) 103,687 84,067 90,631 2012E BPS
Earnings value
2012 EPS (won) (2) 8,500 15,334 9,871
2013 EPS (won) (3) 13,393 17,103 13,513
Weighted avg (won) (4) = (2)x0.6+(3)x0.4 10,457 16,042 11,328
Capitalization ratio (%) (5) 10% 10% 10% Capital Market Consolidation Act
Earnings value/shr (won) (6) = (4) / (5) 104,573 160,416 113,278
Enterprise value
Enterprise value/shr (won) (7) = (1)x0.4 + (6)x0.6 104,219 129,876 104,219 Likely merger ratio 1:0.802447
Shares outstanding (shares) (8) 150,000,000 67,823,565 234,520,910
SDI’s ownership (%) 35.6 12.8
Affiliate value (Wbn) 3,136 3,140
Source: TONGYANG Securities
TONGYANG Securities Inc. 5
Company Report
Investment points 1. Margin to improve on increase in battery sales portion
High-margin battery sales should increase and low-margin PDP and CRP sales should decrease. The solar cell division, which is posting losses, is expected to cut production for the time being. This will boost both margins and operating profit for SDI. Battery demand is likely to surge on robust sales of smartphones, tablets, and notebook PCs. In particular, demand for high-capacity lithium-polymer batteries, in which SDI has a competitive edge, is growing rapidly. We believe SDI’s battery sales will stay strong until at least 2013.
2. Battery demand to rise on growth in high-density products Globally, the mobile device sales portion of total tech devices continues to rise. Growth in high-density products especially is picking up fast as demand for compact design and longevity grows. This is especially good news for SDI, since it is very competitive in high-density products.
3. Great vision as total energy solution company While no palpable results have been produced yet, we see SDI’s ESS and solar cell businesses as important parts of the future energy system (eg, renewable energy development). Going forward, we believe SDI will be able to offer total energy solutions based on its expertise in solar cells and ESS. We think it will also be very competitive in terms of productivity and customer services. We are very bullish about SDI’s growth potential as an energy company.
4. Financials sound As of end-2011, SDI had a net cash position of W25.3bn. For now, there are no large capex plans and strong battery sales should boost cash inflows further. We expect net cash to grow to W577.3bn by end-2013. Ample liquidity should allow it to invest in energy solutions whenever it needs. SDI is advantageously positioned in this segment as it is heavily focused in batteries, while rivals have more diverse business portfolios and have net debt.
6 TONGYANG Securities Inc.
Samsung SDI (006400 KS)
Chart 1. Samsung SDI: P/B band Chart 2. Samsung SDI: EV/EBITDA band
0
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2007 2009 2011 2013
A dj price 1 .5x1.3x 1 .0x0.8x 0 .5x
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A dj price 14 .0x11.3x 8.5x5 .8x 3.0x
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Source: TONGYANG Securities Source: TONGYANG Securities
Chart 3. Samsung SDI: sales outlook Chart 4. Samsung SDI: operating margin outlook
5.05.1
5 .4
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09 10 11 12E 13E
(Wtn)
2%
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09 10 11 12E 13E
Source: Samsung SDI, TONGYANG Securities Source: Samsung SDI, TONGYANG Securities
Chart 5. Samsung SDI: utilization outlook for battery Chart 6. Market shares in small lithium-ion batteries
70%
75%
80%
85%
