Samsung SDI

Samsung SDI (006400 KS)

EV and ESS to trigger butterfly effect

2Q13 review: In-line results; Revenue of W1.31tr (-12% YoY) & OP of W32.3bn

Technology

For 2Q, Samsung SDI posted revenue of W1.31tr (+8% QoQ, -12% YoY) and operating profit of W32.3bn (turning to profit QoQ; -61% YoY), in line with the market consensus. Equity method gains from Samsung Display (SDC) came in at a larger-than-expected W145bn, driving up net profit to W129.2bn (+66% QoQ, +23% YoY) in the quarter.

Results Comment July 29, 2013

Buy

(Maintain) Target Price (12M, W)

220,000

Share Price (07/26/13, W)

164,500 34%

Expected Return

OP (13F, Wbn)

146

Consensus OP (13F, Wbn)

118

EPS Growth (13F, %)

-62.7

Market EPS Growth (13F, %)

18.2

P/E (13F, x)

14.2

Market P/E (13F, x)

9.4

KOSPI

1,910.81

Market Cap (Wbn)

7,494

Shares Outstanding (mn)

47

Free Float (%)

74.6

Foreign Ownership (%)

24.1

Beta (12M) 52-Week Low (W)

0.80 120,500

52-Week High (W)

169,000

(%)

1M

6M

12M

Absolute

22.8

15.0

20.5

Relative

15.6

16.9

13.3

Share price 120

KOSPI

110

EV and ESS business gathering steam Recently, there has been growing anticipation on the large-sized rechargeable battery segment for EV and ESS. But there are many worries as well. Many auto industry experts are still skeptical on EVs, citing the lack of economic viability, charging stations and vehicle safety. We believe it will indeed take time for EVs to take off. However, one meaningful development has been the rapid rise of Tesla Motors this year, whose EVs have evolved from being merely environmentally friendly to an innovative vehicle that offers a whole new driver experience. We believe a number of parallels can be drawn between the EV maker and Apple when it first introduced the iPhone. These small changes can have significant implications for the rechargeable battery industry. Typically, the price and capacity of a single battery featured in an electric vehicle is around a thousand times higher than that of a battery used in laptops. Assuming EVs account for 1% (800,000 units) of global auto sales, this would amount to an addressable rechargeable battery market of US$10bn (W11tr). In 2012, the overall market for small batteries used in IT products was estimated at US$10.8bn (W12tr). Samsung SDI exceeded its EV order target for 1H and is expected to gain further orders in 2H. The BMW i3, for which Samsung SDI is the sole battery supplier, has fully begun mass production and is set to go on sale in September.

Raise TP by 22% to W220,000

100 90 80 70 7/12

Small-sized rechargeable battery shipments and ASP rose 5% and 1% QoQ, respectively. Prismatic and polymer battery shipments were weaker-than-projected, remaining flat QoQ, but cylindrical battery shipments jumped 10% QoQ. The rise in ASP was driven by an increase in large-capacity prismatic batteries. Overall shipments of prismatic batteries remained stagnant due to a sharp decline in shipments to Nokia, which offset the growth of Galaxy S4 shipments. We attribute the flattish polymer battery shipments to the destocking of existing products ahead of the launch of new tablet models. The PDP unit swung to a modest profit QoQ (vs. losses of over W20bn in 1Q), with shipments of 1.6mn units (+5% QoQ, -4% YoY) and revenue of W408bn (+11% QoQ, -17% YoY), from 1.6mn shipments (+5% QoQ, -4% YoY). Electric vehicle (EV) and energy storage system (ESS) losses narrowed QoQ to W33bn and 10bn, respectively.

11/12

3/13

Daewoo Securities Co., Ltd.

7/13

We reiterate our Buy call on Samsung SDI and lift our target price by 22% to W220,000 (from W180,000). We raised 2014F-15F EV battery shipments by 47% (to 25,000 units from 17,000 units) and 22% (to 53,000 units from 43,000 units), respectively. Accordingly, we revised up our large rechargeable battery revenue estimates by 29% for 2014 (to W487bn from W378bn) and 15% (to W852bn from W745bn) for 2015. FY (Dec.)

