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Samsung SDI Co Ltd Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- The company expects to grow in the Small Battery market, excluding EVs, in the India market.
- The company has successfully secured orders for premium prismatic batteries from major OEMs in Europe and Asia.
- The company expects to increase sales by expanding sales to Chinese IT and automotive applications.
- The company expects to increase its presence in the e-two wheeler market with differentiating products featuring longer life cycle life.
- The company expects to secure ESS production capacity to meet growing demand and maximize sales through the SBB 1.5 and high value UPS products tailored for AI datacenters.
- Operating profit for the Electronic Materials was KRW 11.6 billion, down 82% Q-o-Q and 83% Y-o-Y.
- Liabilities rose by KRW 4.9 trillion to KRW 19.2 trillion, driven by increased debt.
- Annual revenue decreased by 23% Y-o-Y to KRW 16.6 trillion, and operating profit fell by 77% Y-o-Y to KRW 363 billion.
- Q4 revenue for the Electric Materials was KRW 190 billion, down 28% Q-o-Q and 31% Y-o-Y.
- New battery cell manufacturing companies are likely to suffer due to stressed financial situation caused by delays in mass production.
- The semiconductor materials market is expected to see steady growth as strong AI demand drives memory bit shipments up this year, leading to increased wafer input.
- The company expects to improve its investment efficiency, including using existing lines better to reduce the cost of new line expansions or adjusting the timing of some investments, depending on the project and the site.
- The company expects company level performance to gradually improve from Q2 after bottoming out in Q1.
- The display materials market is expected to grow slightly Y-o-Y mainly around the OLED panelmakers.
Q&A Highlights from Samsung SDI Co Ltd Earnings Call Q4 2024
- Analyst asked about the details of the one-off expenses in Q4 and the profitability of the EV battery business without the one-off.
- The one-off expenses in Q4 include inventory asset valuation impairment and quality-related provisioning. The EV battery business is expected to record a low-single-digit percentage profit, and the company level profit would also be slightly above breakeven.
- The one-off expenses in Q4 include inventory asset valuation impairment and quality-related provisioning. The EV battery business is expected to record a low-single-digit percentage profit, and the company level profit would also be slightly above breakeven.
- Analyst asked about the company's performance outlook and investment plans for 2023.
- The company expects the EV market to grow, but policy uncertainty is high, and demand in powertools and micro-mobility markets remains muted. Major customers are focusing on inventory adjustments, making near-term recovery of business performance challenging. However, from the second half of 2023, as policy uncertainty is resolved and inventory adjustments come to an end, the company expects improvements. For the ESS and Electronic Material business, demand is relatively more stable, and growth is expected to continue quarter after quarter except for the seasonally weak Q1. The company expects company level performance to gradually improve from Q2 after bottoming out in Q1. The business environment this year is not easy, but the company will focus on minimizing the impact of market slowdown on its performance and patiently laying the foundation for future growth by expanding sales and project awards through close co-work with customers, heightened technology edge, and reforming business fundamentals. The company is also revisiting its investment plan, taking into account the market situation, and is in the process of adjusting its investment plans with an overall conservative stance. The focus is on improving investment efficiency, including using existing lines better to reduce the cost of new line expansions or adjusting the timing of some investments, depending on the project and the site. The company expects CapEx to decrease compared to 2022, but it plans to execute investments necessary for future growth, including the US JV with GM, all-solid batteries, LFP, and the 46-phi, according to original schedules.
