Samsung SDI
(006400 KS)
On the road to transformation
4Q15 review: Worse than expected
Technology
Results Comment
January 26, 2016
Buy
(Maintain)
Target Price (12M, W)
138,000
Share Price (01/25/16, W)
102,500
35%
Expected Return
OP (15F, Wbn)
-60
Consensus OP (15F, Wbn)
2
EPS Growth (15F, %)
-
Market EPS Growth (15F, %)
P/E (15F, x)
20.6
292.9
Market P/E (15F, x)
KOSPI
11.0
1,893.43
Market Cap (Wbn)
Shares Outstanding (mn)
7,048
70
Free Float (%)
Foreign Ownership (%)
79.4
28.8
Beta (12M)
1.12
52-Week Low
52-Week High
76,800
145,000
(%)
Absolute
1M
-10.5
6M
6.8
12M
-18.0
Relative
-5.9
15.4
-16.2
130
Samsung SDI
KOSPI
110
90
70
For 4Q15, Samsung SDI announced revenue of W1.86tr (-6.8% QoQ) and operating loss
of W80.8bn (turning to loss QoQ), missing our expectations and the consensus. The
poor performance was largely attributable to 1) seasonally weak sales and 2) one-off
charges, including W60bn in operating expenses related to the disposal of defective
inventory and compensations in the battery business. On the non-operating side, the
company also took a W150bn write-down in small batteries and a W80bn investment
asset impairment.
Small batteries: Revenue fell 12.1% QoQ to an estimated W623bn due to a seasonal
decline in shipments. Operating loss expanded materially QoQ, hurt by the liquidation of
defective inventory and quality compensations. We expect losses to continue in 1Q16,
but see margins picking up modestly on volume growth effects of new model releases
by the company’s largest customer as well as reduced depreciation expenses due to
write-downs.
Mid/large-sized batteries: Revenue stood at an estimated W225bn. Operating loss
widened QoQ as a result of persistent fixed cost pressures and one-off expenses
(inventory disposal, etc.). The energy storage systems (ESS) business, for which 4Q is
usually the peak season, saw minimal seasonal effects. Given recent macro conditions
and oil price trends, it seems likely some government projects are being delayed. We do
not expect any meaningful improvement in margins in 1Q16.
Electronic materials: Revenue dipped 5.6% QoQ to W409.1bn. Downward pricing
pressures on display materials continued due to the display industry slump, but
semiconductor material margins remained solid. Looking into 1Q16, we forecast
electronic materials earnings to remain flat QoQ.
Chemicals: Revenue contracted 10.8% QoQ to W603.8bn. We originally anticipated
sluggish chemicals earnings due to weaker ABS spreads and unfavorable seasonality, but
robust demand for polycarbonate (PC) led to a better-than-expected performance.
Meanwhile, the company’s shareholders approved the divestiture of the chemicals unit
on January 25th. SDI Chemical will be established on February 1st as Samsung SDI’s
wholly-owned subsidiary.
Reiterate Buy, but Cut TP to W138,000
We maintain our Buy call on Samsung SDI, but reduce our target price to W138,000
(from W148,000). Our sum-of-the-parts analysis reflects an operating value of W5.9tr
and an investment asset value of W3.5tr. The sale of the chemical business means losses
in the near term will be unavoidable. However, once large-sized battery revenue gathers
momentum, we think this will trigger a re-rating of the company’s mid- to long-term
growth potential. That said, much will depend on the situation in China, the world’s
largest electric vehicle battery market.
50
1.15
5.15
9.15
1.16
Daewoo Securities Co.,
Co., Ltd.
FY (Dec.)
Revenue (Wbn)
[Display/IT Materials]
OP (Wbn)
OP margin (%)
Young Ryu
+822-768-4138
young.ryu@dwsec.com
Chuljoong Kim
+822-768-4162
chuljoong.kim@dwsec.com
NP (Wbn)
EPS (W)
ROE (%)
P/E (x)
P/B (x)
12/12
5,771
12/13
3,428
12/14
5,474
12/15F
7,569
12/16F
8,218
12/17F
8,628
187
3.2
-11
-0.3
71
1.3
-60
-0.8
82
1.0
191
2.2
1,472
31,192
131
2,768
-84
-1,426
27
389
1,622
23,046
447
6,348
21.8
1.8
-0.9
0.2
13.7
3.5
4.8
0.9
58.5
1.0
0.7
292.9
0.7
4.4
0.6
16.1
0.6
Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests
Source: Company data, KDB Daewoo Securities Research estimates
Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the
the U.S.