12/10

12/11

12/12

12/13F

12/14F

12/15F

Display/Battery

Revenue (Wbn)

5,124

5,444

5,771

5,855

6,393

6,975

Jonathan Hwang

OP (Wbn)

287

110

187

146

292

437

5.6

2.0

3.2

2.5

4.6

6.3

356

320

1,472

548

725

907

EPS (W)

7,548

6,785

31,192

11,625

15,366

19,227

ROE (%)

6.5

5.3

21.8

7.3

9.3

11.0

P/E (x)

22.3

19.7

4.8

14.2

10.7

8.6

P/B (x)

1.3

1.0

1.0

1.0

1.0

0.9

+822-768-4140 [email protected]

OP margin (%) NP (Wbn)

Note: 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

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS BEGINNING ON PAGE 9.

July 29, 2013

Samsung SDI

Rechargeable battery market to grow at CAGR of 19% through 2020 Last year, the global rechargeable battery market was estimated at US$13.7bn (US$10.8bn for IT, US$2.1bn for electric vehicles (EV), US$0.8bn for energy storage system (ESS)). The rechargeable battery market is still dwarfed by other IT segments (semiconductor: US$300bn; LCD: US$100bn; handsets: US$350bn). However, its growth potential is attractive in the medium- to long-term as new applications like EVs and ESS that require large-sized cells are expected to drive growth going forward. The batteries used in EVs are 1,000 times higher in capacity and price than those for notebook PCs. Accordingly, the growth of the EV and ESS markets should sharply boost the rechargeable battery market. The global rechargeable battery market is projected to grow at a CAGR of 19% through 2020 to reach W54.1bn. While the CAGR of the small-sized battery segment is estimated at just 2%, the EV and ESS markets are forecast to expand at 43% and 29% CAGR, respectively, during that period. We do not believe our EV and ESS market outlook is aggressive. Global EV and plug-in hybrid electric vehicle (PHEV) sales volume, which is estimated at 56,000 and 59,000, respectively, last year, is projected to rise to 123,000 and 91,000 this year. In 2015, global EV and PHEV sales volume is projected to reach 400,000 and 372,000, respectively. Despite such strong growth, EV and PHEV sales volume is expected to account for just 0.5% and 0.4% of global vehicle sales volume (80mn annually), respectively, in 2015. The recovery of the US economy is also likely to provide tailwinds to the EV market. Last year, 27% of EV (15,000 units) and 70% of PHEV (39,000 units) were sold in the US. In 1H13, EV and PHEV sales volume came in at 23,000 (+356% YoY) and 18,000 (+39% YoY) in the US. If the US economy and oil prices remain on an upward trajectory, the EV market would continue to expand going forward. Figure 1. LIB market trends (US$bn) 60

IT

xEV

Figure 2. Small LIB shipment trends

ESS

(bn cells)

Cylindrical (L)

Prismatic (L)

(%)

8

Polymer (L)

YoY growth (R)

30 25

50 6

2012~2020F CAGR: 18.7% → IT 2.0%, xEV 43.1%, ESS 28.7%

40

20 15

4

30

10

20 2

5

10 0

0

0

04

06

08

10

12

14F

16F

18F

20F

09

10

11

12

13F

14F

15F

16F

17F

18F

19F

20F

Source: IIT, KDB Daewoo Securities Research

Source: IIT, KDB Daewoo Securities Research

Figure 3. EV (Electric-Vehicle) shipment trends

Figure 4. ESS (Energy Storage System) market trends

(mn units)

HEV(L)

PHEV(L)

(%)

7

EV(L)

YoY growth (R)

60

(GWh) 12

50

10

40

8

30

6

20

4

10

2

0

0

6 5

Install capacity

4 3 2 1 0 09

10

11

12

13F

14F

15F

Source: IIT, KDB Daewoo Securities Research

KDB Daewoo Securities Research

16F

17F

18F

19F

20F

09

10

11

12

13F

14F

15F

16F

17F

18F

19F

20F

Source: IIT, KDB Daewoo Securities Research

2

July 29, 2013

Samsung SDI

BMW to soon unveil its first EV model i3 BMW is scheduled to launch its first EV model i3 in 2H, which should further accelerate the global EV market growth. The i3 is a premium EV model for urban mobility. BMW will unveil the i3 on July 29th and display at the Frankfurt Motor Show in September. The official base pricing for the model is EUR34,950 for the German market and the US price tag is US$41,350 before tax incentives (US$7,500). For the i3, BMW has established production facilities with an annual capacity of 40,000 units. And Samsung SDI is contracted to supply 21.6kWh lithium-ion batteries for the model. Table 1. Global EV (Li Ion) battery supply trends Company