90%
95%
100%
1Q 11 1Q 12 1Q 13
15.1%18.4%
19.8%
24.7%23.6%
18.3%18.6%
9.7%
0%
5%
10%
15%
20%
25%
30%
2008 2009 2010 2011 2012E
Samsung SDISanyoLG C hemSony
(%)
Source: TONGYANG Securities Source: IIT
TONGYANG Securities Inc. 7
Company Report
Table 3. Peer group analysis
SDI LG Chem Panasonic Sony A123 Systems NEC GS YUASA
Country Korea Korea Japan Japan US Japan Japan
Currency KRW KRW JPY JPY USD JPY JPY
Share price 137,000 371,000 762 1,704 1.16 174 453
Market cap 6,241.5 24,586.6 1,869.2 1,711.9 0.170 453.2 187.3
P/E (x) 2011 22.1 12.4 N/A N/A N/A 122.1 15.6
2012E 17.3 10.7 N/A N/A N/A N/A 15.6
2013E 14.9 9.2 15.2 25.9 N/A 14.2 12.2
EPS 2011 7,026 29,069 35.75 -259 -2 -4.82 28.4
2012E 8,025 33,792 -324.65 -216 -1 -39.01 28.1
2013E 9,295 39,372 47.09 63 -1 11.72 35.7
P/B (x) 2011 1.2 2.5 0.6 0.7 0.3 0.6 1.7
2012E 1.0 2.3 0.8 0.7 0.9 0.7 1.6
2013E 0.9 1.9 0.8 0.7 0.5 0.6 1.4
EV/EBITDA (x) 2011 11.6 6.2 4.7 4.0 N/A 5.8 6.7
2012E 9.0 6.4 7.5 6.6 N/A 7.2 8.3
2013E 7.7 5.6 5.2 3.5 N/A 6.2 6.3
ROE (%) 2011 5.3 24.8 2.8 -9.4 -74.2 -1.6 11.2
2012E 5.8 22.3 -33.6 -8.8 -88.1 -13.9 10.6
2013E 6.4 21.3 5.4 3.2 -36.7 4.9 12.3
Sales (bn) 2011 5,443.9 22,675.6 8,692.7 7,181.3 0.2 3,115.4 272.5
2012E 5,990.7 24,945.3 7,970.0 6,413.3 0.2 3,085.3 291.5
2013E 5,835.4 27,232.8 8,024.0 6,770.0 0.4 3,154.9 324.4
Operating profit (bn) 2011 203.7 2,816.5 305.3 199.8 -0.2 57.8 17.6
2012E 305.9 3,091.9 30.6 -92.8 -0.2 69.6 17.3
2013E 372.7 3,563.3 244.6 166.9 -0.1 95.2 21.1
Net debt (bn) 2011 25.3 1,128.9 550.5 -633.5 0.0 470.4 29.3
2012E 178.3 675.9 1,097.7 -279.2 0.1 489.5 40.5
2013E 577.3 38.2 993.2 -419.4 0.0 503.9 29.9
Source: Datastream, TONGYANG Securities
8 TONGYANG Securities Inc.
Samsung SDI (006400 KS)
Conditions turning favorable for battery market Ultrabooks and mobile device boom to boost battery demand
After the ECB’s active intervention, concerns about Europe’s debt problems are receding. As macro uncertainties dissipate, the global IT industry is likely to regain momentum. We believe demand will rise not only for new mobile devices such as smartphones and tablets, but also for conventional IT devices such as PCs and TVs.
Intel’s “Ivy Bridge”-based ultrabooks are slated to launch from end-2Q. Ultrabooks are designed to be more mobile and smaller than existing notebooks, and are expected to grow rapidly as an alternative to tablets. Notebook shipments should grow 11% in 2012 on ultrabook launches and IT industry recovery.
As the mobile device portion of IT devices rise, the Li-ion battery (LiB) market continues to grow. Ultrabook launches, as well as the spread of smartphones and tablets, are creating favorable conditions for the battery market.
LiPB market to surge
SDI’s Li-ion battery division is enjoying market share gains on economies of sale and product competitiveness. Of note, with the spread of smartphones, demand for Li-ion polymer batteries (LiPB) is rising steeply. Most smartphone makers, except for Samsung Electronics (SEC), have opted for LiPB, as have tablets and ultrabooks. We are bullish about the growth of LiPB given the high growth potential of mobile devices using LiPB.
SDI is the world’s number-one small LiB maker and has an edge in LiPB. We expect it to benefit the most from the growing LiPB market for the following reasons:
1. Facility automation After automating cylindrical LiB production, SDI also automated LiPB production. Facility automation improves safety, the most vital factor in batteries.
