The End of the Loss Tunnel in Sight... Data Centers Revive 'This Company' [Weekend Money]

Samsung SDI Expected to Turn Profitable in Q3, Earlier Than Q4

Strong Sales of Data Center BBUs and ESS Drive Recovery

Once considered a leading stock in the electric vehicle (EV) battery sector, Samsung SDI's share price has struggled over the past few years. A slowdown in EV demand, underperformance of European clients, and a deterioration in the battery industry combined to push the company into the red and chill investor sentiment. However, the market's view is beginning to shift. A new rebound driver has emerged for Samsung SDI, which had previously focused solely on electric vehicles: data centers.

On June 14, Samsung Securities maintained its 'Buy' investment rating on Samsung SDI, citing these changing dynamics. While the target price was lowered by 8.1%, from 7.4 million won to 6.8 million won, the firm noted there is still a potential upside of 36.4% compared to the closing price of 4,985,000 won on June 11.

The key factor is a narrowing of losses. Samsung Securities estimated Samsung SDI’s sales for the second quarter of this year at 3.7 trillion won, with an operating loss of 73.5 billion won. Although the company remains in the red, the loss is significantly reduced compared to the operating loss of 155.6 billion won in the previous quarter and 397.8 billion won in the second quarter of last year.

The improvement in losses is attributed to battery demand from data centers. In the Energy Storage System (ESS) segment, not only have shipments of power products to North America increased, but domestic production and shipments of uninterruptible power supplies (UPS) for data centers have also risen, leading to improved margins compared to the previous quarter. Additionally, strong sales of battery backup units (BBU) for data centers in the small battery segment are expected to contribute to earnings improvement.

The timing of the turnaround into profitability is also expected to move up from the fourth quarter of this year to the third quarter. Operating profit for the third quarter is projected at 14.3 billion won. Samsung Securities believes that the quarterly operating losses that have continued since the first quarter of 2025 could finally end. Operating profit in the fourth quarter is forecast to grow to 122.3 billion won.

The primary reason for the turnaround is the recovery in shipments of EV batteries to Europe. Starting in the second quarter, shipments of batteries for electric vehicle models produced by domestic automakers and destined for Europe have begun, which is expected to lead to a clear increase in the utilization rate at the Hungary plant in the second half of the year.

Improving ESS profitability is also seen as significant. The proportion of lithium manganese oxide (LMO)-based UPS, which is relatively profitable, is expected to rise within the ESS segment, as U.S. sales of these products increase, bringing the share to the 15–20% range. In addition, with the full-scale operation of North American LFP ESS and the meaningful impact of the U.S. Advanced Manufacturing Production Credit (AMPC) expected from the fourth quarter, profitability is anticipated to improve. Furthermore, continued strong sales of small batteries for data center BBUs and power tools are expected to drive the turnaround to profitability from the third quarter.

Jang Jeonghoon, a research analyst at Samsung Securities, said, "Although we have lowered our target price due to a decline in the EV/EBITDA multiple of peer groups, we are maintaining our 'Buy' recommendation as we expect performance to improve with the earlier-than-expected turnaround to profitability."

This content was produced with the assistance of AI translation services.