EV customer Model

AESC

Nissan

Battery capacity

km per charge

Price

Leaf

24.1 kWh

135 km

$31,698

(NEC + Nissan)

Renault

Fluence

26.6 kWh

185 km

$35,000

Lithium Energy Japan

Mitsubishi

iMiEV-G

16.5 kWh

100 km

$29,125

(GS Yuasa + Mitsubishi)

Mitsubishi

MiniCab MiEV-G

16.5 kWh

100 km

$24,500

Toshiba

Mitsubishi

iMiEV-M

10.6 kWh

75 km

$23,200

Blue Energy

Mitsubishi

MiniCab MiEV-M

10.6 kWh

75 km

$20,000

Honda

Fit EV

19.2 kWh

132 km

$36,625

Civic Hybrid

0.7 kWh

-

$24,360

1.0 kWh

-

$37,000

Honda

(3rd generation)

(GS Yuasa + Honda) PEVE

Toyota

Prius alpha Hybrid

(Panasonic + Toyota) Panasonic Sanyo

LG Chemical

Samsung SDI

SK Innovation

BYD

Tesla

Model S

60.0 kWh

335 km

$69,900

Tesla

Model S

85.0 kWh

426 km

$79,900

Toyota

Prius PHEV

4.2 kWh

18 km (Electric)

$32,000

Ford

C-Max Hybrid

1.4 kWh

-

$25,995

Ford

C-Max Energi

7.6 kWh

32 km (Electric)

$33,745

Audi

Q5 Hybrid

1.3 kWh

-

$50,900

GM

Volt PHEV

16.2 kWh

61 km (Electric)

$43,550 $25,650

Hyundai

Sonata Hybrid

1.4 kWh

-

Renault

Twizy

7.7 kWh

100 km

$9,000

Renault

Fluence

26.6 kWh

185 km

$35,000

Renault

ZOE

22.0 kWh

150 km

$30,995

Ford

Focus Electric

22.5 kWh

122 km

$39,995

BMW

i3 EV

21.6 kWh

160 km

$41,350

BMW

i8 PHEV

7.2 kWh

35 km (Electric)

-

Chrysler

Fiat 500 EV

19.8 kWh

140 km

$31,800

VW

CrossBlue PHEV

9.7 kWh

32 km (Electric)

-

Kia

Ray EV

16.4 kWh

138 km

Mercedes

SLS AMG E-Cell

48.0 kWh

145 km

BYD

e6

75.0 kWh

195 km

$40,000 $500,000 (expected) $35,000

Source: IIT, KDB Daewoo Securities Research

Figure 5. BMW i3 – Concept (Pure EV)

Figure 6. BMW i8 – Concept (Plug-In Hybrid EV)

Source: BMW

Source: BMW

KDB Daewoo Securities Research

3

July 29, 2013

Samsung SDI

3Q13 outlook: Revenue of W1.44tr (-5% YoY); OP of W61bn (-29% YoY) We expect Samsung SDI’s rechargeable battery earnings to continue to improve in 3Q as customer’s launch of new smartphone and tablet PC models is projected to push up the company’s prismatic and cylindrical battery shipments by 14% and 15%, respectively. We estimate the company’s 3Q13 net profit at W174bn. Table 2. Quarterly earnings forecasts (under consolidated K-IFRS) Shipments (mn units) CRT PDP Small- to mid-sized LIB ASP (US$) CRT PDP Small- to mid-sized LIB Revenue (Wbn) CRT PDP Small- to mid-sized LIB Others (EV, ESS, PV) Operating profit (Wbn) CRT PDP Small- to mid-sized LIB Other EV ESS PV OP margin (%) CRT PDP Small- to mid-sized LIB Net profit (Wbn) SMD equity-method gains Net margin (%) EBITDA (Wbn) EBITDA margin (%) Growth (QoQ/YoY) Shipments (%) CRT PDP Small- to mid-sized LIB ASP (%) CRT PDP Small- to mid-sized LIB Revenue (%) CRT PDP Small- to mid-sized LIB Other (EV, ESS, PV) Operating profit (%) CRT PDP Small- to mid-sized LIB Other/PB Net profit (%) SMD equity-method gains EBITDA (%)

(Wbn, %)