2. Technical expertise Samsung SDI has accumulated technical expertise through years of R&D. Of note, it has established a technological entry barrier as raw material compounding technology requires years of experience.
3. Continued capacity additions SDI is ramping up capacity the most aggressively among peers. With economies of scale, it can bolster partnerships with clients and trim costs.
TONGYANG Securities Inc. 9
Company Report
Chart 7. Global smartphone shipment outlook Chart 8. Global tablet shipment outlook
180
307
482
654
801
0
200
400
600
800
1,000
09 10 11 12E 13E
(mn units )
18
68
111
146
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10 11 12E 13E
(mn units )
Source: iSuppli, TONGYANG Securities Source: iSuppli, TONGYANG Securities
Chart 9. Global notebook PC shipment outlook Chart 10. Ultrabook portion outlook
170
204214
237250
100
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09 10 11 12E 13E
(mn units )
15%28%
38% 43%
2%0%
20%
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2011 2012 2013 2014 2015
Non-U ltrabooks
U ltrabooks
Source: iSuppli, TONGYANG Securities Source: iSuppli, TONGYANG Securities
Chart 11. SDI Li-ion battery shipment forecast Chart 12. SDI Li-ion battery sales forecast
566
756
1,004
1,249
1,523
400
600
800
1000
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1600
09 10 11 12E 13E
(mn units )
2.0
2 .3
2 .7
3.4
3.8
1
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4
09 10 11 12E 13E
(Wtn)
Source: TONGYANG Securities Source: Company data, TONGYANG Securities
10 TONGYANG Securities Inc.
Samsung SDI (006400 KS)
Growing into total energy solution provider Diversifying business portfolio based on small LiB technology
SDI is seeking to diversify its business portfolio based on small IT LiB technology, expanding into LiB for eBikes, machine tools, and electric vehicles; energy storage system (ESS); and solar cells. Currently, machine tool LiB accounts for 20% of SDI’s total LiB sales; eBike/electric vehicle LiB, ESS, and solar cell are still in R&D.
Subsidiary SB LiMotive is handling the electric vehicle LiB business. We expect it to do R&D projects in partnership with automakers and generate sales from 2013. For ESS, SDI participated in the smart-grid projects in Jeju and Daegu. The company should post full-fledged ESS sales in 2014~2015, when solar power generation costs should be equal to thermal power/nuclear power generation costs.
Solar cells are bringing in sales, but continue to remain in the red on sharp ASP cuts and lack of economies of scale. Amid cheap crystalline solar cell imports from China, SDI is shifting to thin-film solar cells. Currently, it is developing thin-film technology whose energy conversion efficiency should be close to that of crystalline technology.
Solar power, one of the most promising new and renewable energies, should post capacity CAGR of 13% until 2035. Given the strong growth potential of thin-film solar cells, we need to keep an eye on SDI’s ongoing thin-film technology development.
Chart 13. New and renewable energy portion outlook Chart 14. Solar cell market outlook, by segment
80%66%
59% 54% 49% 45%
13%
23%26%
28%29%
31%
2%6% 8% 10% 12% 14%
0%
20%
40%
60%
80%
100%
2009 2020 2030
O ther
Solar power
Wind power
Hydro power
4 7
2018
19
30
0
10
20
30
40
50
2011 2015 2020
C rys talline
Thin film
(US$bn)
Source: IEA Source: Company data
TONGYANG Securities Inc. 11
Company Report
Table 4. Power generation capacity outlook, by segment (GW)
2009 2015 2020 2025 2030 2035 CAGR
Thermal power 3,310 4,007 4,238 4,382 4,571 4,793 1%
Nuclear power 393 431 495 546 591 633 2%
New & renewable 1,253 1,758 2,207 2,665 3,131 3,613 4%
Hydro 1,007 1,152 1,297 1,439 1,548 1,629 2%
Wind 159 397 582 752 921 1,102 8%
Solar power 22 112 184 272 385 499 13%
Biomass 53 75 109 148 193 244 6%
Solar thermal 1 7 14 25 45 81 18%
Geothermal 11 15 20 27 33 41 5%
Tidal - - 1 2 6 17 na
Source: IEA
12 TONGYANG Securities Inc.
Samsung SDI (006400 KS)
To differentiate itself as total energy solution play SDI is seeking to grow into a total energy solution provider, differentiating itself from competitors. A majority of LiB makers are developing ESS, but only SDI and Panasonic are also engaged in new and renewable energy.