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
January 26, 2016
Samsung SDI
Table 1. 4Q15 review
Revenue
(Wbn, %, %p)
4Q14
30Q15
30Q15
1,910.1
37.2
Operating profit
OP margin
Pretax profit
Net profit
4Q15P
Growth
Preliminary
KDB Daewoo
Consensus
YoY
QoQ
1,997.7
1,861.8
1,999.2
1,909.0
-2.5
-6.8
17.9
-80.8
-3.2
-5.4
TTR
TTR
1.9
0.9
-4.3
-0.2
-0.3
-6.3
-5.2
-38.6
675.9
-316.9
63.4
36.6
RR
TTR
-129.1
499.2
-201.5
46.8
45.6
RR
TTR
Notes: TTR and RR refer to “turning to red” and “remaining in red,” respectively
Source: WISEfn, KDB Daewoo Securities Research estimates
Table 2. Earnings forecast revisions
(Wbn, W, %, %p)
Previous
Revenue
Operating profit
Net profit
EPS
OP margin
Net margin
Revised
% chg.
chg.
2015
2016F
2015
2016F
2015
2016F
7,707
18
8,529
100
7,569
-60
8,218
82
-1.8
TTR
-3.6
-18.0
302
1,627
27
1,622
-91.1
-0.3
4,294
23,120
389
23,046
-91.1
-0.3
0.2
3.9
1.2
19.1
-0.8
0.4
1.0
19.7
-1.0
-3.6
-0.2
0.7
Notes: TTR refers to “turning to red”
Source: KDB Daewoo Securities Research estimates
Table 3. Quarterly and annual earnings
(Wbn, W, %)
1Q15
2Q15
3Q15
4Q15P
4Q15P
1Q16F
2Q16F
3Q16F
4Q16F
2015F
2016F
1,866
1,844
1,998
1,862
1,922
1,998
2,139
2,158
7,570
8,218
Energy solutions
795
780
887
848
923
953
1,046
1,069
3,310
3,992
Small LIB (IT)
707
651
709
623
699
703
762
745
2,691
2,910
88
129
177
225
224
250
284
324
619
1,082
1,071
1,064
1,111
1,013
999
1,045
1,093
1,089
4,260
4,226
Chemicals
668
667
677
604
601
628
647
646
2,616
2,521
Electronic materials
396
396
433
409
398
417
446
443
1,634
1,704
0
0
0
0
0
0
0
0
0
1
7.4
-3.6
17.8
-80.8
-21.4
4.8
42.0
56.4
-59
82
Energy solutions
-78
-110
-102
-171
-103
-79
-46
-27
-461
-255
Small LIB (IT)
12
-25
-22
-76
-10
-4
19
31
-111
37
Large + mid-sized LIB
-90
-85
-80
-95
-93
-75
-65
-58
-351
-291
Revenue
Large + mid-sized LIB
Materials
Other (PDP, solar, etc.)
Operating profit
Materials
85
107
120
90
81
84
88
83
402
337
Chemicals
35
56
64
46
36
37
38
35
200
146
Electronic materials
50
51
56
45
45
47
50
48
202
190
-57
-32
4
21
OP (ex.