1Q13

2Q13P

3Q13F

4Q13F

1Q14F

2Q14F

3Q14F

4Q14F

2012

2013F

2014F

0.7 1.5 274

0.8 1.6 286

0.8 1.6 314

0.6 1.7 303

0.4 1.4 287

0.5 1.4 336

0.5 1.5 351

0.3 1.5 330

9.3 7.0 1,095

2.8 6.4 1,177

1.7 5.8 1,304

29 226 2.6 1,208 22 368 772 46 -33 -4 -21 55 -64 -41 -15 -8 -2.8 -18.0 -5.6 7.1 78 100 6.4 71 5.9

27 230 2.6 1,307 24 408 843 32 32 0 2 80 -49 -33 -10 -6 2.5 0.5 0.5 9.4 129 145 9.9 161 12.3

29 228 2.8 1,435 23 398 938 76 61 0 1 100 -40 -30 -5 -5 4.3 0.5 0.2 10.7 174 162 12.1 197 13.7

28 225 2.8 1,392 16 411 898 67 48 0 2 81 -35 -30 0 -5 3.4 0.5 0.5 9.0 151 146 10.8 190 13.7

28 219 2.7 1,239 13 316 823 87 25 0 -4 69 -40 -30 -5 -5 2.1 0.5 -1.2 8.4 106 101 8.6 169 13.6

26 216 2.7 1,427 13 330 961 122 65 0 0 96 -30 -25 0 -5 4.6 0.5 -0.1 10.0 176 151 12.4 208 14.6

28 219 2.8 1,570 14 341 1,045 170 102 0 -3 130 -25 -25 5 -5 6.5 0.5 -1.0 12.5 227 179 14.5 247 15.7

27 216 2.8 1,499 10 357 984 149 73 0 0 96 -23 -20 3 -5 4.9 0.5 0.0 9.7 200 174 13.4 221 14.7

29 257 2.7 5,771 307 2,029 3,349 87 187 -1 16 321 -99

3.2 -0.3 0.8 9.6 1,472 452 25.5 641 11.1

28 227 2.7 5,342 86 1,585 3,451 221 108 -4 -15 316 -188 -134 -30 -24 2.0 -4.3 -1.0 9.1 532 552 9.9 619 11.6

27 218 2.7 5,735 49 1,344 3,813 529 266 0 -7 391 -118 -100 3 -20 4.6 0.5 -0.6 10.2 710 605 12.4 845 14.7

-36.4 -21.1 3.2

14.3 5.3 4.3

-6.0 2.5 9.9

-26.9 5.6 -3.6

-23.6 -20.6 -5.1

14.3 5.3 16.9

-6.0 2.5 4.5

-26.9 5.6 -6.1

-20.4 2.7 10.4

-70.0 -8.7 7.5

-40.0 -9.5 10.8

-12.1 -9.2 -9.3 -14.6 -44.4 -28.7 -6.8 53.6 TTR RR TTR -3.4 RR 39.5 -25.7 -31.4

-8.6 1.6 1.0 8.2 8.2 10.9 9.2 -30.5 TTB TTB TTB 45.1 RR 66.3 44.8 127.4

8.8 -1.0 5.2 9.8 -1.6 -2.4 11.2 135.4 90.4 -1.6 -57.4 26.2 RR 34.4 11.5 22.4

-2.7 -1.0 0.8 -3.0 -29.9 3.1 -4.2 -11.3 -21.8 -29.9 152.5 -19.6 RR -13.1 -9.8 -3.3

1.3 -3.0 -3.5 -11.0 -22.6 -23.0 -8.4 30.2 -46.9 -22.6 TTR -14.5 RR -29.5 -30.6 -11.1

-8.6 -1.0 0.0 15.2 4.4 4.3 16.8 40.2 156.7 4.4 RR 38.6 RR 65.9 49.5 23.0

8.8 1.0 4.1 10.1 2.3 3.5 8.7 39.1 55.7 2.3 RR 36.0 RR 28.6 18.8 18.9

-2.7 -1.0 0.3 -4.5 -28.9 4.5 -5.8 -12.5 -28.1 -28.9 TTB -26.6 RR -11.7 -3.1 -10.7

5.7 -11.9 8.5 6.0 -14.1 -8.3 22.0 -32.6 70.1 TTR 83.0 23.0 RR 359.4 57.4 16.9

-3.2 -11.6 -0.6 -7.4 -72.1 -21.9 3.1 154.5 -42.1 RR TTR -1.7 RR -63.9 22.1 -3.6

-2.0 -4.3 1.8 7.4 -42.5 -15.2 10.5 139.5 145.7 TTB RR 23.8 RR 33.6 9.7 36.6

Note: “TTB,” “TTR,” and “RR” stands for “turn to black,” “turn to red,” and “remain in red,” respectively. Source: Company data, KDB Daewoo Securities Research