SDI offers total energy solutions and should generate sales growth, trim costs through synergies created between divisions, and solidify its customer base thanks to its offering of one-stop service.
The solar power market is expected to grow with the start of small- to mid-size power generation and home power generation, segments for which energy storage systems (ESS) based on LiB are more suitable. we believe SDI’s solar cell and ESS will be competitive from the initial growth phase of the new and renewable energy market. We are bullish on its long-term growth potential in total energy solutions.
Chart 15. SDI’s future energy solutions
Source: Company data
TONGYANG Securities Inc. 13
Company Report
Strong battery sales to boost earnings by 2013 1Q preview: operating profit estimated at W58.6bn (+428% q-q)
We think operating profit rose considerably q-q in 1Q thanks to a sound battery business, dividend income, and base effect (one-off costs in 4Q11). SDI’s utilization rate climbed from the mid-70% in 4Q11 to the 90% level in 1Q12, as setmakers increased their battery purchases in 1Q12 after inventory adjustment in 4Q11. We estimate 1Q battery operating margin at 8.3%, up 2%p q-q thanks to lower costs from larger output and higher utilization.
SDI booked W11.0bn in one-off costs in 4Q11 (loss from impairment of inventory of raw materials, bonus payment), but likely suffered no such one-offs in 1Q12. Also, 1Q dividend income is estimated at W18.0bn.
Operating profit to rise further in 2Q
Battery orders are likely to grow in 2Q thanks to the release of ultrabooks. Of note, the portion of high-margin polymer battery sales is rising. We expect 2Q battery shipments to rise 8% q-q and ASP 1% q-q. As a result, battery utilization should increase further and operating margin should hit 10%.
Meanwhile, due to the lack of one-off gains (such as dividend income booked in 1Q12), operating losses from “other” businesses are likely to widen, but should be offset by strong battery business. SDI’s total 2Q operating profit is expected to recover to W70.5bn (+20% q-q).
Earnings growth, driven by battery business, to continue into 2013
The battery market is expected to continue to grow, given the increasing importance of mobile devices in IT environments. Considering the rising portion of polymer battery sales, we think SDI is well positioned to benefit from the growing battery market. Meanwhile, the PDP and CRT businesses, which are in decline, seem unlikely to grow, but should break even thanks to no more depreciation and the exit of rivals.
Therefore, we expect SDI to grow thanks to the strong battery business until 2014, when ESS and solar cell business should emerge as new growth drivers. Given its edge in the battery business, we think its market share will expand further and its margins will grow.