ex. chemicals
hemicals)
-64
Source: Company data, KDB Daewoo Securities Research estimates
Figure 1. ABS spread ((-1.5M)
Figure 2. 1212-month forward P/B band
(W)
250,000
(US$/tonne)
700
ABS spread (-1.5M)
1.3x
600
200,000
500
1.1x
400
0.9x
150,000
300
0.7x
200
100,000
0.5x
100
50,000
0
1/13
7/13
1/14
7/14
Source: KDB Daewoo Securities Research
KDB Daewoo Securities Research
1/15
7/15
1/16
10
11
12
13
14
15
16
Source: KDB Daewoo Securities Research
2
January 26, 2016
Samsung SDI
Samsung SDI (006400 KS/Buy/TP: W138,000)
Comprehensive Income Statement (Summarized)
Statement of Financial Condition (Summarized)
(Wbn)
12/14 12/15F 12/16F 12/17F
(Wbn)
12/14
12/15F
12/16F
12/17F
Revenue
5,474
7,569
8,218
8,628
Current Assets
3,536
4,495
6,267
6,718
Cost of Sales
Gross Profit
4,545
929
6,142
1,427
6,636
1,582
6,968
1,660
Cash and Cash Equivalents
AR & Other Receivables
628
893
718
1,170
1,891
1,355
2,123
1,423
858
1,487
1,500
1,470
Inventories
71
71
-60
-60
82
82
191
191
Other Current Assets
Non--Current Assets
Non
NonNon-Operating Profit
Net Financial Income
Net Gain from Inv in Associates
128
-16
190
102
-12
280
2,155
6
2,105
425
16
365
Pretax Profit
199
42
2,237
616
Total Assets
Income Tax
Profit from Continuing Operations
47
152
14
28
604
1,633
166
450
Current Liabilities
AP & Other Payables
Profit from Discontinued Operations
-232
0
0
0
-80
-84
28
27
1,633
1,622
450
447
SG&A Expenses
Operating Profit (Adj)
Operating Profit
Net Profit
Controlling Interests
Non-Controlling Interests
769
845
980
1,029
1,246
12,433
1,762
11,912
2,041
12,180
2,143
12,282
Investments in Associates
4,979
5,183
5,183
5,183
Property, Plant and Equipment
Intangible Assets
3,325
1,279
3,488
1,279
3,594
1,171
3,681
1,089
15,969
16,406
18,447
19,000
2,254
565
3,199
638
3,521
739
3,638
776
975
1,171
1,171
1,171
714
1,887
1,390
1,821
1,611
1,977
Short-Term Financial Liabilities
Other Current Liabilities
Non--Current Liabilities
Non
803
841
841
1,691
2,033
841
1,084
4,142
980
5,020
1,136
5,497
1,192
5,672
11,587
357
11,098
357
12,650
357
13,027
357
Capital Surplus
5,033
5,033
5,033
5,033
Retained Earnings
Non--Controlling Interests
Non
4,862
240
4,819
289
6,371
299
6,747
302
11,827
11,387
12,949
13,329
12/14
19.0
12/15F
292.9
21.1
12/16F
4.4
9.9
12/17F
16.1
8.7
0.7
13.9
0.7
12.8
0.6
8.5
0.6
7.0
-1,426
389
23,046
6,348
4
0
11
3
Total Comprehensive Profit
Controlling Interests
244
237
-405
-292
1,633
728
450
201
Other Non-Current Liabilities
Total Liabilities
Non-Controlling Interests
EBITDA
6
604
-113
627
904
684
249
787
Controlling Interests
Capital Stock
FCF (Free Cash Flow)
-166
-12
-352
123
EBITDA Margin (%)
Operating Profit Margin (%)
11.0
1.3
8.3
-0.8
8.3
1.0
9.1
2.2
Net Profit Margin (%)
-1.5
0.4
19.7
5.2
Stockholders' Equity
Cash Flows (Summarized)
(Wbn)
Cash Flows from Op Activities
Net Profit
Non-Cash Income and Expense
Depreciation
Amortization
Others
Chg in Working Capital
Chg in AR & Other Receivables
Chg in Inventories
Chg in AP & Other Payables
Income Tax Paid
Cash Flows from Inv Activities
Chg in PP&E
Chg in Intangible Assets
Chg in Financial Assets
Others
Cash Flows from Fin Activities
Chg in Financial Liabilities
Chg in Equity
Dividends Paid
Others
Long-Term Financial Liabilities
Forecasts/Valuations (Summarized)
12/14 12/15F 12/16F 12/17F
311
645
248
723
-80
28
1,633
450
440
444
352
556
-905
494
381
513
P/E (x)
P/CF (x)
P/B (x)
EV/EBITDA (x)
89
131
108
82
-93
10
-335
240
-1,507
118
-214
43
EPS (W)
CFPS (W)
BPS (W)
267
-97
-160
-59
DPS (W)
1,000
1,000
1,000
1,000
140
-213
-46
256
-134
73
-49
27
Payout ratio (%)
Dividend Yield (%)
-85.6
0.9
249.2
0.9
4.2
1.0
15.3
1.0
6,118
5,393 10,340 11,804