KDB Daewoo Securities Research

4

July 29, 2013

Samsung SDI

Figure 7. Consolidated revenue

Figure 8. Consolidated operating profit

(Wbn)

(Wbn)

1,800

CRT

PDP

Rechargeable battery

(%)

150

New biz

1,500

PDP (L)

Rechargeable battery (L)

New biz (L)

OP margin (R)

15

100

10

50

5

0

0

-50

-5

1,200 900 600 300 0

-100 1Q09

1Q10

1Q11

1Q12

1Q13

-10

1Q14F

1Q09

1Q10

1Q11

1Q12

1Q13

Source: Company data, KDB Daewoo Securities Research

Source: Company data, KDB Daewoo Securities Research

Figure 9. PDP shipments

Figure 10. LIB shipments

('000)

(%)

2,000

PDP shipment (L)

80

YoY growth (R)

1Q14F

(mn cells) 400

(%) Rechargeable battery (L)

100

YoY growth (R)

70 1,600

60

80 300

60

50 1,200

40 30

800

40 200 20

20 10

400

0

0

100

-20

-10 -20

0 1Q09

1Q10

1Q11

1Q12

1Q13

0

1Q14F

-40 1Q09

1Q10

1Q11

1Q12

1Q13

Source: Company data, KDB Daewoo Securities Research

Source: Company data, KDB Daewoo Securities Research

Figure 11. SEC Galaxy series LIB capacity comparison

Figure 12. Small LIB’s OP and share price trends

P rismat ic

(mAh)

(Wbn)

P olymer

IT LIB OPM (L)

Share price (R)

(W)

150

8,000

220,000 Galaxy S2, iPad 2

7,000

+15%

Galaxy S4 Note 8.0 Galaxy S3 New iPad

6,000 100

+24%

180,000

4,000

160,000

4,000 2,600

50

2,100 1,500

200,000

4,600

+27%

2,000

1Q14F

140,000

1,650 120,000 0

0 S1

S2

S3

S4

Source: KDB Daewoo Securities Research

KDB Daewoo Securities Research

Tab 7.0

Note 8.0 Note 10.1

100,000 1Q10

1Q11

1Q12

1Q13

Source: KDB Daewoo Securities Research

5

July 29, 2013

Samsung SDI

Raise 2013F EPS by 1% and 2014F EPS by 6% We reiterate our Buy call on Samsung SDI and lift our target price by 22% to W220,000 (from W180,000). We raised 2014F-15F EV battery shipments by 47% (to 25,000 units from 17,000 units) and 22% (to 53,000 units from 43,000 units), respectively. Accordingly, we revised up our large rechargeable battery revenue estimates by 29% for 2014 (to W487bn from W378bn) and 15% (to W852bn from W745bn) for 2015. Our target price is based on the sum of the company’s operating value (small-sized rechargeable batteries: W3.5tr, large-sized rechargeable batteries: W2tr) and asset value (SDC: W3.4tr, others: W1.1tr). In light of the rapidly expanding EV market, we revised up operating value for the largesized battery business from W0.7tr to W2.0tr. Table 3. 2Q13P earnings results (under consolidated K-IFRS)

Revenue Operating profit

2Q12

1Q13

1,477 83

(Wbn, %, %p)

2Q13P

Growth

Preliminary

KDB Daewoo

Consensus

YoY

1,208

1,307

1,437

1,399

-11.5

QoQ 8.2

-33

32

38

31

-60.9

TTB

OP margin

6

-3

2.5

2.7

2

-3.1

5.2

Pretax profit

166

109

172

169

177

3.7

58.2

Net profit

105

78

129

130

125

23.8

66.3

Note: “TTB” stands for “turn to black” Source: FnGuide, KDB Daewoo Securities Research estimates

Table 4. Earnings forecast revisions (under consolidated K-IFRS) Previous Revenue

(Wbn, W, %)

