OLED TV Demand to Continue to Falter
The author is an analyst of KB Securities. He can be reached at jeff.kim@kbfg.com. -- Ed.
Maintain HOLD but revise down TP to KRW16,000
We maintain HOLD but cut our 12m TP to KRW16,000 (0.5x 12m fwd P/B) for LG Display. We have made significant downward revisions to 2022E-2023E earnings to reflect shrinking TV/IT panel shipments in view of declining global TV demand next year (-1% YoY, following -4% YoY for 2022E) and persistent sluggishness in PC demand. The LCD supply glut should continue into next year, as global TV/PC demand continue to be hampered by an economic recession in Europe and China, and Chinese panel makers (BOE, CSOT) continue to expand output capacity.
2022E operating loss of KRW1.3tn
For 3Q22, we expect revenue of KRW5.9tn and operating loss of KRW619.3bn. OP should come in below market consensus (operating loss of KRW505.6bn), largely due to cuts to LCD/OLED shipments and ASP amid falling demand. Meanwhile, the decline in LCD panel prices persistent for the past one year has come to a halt in October following panel makers’ aggressive adjustments to utilization rates in August-September, but demand remains subdued. As such, we see operating losses continuing in 4Q22 (operating loss of KRW232.2bn). For the full year, we forecast revenue of KRW24.7tn (-17.0% YoY), with OP turning to red YoY (operating loss of KRW1.3tn).
OLED TV demand to continue to falter
OLED TV panel shipments should decline this year thanks to sluggish OLED TV demand in Europe. Substantial increases in OLED TV shipments are unlikely for 2023 as well, with: (1) decline in real spending power (i.e., surge in energy prices in Europe) leading to softening OLED TV demand; and (2) LG Electronics and Sony, the key drivers of growth in global OLED TV markets until now (accounting for 80% of LG Display’s OLED TV panel shipments), likely to be forced to cut prices amid inflationary pressures in Europe.