The author is an analyst for NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com -- Ed.
Although OLED TV demand remains weak, the expansion of OLED shipments for the smartphones of a North American customer is positive. We see strong chances for LGD to turn to profit in 4Q23. LGD’s earnings should improve in earnest from 2H24, when demand for IT devices should recover.
Prolonged slowdown in OLED TV demand is disappointing
Considering the prolonged slump in OLED TV demand, we trim our earnings forecasts for LG Display (LGD), in turn lowering our TP from W18,000 to W16,000. However, given the possibilities of OLED TV customer diversification, IT set demand recovery, and mid/long-term growth from automotive electronics, we maintain a Buy rating.
Lackluster sales of OLED TVs, a high-end product, have prolonged amid weakening consumption capacity due to global macro deterioration. Against this backdrop, we chop our forecasts for LGD’s OLED TV panel shipments by 10% to 4.4mn units for 2023 and 5.8mn units for 2024. Also, we now foresee 2024 operating loss of W126.1bn instead of OP of W84.4bn. Our TP calculation reflects a reduction in target P/B from 0.91x to 0.8x, the average level of 2017.
Operating income tops expectations in 3Q23; turn to OP forecast from 4Q23
LGD logged 3Q23 operating loss of W662.1bn (RR y-y), slightly beating our estimate. In 4Q23, backed by the full-fledged start of supply of high-margin OLED smartphone panels to a North American client, LGD should turn profitable.
Although demand for IT sets is still sluggish overall, we expect LGD to enjoy sales improvement of about 2~3% on average in 2024. Although it will be difficult to achieve annual OP in 2024 due to light demand for OLED TVs, OP is likely in 2H24 driven by sales improvement. We continue to see growth potential from an expansion in new OLED applications (eg, tablets and other electronics).