Revised

% change

14F

15F

13F

14F

15F

13F

14F

5,742

5,610

6,070

5,342

5,735

6,239

-7.0

2.2

118

245

362

108

266

397

-8.0

8.8

2.8 - Worsening profitability of PDP business 9.7 - One-off expenses in ESS business

Operating profit Net profit

15F

529

673

849

532

710

884

0.6

5.5

4.1

11,207

14,272

18,003

11,268

15,056

18,736

0.6

5.5

4.1

OP margin

2.0%

4.4%

6.0%

2.0%

4.6%

6.4%

0.0

0.3

0.4

Net margin

9.2%

12.0%

14.0%

9.9%

12.4%

14.2%

0.7

0.4

0.2

Avg. US$/W

1,079

1,065

1,065

1,088

1,065

1,065

0.9

0.0

0.0

EPS

Notes

13F

Source: KDB Daewoo Securities Research estimates

Table 5. Calculation of target price (sum-of-the-parts methodology) Operating value

(Wbn, W, x)

EBITDA

Applied EV/EBITDA

EV

CRT

19

0.0

0.0

CRT liquidation to be expedited

PDP

74

0.0

0.0

LGE: 5.5x; Panasonic: 4.8x

690

5.0

3,452

LG Chem: 6.5x; Sony: 4.0x; GS Yuasa: 8.7x

-

-

2,000

DCF (WACC=10.7%; 50% stake)

Small- to mid-sized LIB Large-sized LIB Total operating value (A) Investment asset value (Samsung Display) Samsung Display Investment asset value (listed)

Notes

5,452 EBITDA

Applied EV/EBITDA

9,498

3

3,419

LGD: 2.1x; Sharp: 6.2x (15% stake)

Market cap

Discount %

Samsung Fine Chemicals

1,259

20.0

116

11.5% ownership

Samsung Engineering

3,116

20.0

127

5.1% ownership

Samsung C&T

8,717

20.0

502

7.2% ownership

Hotel Shilla

2,700

20.0

2

0.1% ownership

S1

2,660

20.0

234

11.0% ownership

Book value

Discount %

194

20.0

155

Excluding SDC

Investment asset value (unlisted) Valuation gains/losses on investment securities Total investment asset value (B)

4,556

Net borrowings (C)

535

Borrowings of W1,468bn; CCE of W933bn

Treasury stock (D)

495

2.20mn treasury shares * share price of W164,500

EV (A)+(B)-(C)+(D)

9,968

Value per share

218,791

Note: “CCE” stands for “cash and cash equivalents” Source: KDB Daewoo Securities Research estimates

KDB Daewoo Securities Research

6

July 29, 2013

Samsung SDI

Valuation comparison of global peers Table 6. Valuation comparison of Samsung SDI and global peers Revenue

Market cap

OP

(Wbn, %, x) NP

ROE

P/E

P/B

EV/EBITDA

13F

14F

13F

14F

13F

14F

13F

14F

13F

14F

13F

14F

13F

14F

7,494

5,342

5,736

108

266

532

710

7.1

9.2

14.6

10.9

1.0

1.0

13.4

9.9

LGE

11,832

60,860

67,136

1,501

2,185

515

1,108

4.2

8.8

25.4

11.8

1.2

1.1

6.2

4.8

Panasonic

24,037

82,314

82,866

2,886

3,282

695

920

4.9

5.5

31.9

23.6

1.4

1.3

5.0

4.7

5.4

7.8

24.0

15.4

1.2

1.1

8.2

6.5

Samsung SDI

PDP avg. Samsung SDI

7,494

5,342

5,736

108

266

532

710

7.1

9.2

14.6

10.9

1.0

1.0

13.4

9.9

LG Chem

19,020

24,280

25,868

1,984

2,546

1,586

2,037

14.1

16.0

13.4

10.4

1.8

1.6

7.4

5.6

Sony

24,424

84,037

87,388

2,586

3,308

621

1,067

2.5

4.4

41.6

23.9

1.0

0.9

4.2

3.7

1,942

3,710

3,855

169

205

128

150

9.0

10.9

15.6

12.6

1.3

1.2

9.3

8.1

13,282

9,644

10,574

395

508

189

257

4.6

6.1

57.8

40.2

2.6

2.4

18.1

15.7

1,518

2,186

2,545

140

155

120

131

17.2

16.6

12.6

11.6

2.1

1.9

7.3

6.7

493

1,063

1,209

47

54

41

43

14.9

15.2

11.2

11.6

1.7

1.6

5.4

5.2

9.9

11.2

23.8

17.3

1.6

1.5

9.3

7.9

GS Yuasa BYD Simplo Tech Dynapack Battery avg.