14 TONGYANG Securities Inc.
Samsung SDI (006400 KS)
Table 5. Earnings forecast by business (Wbn, won)
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 2011 2012E 2013E
Rev 1,209 1,349 1,448 1,438 1,422 1,481 1,563 1,524 5,444 5,991 5,835
OP 60 89 43 11 59 70 91 86 204 306 373
RP 112 131 136 100 113 125 122 117 478 477 555
NP 83 95 112 61 94 104 101 97 351 396 455
EPS (Won) 1,728 1,899 2,194 1,206 1,895 2,111 2,057 1,962 7,026 8,025 9,295
OPM (%) 5.0 6.6 3.0 0.8 4.1 4.8 5.8 5.6 3.7 5.1 6.4
Pre-tax (%) 9.2 9.7 9.4 7.0 8.0 8.4 7.8 7.7 8.8 8.0 9.5
NPM (%) 6.9 7.0 7.7 4.3 6.6 7.0 6.5 6.4 6.4 6.6 7.8
Sales 1,209 1,349 1,448 1,438 1,422 1,481 1,563 1,524 5,444 5,991 5,835
Battery 568 715 764 697 754 833 913 913 2,745 3,413 3,803
PDP 520 526 539 622 562 552 558 521 2,207 2,194 1,715
CRT 105 94 98 83 77 68 63 61 380 270 197
Other 16 13 46 36 29 27 29 29 112 114 120
OP 60 89 43 11 59 70 91 86 204 306 373
Battery 43 81 77 45 62 83 99 96 245 340 400
PDP -4 8 1 7 4 3 6 4 13 17 10
CRT 5 1 0 0 0 0 1 0 6 2 2
Other 17 -1 -35 -41 -8 -16 -15 -14 -61 -53 -39
OPM (%) 5.0 6.6 3.0 0.8 4.1 4.8 5.8 5.6 3.7 5.1 6.4
Battery 7.5 11.3 10.1 6.4 8.3 10.0 10.9 10.5 8.9 10.0 10.5
PDP -0.7 1.6 0.1 1.2 0.6 0.6 1.0 0.8 0.6 0.8 0.6
CRT 4.6 1.5 0.1 0.1 0.4 0.5 1.0 0.5 1.7 0.6 0.8
Other 103.0 -10.6 -74.9 -112.9 -26.2 -59.8 -50.9 -49.6 -54.0 -46.4 -32.2
Note: “Other” includes one-offs and gains/losses from solar cell and ESS Source: Company data, TONGYANG Securities
TONGYANG Securities Inc. 15
Company Report
Table 6. Basic assumptions for our earnings forecast (mn units, US$)
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 2011 2012E 2013E
Battery
Global notebook ship 50.1 48.6 53.5 61.8 53.9 53.8 60.8 68.6 214.0 237.1 250.1
% q-q -10 -3 10 16 -13 0 13 13 5 11 6
Global smartphone ship 106.0 115.6 125.3 134.9 150.4 160.3 166.8 176.6 481.8 654.1 801.4
% q-q 15 9 8 8 12 7 4 6 57 36 23
SDI’s utilization (%) 88 89 89 75 90 92 93 86 85 90 91
% q-q 5%p 1%p 0%p -14%p 15%p 2%p 1%p -7%p -2%p 5%p 1%p
SDI’s shipment 217.8 268.3 276.2 241.6 261.1 298.7 339.9 349.1 1,003.9 1,248.8 1,523.4
