Demand for Big-screen TVs Climbing amid COVID-19 Pandemic
The authors are analysts of Shinhan Investment Corp. They can be reached at johnsoh@shinhan.com and chank@shinhan.com, respectively. -- Ed.
32-inch LCD TV open cell panel price rose 6% MoM in June; uptrend to continue
Due to the COVID-19 pandemic, more consumers in the US are now at home watching Netflix on 65-inch or larger LCD TVs. In a bid to expand market share amid the rise in demand, TV makers in Korea and China are expected to increase their purchase of LCD TV panels by more than 30% QoQ in 3Q20. The price of 32-inch LCD TV open cell panels rebounded by 6% MoM to USD35 in June as a result.
In 1Q21, global supply of 8G or higher generation LCD panels is set to fall 9.7% QoQ in terms of total area, with Samsung Display to discontinue LCD production from 2021. LCD TV panel prices should thus continue upward through the end of the year.
OLED TV and POLED panel production back to normal levels
OLED TV panel production is now in full swing, with the OLED TV panel line in Guangzhou finally running at normal capacity after a year of delay. We believe OLED TV panel output will jump 41% YoY to 4.81mn units in 2020 and 65.7% YoY to 7.97mn in 2021. Shipments of smartphone-use OLED panels to strategic clients are expected to grow more than threefold with production at the small/mid-size POLED panel line also back to normal levels. POLED panel operations, in particular, should turn profitable in 2021 on visible growth in sales of high-margin automobile-use panels.
Retain BUY and raise target price by 6.7% to KRW16,000
We raise our target price for LG Display by 6.7% to KRW16,000 with: 1) LCD TV panel prices to continue on an uptrend after rebounding in June; 2) operating earnings likely to turn around to an operating profit of KRW246bn in 4Q20; and 3) OLED panel operations back to normal. Our revised target price is based on a target PBR of 0.54x, with a 10% discount applied to the PBR low of 0.6x recorded during the 2008 financial crisis. Watching movies at home on Netflix or Disney Plus with a 65-inch or larger big-screen TV has emerged as a new trend amid the pandemic. With demand for 65-inch OLED TVs seeing a further boost from the June release of Sony's PlayStation5, we find that the outlook is turning increasingly brighter for LG Display.