Source: Bloomberg, KDB Daewoo Securities Research estimates

Figure 13. Share performances of global LIB makers

Figure 14. Share performances of global PDP makers

(-1Y=100)

(-1Y=100)

260

Samsung SDI Sony

240

LG Chem GS Yuasa

220

300

Samsung SDI

LGE

250

Panasonic Hitachi

Sony Pioneer

200 200

180 160

150

140 120

100

100 80

50

60 40

0 7/11

10/11

1/12

4/12

7/12

10/12

1/13

4/13

7/13

11.7

11.10

12.1

12.4

12.7

12.10

Source: Bloomberg, KDB Daewoo Securities Research

Source: Bloomberg, KDB Daewoo Securities Research

Figure 15. P/B band of Samsung SDI

Figure 16. P/B-ROE comparison (2013F)

(Market cap, Wtr) 12

13.1

13.4

13.7

(P/B, x) 1.6x Takes lead in LIB industry

10

1.6 1.3x

LG Chem 1.4

CRT hits record earnings

Panasonic

8

1.0x

LG E

6

Hitachi

GS Yuasa

1.2 0.7x 1.0

LG D

S amsung S DI

4 Financial crisis

Sony

0.4x

Pioneer

0.8

2 PDP loses to LCD camp

(ROE, %) 0.6

0 95

97

99

01

03

Source: KDB Daewoo Securities Research

KDB Daewoo Securities Research

05

07

09

11

13 F

0

2

4

6

8

10

12

14

16

Source: Bloomberg, KDB Daewoo Securities Research

7

July 29, 2013

Samsung SDI

Samsung SDI (006400 KS/Buy/TP: W220,000) Comprehensive Income Statement (Summarized)

Statement of Financial Condition (Summarized)

(Wbn)

12/12 12/13F 12/14F 12/15F

(Wbn)

12/12 12/13F 12/14F 12/15F

Revenue

5,771

5,855

6,393

6,975

Current Assets

2,415

2,675

2,733

2,730

Cost of Sales

4,863

4,927

5,222

5,588

Cash and Cash Equivalents

947

1,042

1,004

847

Gross Profit

908

927

1,172

1,387

AR & Other Receivables

704

777

824

899

SG&A Expenses

721

782

880

950

Inventories

559

617

654

713

Operating Profit (Adj)

187

146

292

437

Other Current Assets

180

199

211

230 10,762

Operating Profit

187

146

292

437

Non-Current Assets

8,480

9,126

9,808

Non-Operating Profit

1,843

574

648

739

Investments in Associates

4,005

4,552

5,160

5,860

Net Financial Income

4

19

23

23

Property, Plant and Equipment

1,971

2,250

2,356

2,608

Net Gain from Inv in Associates

2,239

535

608

699

Pretax Profit

2,029

719

940

1,176

Income Tax

Intangible Assets Total Assets

171

150

125

107

10,895

11,801

12,541

13,491 2,420

543

151

188

235

Current Liabilities

2,004

2,188

2,277

1,487

569

752

941

AP & Other Payables

744

822

871

950

0

0

0

0

Short-Term Financial Liabilities

659

702

702

702

Net Profit

1,487

569

752

941

Other Current Liabilities

Controlling Interests

1,472

548

725

907

Non-Current Liabilities

Profit from Continuing Operations Profit from Discontinued Operations

Non-Controlling Interests

601

664

704

768

1,327

1,835

2,083

2,303

15

21

27

34

Long-Term Financial Liabilities

474

777

777

777

Total Comprehensive Profit

1,325

287

470

659

Other Non-Current Liabilities

810

993

1,219

1,440

Controlling Interests

1,321

270

446

628

Total Liabilities

3,331

4,022

4,359

4,723

4

17

24

31

Controlling Interests

7,373

7,576

7,954

8,511

Non-Controlling Interests EBITDA

641

656

871

1,053

FCF (Free Cash Flow)

657

-155

138

86

EBITDA Margin (%)

11.1

11.2

13.6

15.1

3.2

2.5

4.6

6.3

25.5

9.4

11.3

13.0

Operating Profit Margin (%) Net Profit Margin (%)