% q-q 5 23 3 -13 8 14 14 3 33 24 22
SDI’s ASP 2.3 2.5 2.6 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.6
% q-q -7 6 4 -2 1 0 -1 0 -5 2 2
PDP
SDI’s shipment 1.7 1.6 1.7 1.8 1.7 1.8 1.9 1.8 6.8 7.2 6.9
% q-q -2 -1 4 8 -7 5 5 -3 6 6 -5
SDI’s ASP 281.3 296.3 293.6 293.9 288.1 279.4 276.6 273.9 291.4 279.3 256.4
% q-q 0 5 -1 0 -2 -3 -1 -1 -4 -4 -8
CRT
SDI’s shipment 3.3 3.1 3.0 2.8 2.7 2.5 2.4 2.4 12.2 10.0 8.6
% q-q -5 -6 -3 -7 -4 -7 -4 0 -18 -18 -14
SDI’s ASP 28.4 28.1 30.2 25.6 25.1 24.9 24.6 24.4 28.1 24.8 23.5
% q-q 3 -1 7 -15 -2 -1 -1 -1 -5 -12 -5
Source: Company data, TONGYANG Securities
16 TONGYANG Securities Inc.
Samsung SDI (006400 KS)
[Appendix]
Samsung SDI related glossary Items Details
Rechargeable battery
Cylindrical
High capacity density and power density
Mostly for products consuming much energy (eg, notebook, machine tool, electric scooter)
Jelly roll mounted into metal can
Square
Mostly used for handsets and digital cameras
Customized battery; diverse sizes and capacity, depending on customer/application
Both poles and separator mounted into flat metal can
Polymer
Mostly used for smartphones, MP3, and tablet PC
Polymer uses aluminum film pouch (cylindrical/square batteries use aluminum can)
Applied to notebooks (recently used for Ultrabook)
Machine tool
Machine tool LiB accounts for 20% of SDI’s total LiB sales
PDP & CRT
PDP module
Plasma display panel; flat display panel using plasma
Neon- or argon-injected gas tubes arranged between two glass plates
Losing market share to larger-sized LCD screens
CRT
Cathode ray tube; vacuum tube device using electron gun and shadow mask
Relatively simple manufacturing and working process; rich color and wide viewing angle
Lost ground due to appearance of light, thin LCD
Solar photovoltaic
Cell
Basic unit of solar cell battery that converts light energy into electricity
Based on photovoltaic effect (light falling on two-layer semicon device produces potential difference between layers; this voltage can drive current through external circuit,producing useful work)
Module
While cell is basic unit to generate electricity, module is basic unit to supply electricity
Multiple cells connected in series or in parallel
System
Generator combining multiple modules and devices.
ESS (energy storage system)
ESS
Energy storage system to store electricity for use at appropriate time and place
Designed to resolve unstable electrical power supply of renewable energy and demand concentration by time slot, and generate profit from unused electricity
TONGYANG Securities Inc. 17
Company Report
Other
Battery
Device that converts energy, created from chemical or physical reaction, into electrical energy
Divided into chemical cell using chemical reaction and physical cell using physical reaction
Chemical cell usually refers to storage battery, physical cell to solar cell and thermobattery
Rechargeable battery
Charging/discharging repeatedly by transforming chemical energy into electrical energy
Chemical energy changed into electrical energy through process of oxidation/reduction
Discharged through oxidation; charged through reduction
Key raw material of rech battery
80% of total raw material costs (eg, cathode/anode material, separator, electrolyte)
70% of cathode material used in Korea comes from domestic sources, 10% for anode material, 30% for separator, and 80% for electrolyte
Lithium-ion battery
Currently major product of rechargeable battery Graphite used as cathode active material, lithium compound as anode active material, organic solvents as electrolyte
Light weight, high density, large output, high-speed charging, low self-discharge
Lithium polymer battery Advanced type of Li-ion battery; gel-type polymer electrolyte instead of liquefied electrolyte
Ultra thin, flexible product possible, as aluminum film used as exterior material
EV
Electric vehicle Categorized into HEV (hybrid EV), PHEV (plug-in hybrid EV), EREV (extended-range EV), BEV (battery EV), FCEV (fuel-cell EV)