- The company expects the EV market to grow, but policy uncertainty is high, and demand in powertools and micro-mobility markets remains muted. Major customers are focusing on inventory adjustments, making near-term recovery of business performance challenging. However, from the second half of 2023, as policy uncertainty is resolved and inventory adjustments come to an end, the company expects improvements. For the ESS and Electronic Material business, demand is relatively more stable, and growth is expected to continue quarter after quarter except for the seasonally weak Q1. The company expects company level performance to gradually improve from Q2 after bottoming out in Q1. The business environment this year is not easy, but the company will focus on minimizing the impact of market slowdown on its performance and patiently laying the foundation for future growth by expanding sales and project awards through close co-work with customers, heightened technology edge, and reforming business fundamentals. The company is also revisiting its investment plan, taking into account the market situation, and is in the process of adjusting its investment plans with an overall conservative stance. The focus is on improving investment efficiency, including using existing lines better to reduce the cost of new line expansions or adjusting the timing of some investments, depending on the project and the site. The company expects CapEx to decrease compared to 2022, but it plans to execute investments necessary for future growth, including the US JV with GM, all-solid batteries, LFP, and the 46-phi, according to original schedules.
- Analyst asked about the company's plans for the Stellantis joint venture operation and AMPC.
- The company has already started operation of its first line for the Stellantis joint venture, which is two months ahead of the original schedule. They are focusing on-time setup and ramp-up to stabilize the plant early on. Regarding the AMPC, the company is still in discussion with the customer over full-year volume and it's difficult to disclose the specific size at this point. They will communicate with the market at a later time, once customer discussions are completed and specific projections are available.
- The company has already started operation of its first line for the Stellantis joint venture, which is two months ahead of the original schedule. They are focusing on-time setup and ramp-up to stabilize the plant early on. Regarding the AMPC, the company is still in discussion with the customer over full-year volume and it's difficult to disclose the specific size at this point. They will communicate with the market at a later time, once customer discussions are completed and specific projections are available.
- Analyst asked about the company's Electronic Materials business and strategy by product.
- The company plans to launch new high-power batteries to expand sales in powertools and actively take on the Battery Backup Unit, the BBU market, where demand is growing with the increase of data centers. They will also increase their presence in the recently growing e-two wheeler market with differentiating products featuring longer life cycle life. For mid- to long-term growth, they plan to launch the new ultra-high-power products to supply to outdoor power equipment projects and hybrid EV projects. The 46-phi, which starts mass production in Q1, will offer better quick charging and cycle life performance and will be used to win new EV projects to build mid- to long-term growth momentum.
- The company plans to launch new high-power batteries to expand sales in powertools and actively take on the Battery Backup Unit, the BBU market, where demand is growing with the increase of data centers. They will also increase their presence in the recently growing e-two wheeler market with differentiating products featuring longer life cycle life. For mid- to long-term growth, they plan to launch the new ultra-high-power products to supply to outdoor power equipment projects and hybrid EV projects. The 46-phi, which starts mass production in Q1, will offer better quick charging and cycle life performance and will be used to win new EV projects to build mid- to long-term growth momentum.
- Analyst asked about the company's LFP battery preparation.
- The company has already completed a platform that differentiates them from competitors in terms of higher energy density and cycle life. They are currently in commercialization of LFP with offerings specific to EV and ESS markets, respectively. For EV batteries, their LFP batteries differentiate from existing products in terms of higher energy density and cycle life by leveraging their prismatic form factor, material and electrode technology. They are discussing 2027 mass production projects with key customers and preparing a system for local supply to meet the needs of key customers. For ESS, they have already developed one of the industry's largest capacity LFP cell in the second half of last year, and they plan to complete proofing their production process and mass production feasibility this year with the aim of starting mass production of the LFP based SBB 2.0 with better cost competitiveness and
- The company has already completed a platform that differentiates them from competitors in terms of higher energy density and cycle life. They are currently in commercialization of LFP with offerings specific to EV and ESS markets, respectively. For EV batteries, their LFP batteries differentiate from existing products in terms of higher energy density and cycle life by leveraging their prismatic form factor, material and electrode technology. They are discussing 2027 mass production projects with key customers and preparing a system for local supply to meet the needs of key customers. For ESS, they have already developed one of the industry's largest capacity LFP cell in the second half of last year, and they plan to complete proofing their production process and mass production feasibility this year with the aim of starting mass production of the LFP based SBB 2.0 with better cost competitiveness and
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