164,775 157,839 179,886 185,234
-50
26
-604
-166
Revenue Growth (%)
59.7
38.3
8.6
5.0
-328
-434
-522
-639
-1,110
-600
-786
-600
EBITDA Growth (%)
Operating Profit Growth (%)
44.2
-
3.8
-
9.1
-
15.1
132.9
- 5,824.4
-72.5
-3
-13
0
0
-1,896
2,005
427
-297
-510
0
-186
0
EPS Growth (%)
Accounts Receivable Turnover (x)
Inventory Turnover (x)
7.6
8.5
8.2
9.4
7.5
9.0
7.2
8.6
-84
96
-70
-70
Accounts Payable Turnover (x)
13.3
14.5
13.3
12.7
594
3,886
234
0
0
0
0
0
ROA (%)
ROE (%)
-0.6
-0.9
0.2
0.2
9.4
13.7
2.4
3.5
-83
-70
-70
-70
ROIC (%)
-4,481
-68
0
0
Increase (Decrease) in Cash
-103
91
1,172
232
Beginning Balance
Ending Balance
730
628
628
718
718
1,891
1,891
2,123
Liability to Equity Ratio (%)
Current Ratio (%)
Net Debt to Equity Ratio (%)
Interest Coverage Ratio (x)
1.4
-0.8
1.2
2.7
35.0
44.1
42.5
42.6
156.8
140.5
178.0
184.7
0.6
1.7
-1.9
-1.1
-12.6
1.4
-14.6
3.3
Source: Company data, KDB Daewoo Securities Research estimates
KDB Daewoo Securities Research
3
January 26, 2016
Samsung SDI
APPENDIX 1
Important Disclosures & Disclaimers
2-Year Rating and Target Price History
Company (Code)
Samsung SDI(006400)
Date
Rating
01/25/2016
Buy
Target Price
138,000
11/29/2015
Buy
148,000
10/01/2015
Buy
133,000
07/30/2015
Buy
123,000
07/01/2015
Buy
168,000
05/26/2015
Buy
175,000
04/28/2015
Buy
156,000
02/02/2015
Buy
163,000
01/23/2015
Buy
150,000
(W)
Samsung SDI
250,000
200,000
150,000
100,000
50,000
0
Jan 14
Jan 15
Jan 16
No Coverage
10/31/2014
10/01/2014
Buy
Buy
180,000
190,000
01/26/2014
11/29/2013
Buy
Buy
200,000
240,000
Stock Ratings
Industry Ratings
Buy
: Relative performance of 20% or greater
Overweight
: Fundamentals are favorable or improving
Trading Buy : Relative performance of 10% or greater, but with volatility
Neutral
: Fundamentals are steady without any material changes
Hold
: Relative performance of -10% and 10%
Underweight : Fundamentals are unfavorable or worsening
Sell
: Relative performance of -10%
Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆))
* Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months.
* Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material
development.
* The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of
future earnings.
* The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic
conditions.
Equity Ratings Distribution
Buy
Trading Buy
Hold
Sell
71.08%
11.76%
17.16%
0.00%
* Based on recommendations in the last 12-months (as of December 31, 2015)
Disclosures
As of the publication date, Daewoo Securities Co., Ltd and/or its affiliates do not have any special interest with the subject company and do not own 1% or
more of the subject company's shares outstanding.
Analyst Certification
The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean
securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions
expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this
report. Daewoo Securities Co., Ltd. policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s
area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified
herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been
promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific
recommendations or views contained in this report but, like all employees of Daewoo Securities, the Analysts receive compensation that is impacted by
overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and
private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of
the Analyst or Daewoo Securities Co., Ltd. except as otherwise stated herein.
Disclaimers
This report is published by Daewoo Securities Co., Ltd. (“Daewoo”), a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange.
Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has not been
independently verified and Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or
correctness of the information and opinions contained herein or of any translation into English from the Korean language. If this report is an English
translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this
report. Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising from the use hereof. This
report is for general information purposes only and it is not and should not be construed as an offer or a solicitation of an offer to effect transactions in any
securities or other financial instruments. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of
the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any
laws and regulations or subject Daewoo and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use hereof.
KDB Daewoo Securities Research
4
January 26, 2016
Samsung SDI
Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or
form or redistributed or published, in whole or in part, without the prior written consent of Daewoo. Daewoo, its affiliates and their directors, officers,
employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a
purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or
agents. Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment
banking, market-making or other financial services as are permitted under applicable laws and regulations. The price and value of the investments referred to
in this report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to
future performance. Future returns are not guaranteed, and a loss of original capital may occur.
Distribution
United Kingdom: This report is being distributed by Daewoo Securities (Europe) Ltd. in the United Kingdom only to (i) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other
persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant
Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its
contents.
United States: This report is distributed in the U.S. by Daewoo Securities (America) Inc., a member of FINRA/SIPC, and is only intended for major institutional
investors as defined in Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934. All U.S. persons that receive this document by their acceptance
thereof represent and warrant that they are a major institutional investor and have not received this report under any express or implied understanding that
they will direct commission income to Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed
herein should contact and place orders with Daewoo Securities (America) Inc., which accepts responsibility for the contents of this report in the U.S. The
securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or
sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements.
Hong Kong: This document has been approved for distribution in Hong Kong by Daewoo Securities (Hong Kong) Ltd., which is regulated by the Hong Kong
Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for
distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws
of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person.
All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Daewoo or
its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Daewoo and its
affiliates to any registration or licensing requirement within such jurisdiction.
KDB Daewoo Securities International Network
Daewoo Securities Co. Ltd. (Seoul)
Head Office
34-3 Yeouido-dong, Yeongdeungpo-gu
Seoul 150-716
Korea
Tel: 82-2-768-3026
Daewoo Securities (Hong Kong) Ltd.
Two International Finance Centre
Suites 2005-2012
8 Finance Street, Central
Hong Kong, China
Tel: 85-2-2845-6332
Daewoo Securities (America) Inc.
320 Park Avenue
31st Floor
New York, NY 10022
United States
Tel: 1-212-407-1000
Daewoo Securities (Europe) Ltd.
41st Floor, Tower 42
25 Old Broad St.
London EC2N 1HQ
United Kingdom
Tel: 44-20-7982-8000
Daewoo Securities (Singapore) Pte. Ltd.
Six Battery Road #11-01
Singapore, 049909
Tel: 65-6671-9845
Tokyo Branch
7th Floor, Yusen Building
2-3-2 Marunouchi, Chiyoda-ku
Tokyo 100-0005
Japan
Tel: 81-3- 3211-5511
Beijing Representative Office
2401A, 24th Floor, East Tower, Twin Towers
B-12 Jianguomenwai Avenue
Chaoyang District, Beijing 100022
China
Tel: 86-10-6567-9299
Shanghai Representative Office
Room 38T31, 38F SWFC
100 Century Avenue
Pudong New Area, Shanghai 200120
China
Tel: 86-21-5013-6392
Ho Chi Minh Representative Office
Suite 2103, Saigon Trade Center
37 Ton Duc Thang St,
Dist. 1, Ho Chi Minh City,
Vietnam
Tel: 84-8-3910-6000
Daewoo Investment Advisory (Beijing) Co., Ltd.
Daewoo Securities (Mongolia) LLC
PT. Daewoo Securities Indonesia
2401B, 24th Floor, East Tower, Twin Towers
B-12 Jianguomenwai Avenue,
Chaoyang District, Beijing 100022
China
#406, Blue Sky Tower, Peace Avenue 17
1 Khoroo, Sukhbaatar District
Ulaanbaatar 14240
Mongolia
Equity Tower Building Lt.50
Sudirman Central Business District Jl.
Jendral Sudirman Kav. 52-53, Jakarta Selatan
Indonesia 12190
Tel: 86-10-6567-9699
Tel: 976-7011-0807
Tel: 62-21-515-1140
KDB Daewoo Securities Research
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