Source: TONGYANG Securities
18 TONGYANG Securities Inc.
Samsung SDI (006400 KS)
Samsung SDI (006400 KS) pro forma financial statements (K-IFRS, consolidated)
Statement of financial position Statement of comprehensive income (K-IFRS)
FY to Dec (Wbn) 2010 2011E 2012E 2013E 2014E FY to Dec (Wbn) 2010 2011E 2012E 2013E 2014E
Non-current assets 5,482 6,163 6,327 6,375 6,477 Sales 5,124 5,444 5,991 5,835 6,010
Investment in affiliate 1,149 1,899 2,084 2,274 2,468 Cost of sales 4,334 4,761 5,130 4,927 5,043
LT financial assets 2,262 2,050 2,050 2,050 2,050 Gross profit 790 683 861 908 968
Tangible assets 1,727 1,827 1,796 1,660 1,553 SG&A 556 573 605 589 607
Other non-current 206 192 219 229 252 Reported op prof 287 204 306 373 418
Current assets 2,452 2,364 2,526 2,780 3,025 Adjusted op prof 234 110 256 319 361
Cash & equivalent 1,066 758 761 1,060 1,254 Other op prof/loss 53 94 50 54 57
ST financial assets 73 29 29 29 29 Non-operating prof 136 274 172 183 193
Accts rec & other 725 844 929 905 932 Interest income 41 22 22 26 29
Inventory 484 584 642 626 644 Interest expense 27 19 20 20 16
Other current 104 150 165 161 165 Forex gain/loss -36 -17 -16 -17 -18
Total assets 7,934 8,527 8,853 9,154 9,501 Equity-meth gain/loss 151 284 185 190 194
Non-current liabilities 604 463 466 465 466 Other -42 -163 0 4 4
LT financial liabilities 228 0 0 0 0 Pre-tax from cont op 423 478 478 555 610
Other non-current liab 351 431 435 433 434 Income tax 38 127 81 100 122
Current liabilities 1,098 1,750 1,699 1,571 1,453 Net profit 385 351 396 455 488
Accts payable & other 555 524 576 561 578 NP for controlling int 356 320 366 424 452
ST financial liabilities 130 761 611 511 361 Total comprehensive inc 1,106 157 372 431 464
Other current 413 465 512 498 513 TCI for controlling int 1,070 125 340 398 427
Total liabilities 1,703 2,213 2,166 2,036 1,919 EBITDA 610 549 717 796 844
Equity for controlling int 6,051 6,118 6,458 6,856 7,283 Free cash flow 48 -130 189 435 381
Paid-in capital 241 241 241 241 241 EPS 7,762 7,026 8,025 9,295 9,923
Capital surplus 1,256 1,258 1,258 1,258 1,258 Book value/share 132,039 133,305 140,516 148,955 158,000
Retained earnings 3,391 3,611 3,976 4,400 4,852 Dividend/share 1,600 1,500 0 0 0
Equity for non-control int 180 196 229 262 299 EBITDA/share 12,924 11,629 15,199 16,880 17,888
Total equity 6,231 6,315 6,687 7,118 7,582
Net debt -781 -25 -178 -577 -922
Cash flow statement Valuation
FY to Dec (Wbn) 2010 2011E 2012E 2013E 2014E FY to Dec 2010 2011E 2012E 2013E 2014E
Operating cash flow 446 279 564 718 700 Gross margin (%) 15.4 12.6 14.4 15.6 16.1
Net profit 385 351 396 455 488 Operating margin (%) 4.6 2.0 4.3 5.5 6.0
Depreciation & amortization 376 439 461 478 483 Net margin (%) 7.5 6.5 6.6 7.8 8.1
Forex translation gain/loss -2 -8 16 17 18 EBITDA margin (%) 11.9 10.1 12.0 13.7 14.0
Affiliate invest gain/loss -151 -284 -185 -190 -194 Sales (% y-y) 3.5 6.2 10.0 -2.6 3.0
Inc (dec) in net working cap -135 -275 -72 22 -22 Operating profit (% y-y) 118.6 -53.1 132.7 24.5 13.2
Other -54 -152 19 -4 7 Net profit (% y-y) 79.4 -8.8 12.9 14.9 7.2
Investing cash flow -184 -840 -391 -299 -339 EPS (% y-y) 63.4 -9.5 14.2 15.8 6.8
Disp (acq) of tangible asst -347 -407 -408 -321 -361 EBITDA (% y-y) 4.5 -10.0 30.7 11.1 6.0
Inc (dec) in intang asst -1 -23 -5 -5 -7 ROE (%) 6.5 5.3 5.8 6.4 6.4
Inc (dec) in ST/LT finl asst 0 0 0 0 0 ROA (%) 5.0 4.3 4.6 5.1 5.2
Other 164 -411 22 26 29 Accts rec turnover (x) 8.0 7.3 7.2 6.8 7.0
Financing cash flow -648 251 -170 -120 -166 Inventory turnover (x) 12.0 10.2 9.8 9.2 9.5
Inc (dec) in ST/LT finl liab -586 355 -150 -100 -150 P/E (x) 20.3 22.1 16.8 14.5 13.6
Inc (dec) in equity 24 6 0 0 0 P/B (x) 1.2 1.2 1.0 0.9 0.9
Dividend payout -60 -77 0 0 0 EV/EBITDA (x) 11.8 11.6 8.8 7.4 6.7
Others -25 -34 -20 -20 -16 Div yield (com shr, %) 1.0 1.1 0.0 0.0 0.0
Inc (dec) in cash & eq -367 -309 3 299 195 Debt-to-equity (%) 27.3 35.0 32.4 28.6 25.3
Beginning cash & equiv 1,434 1,066 758 761 1,060 Net debt-to-equity (%) -12.5 -0.4 -2.7 -8.1 -12.2