Cash Flows (Summarized) (Wbn) Cash Flows from Op Activities Net Profit Non-Cash Income and Expense Depreciation Amortization Others Chg in Working Capital

Capital Stock

241

241

241

241

Capital Surplus

1,258

1,259

1,259

1,259

Retained Earnings

4,987

5,462

6,119

6,954

191

203

227

258

7,565

7,779

8,182

8,768

Non-Controlling Interests Stockholders' Equity

Forecasts/Valuations (Summarized) 12/12 12/13F 12/14F 12/15F

12/12 12/13F 12/14F 12/15F

565

528

690

788

P/E (x)

4.8

14.2

10.7

8.6

1,487

569

752

941

P/CF (x)

3.7

7.3

6.0

5.1

-833

111

119

112

P/B (x)

424

480

554

598

EV/EBITDA (x)

1.0

1.0

1.0

0.9

11.5

12.6

9.6

8.1

31

31

25

18

EPS (W)

31,192

11,625

15,366

19,227

-415

33

81

82

CFPS (W)

40,827

22,439

27,642

32,287

-8

-22

7

-29

BPS (W)

110

-19

-47

-75

DPS (W)

1,500

1,500

1,600

1,800

2

-46

-37

-60

Payout ratio (%)

4.6

12.3

9.9

8.9

36

-17

49

79

Dividend Yield (%)

1.0

0.9

1.0

1.1

-81

-131

-188

-235

Revenue Growth (%)

6.0

1.5

9.2

9.1

Cash Flows from Inv Activities

-473

-745

-625

-832

EBITDA Growth (%)

16.9

2.2

32.8

20.9

Chg in PP&E

-418

-760

-660

-850

Operating Profit Growth (%)

69.9

-22.1

100.3

49.8

359.7

-62.7

32.2

25.1

7.9

8.3

8.4

8.5

Inventory Turnover (x)

10.1

10.0

10.1

10.2 10.1

Chg in AR & Other Receivables Chg in Inventories Chg in AP & Other Payables Income Tax Paid

Chg in Intangible Assets

0

0

0

0

EPS Growth (%)

Chg in Financial Assets

0

0

0

0

Accounts Receivable Turnover (x)

-55

15

35

18

Others Cash Flows from Fin Activities Chg in Financial Liabilities Chg in Equity Dividends Paid

156,232 160,967 169,515 181,691

88

294

-103

-113

Accounts Payable Turnover (x)

10.9

9.8

9.9

187

324

0

0

ROA (%)

15.3

5.0

6.2

7.2

2

1

0

0

ROE (%)

21.8

7.3

9.3

11.0 12.2

-76

-67

-67

-72

ROIC (%)

Others

-25

-31

-36

-42

Liability to Equity Ratio (%)

Increase (Decrease) in Cash

189

95

-38

-157

Beginning Balance

758

947

1,042

1,004

Ending Balance

947

1,042

1,004

847

Current Ratio (%)

5.4

4.7

8.7

44.0

51.7

53.3

53.9

120.5

122.3

120.0

112.8

Net Debt to Equity Ratio (%)

2.1

5.1

5.3

6.7

Interest Coverage Ratio (x)

7.6

4.1

7.0

10.5

Source: Company data, KDB Daewoo Securities Research estimates

KDB Daewoo Securities Research

8

July 29, 2013

Samsung SDI

Important Disclosures & Disclaimers Disclosures

(W)

As of the publication date, Daewoo Securities Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of Samsung SDI as an underlying asset, and other than this, Daewoo Securities has no other special interests in the covered companies. As of the publication date, Daewoo Securities Co., Ltd. issued equity-linked warrants with Samsung SDI as an underlying asset, and other than this, Daewoo Securities has no other special interests in the covered companies.

Samsung SDI

250,000 200,000 150,000 100,000 50,000 0 7/11

Stock Ratings

1/12

7/12

1/13

7/13

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. 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. 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.

KDB Daewoo Securities Research

9

July 29, 2013

Samsung SDI

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 Tel: 85-2-2514-1304

Daewoo Securities (America) Inc. 320 Park Avenue, 31st Fl. New York, NY 10022

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Tel: 65-6671-9845

Tokyo Representative Office 7th Floor, Yusen Building 2-3-2 Marunouchi, Chiyoda-ku Tokyo 100-0005 Japan Tel: 81-3- 3211-5511

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KDB Daewoo Securities Research

United States Tel: 1-212-407-1000

10