Ending cash & equiv 1,066 758 761 1,060 1,254 Net fin cost/sales (%) -0.3 -0.1 0.0 -0.1 -0.2
OP/financing cost (x) 8.6 5.7 12.9 16.3 22.0
Note: EPS, BPS, P/E and P/B are based on controlling interest For valuation metrics such as P/E, historical figures are based on annual averages, estimates on current price For ROA or ROE, assets and equity are averages of end-of-year figures for given year and year prior Data to 2010 based on K-GAAP and from 2011, K-IFRS Source: TONGYANG Securities
TONGYANG Securities Inc. 19
Company Report
Samsung SDI (006400 KS) ratings and target price history
(won)
0
50,000
100,000
150,000
200,000
250,000
A pr 2010 O ct 2010 A pr 2011 O ct 2011
C urrent price
Target price
Date Rating TP (won)
2012/04/09 BUY 165,000
Analyst changed
Source: TONGYANG Securities
Disclosures & disclaimers
This research report has been prepared for informational purposes only; it does not constitute an offer or a solicitation of an offer to buy or sell any securities or other financial instruments. The information and data contained in this report have been obtained from sources we consider reliable; however, we make no representation that the information provided in this report is accurate or complete, and it should not be relied on as such. The recipient of this report should use his/her independent judgment regarding the sale or purchase of any securities or financial instruments mentioned herein. We disclaim any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. This report is for our clients only. It is copyrighted material and may not be reproduced, transmitted, quoted, or distributed in any manner without the prior written consent of TONGYANG Securities Inc.
As of the publication date of this report, TONGYANG Securities Inc. does not own a stake in excess of 1%, nor does it have any interest whatsoever, in the subject company (ies). The material contained herein was not disclosed by TONGYANG Securities Inc. to any institutional investors or third parties prior to its publication. As of the date of publication of this report TONGYANG Securities Inc. is an issuer and liquidity provider for equity linked warrants backed by the shares of the subject company. The analyst (s) of this report or the analyst (s)’ spouse does not have any financial interest in the securities of the subject company (ies) mentioned herein, nor financial interest of any nature related to the subject company (ies) (including without limitation, whether it consists of any option, right, warrant, future, long or short position), as of the publication date of this report. Analyst certification
I/We, as the research analyst/analysts who prepared this research report, do hereby certify that the views expressed in this report accurately reflect my/our personal views about the subject securities discussed in this report.
Stock and sector ratings
Stock ratings include an Investment Rating (Buy, Hold, Sell) as well as a Volatility Risk Rating (High, Low) that are based on the expected absolute return of a stock over the next 6 -12 months.
- Buy: Low Risk if a stock is expected to return 10% or more; High Risk if a stock is expected to return 20% or more
- Hold: Low Risk if a stock is expected to return between -10 and +10%; High Risk if a stock is expected to return between -20 and +20%
- Sell: Low Risk if a stock is expected to decline by 10% or more; High Risk if a stock is expected to fall by 20% or more
Sector ratings suggest 6 to 12 - month forward investment weighting of a given sector compared to its market capitalization weighting.
- Overweight: Investment weighting is higher than the market capitalization weighting - Neutral: Investment weighting is equal to the market capitalization weighting - Underweight: Investment weighting is lower than the market capitalization weighting
20 TONGYANG Securities Inc.
Samsung SDI (006400 KS)
TONGYANG Securities International Network
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