LCD TV Panel Prices Sustain a Strong Uptrend
The author is an analyst of KB Securities. He can be reached at jeff.kim@kbfg.com. -- Ed.
LCD TV panel prices in second half of August up 7.8% HoH
According to market research firm WitsView, LCD TV panel prices in the second half of August sustained a strong uptrend, with average TV panel prices rising 7.8% HoH/+12.2% MoM (32” +7.3% at USD44.00; 43” +10.7% at USD83.00; 50” +8.6% at USD101.00; 55” +8.1% at USD133.00; 65” +4.5% at USD185.00; 75” +0.7% at USD300.00). The price increases were supported by: (1) Rising demand for home entertainment amid the COVID-19-induced work-at-home economy; (2) Rising demand for 55”-75” TVs (-48% YoY) due to price declines; (3) Global TV companies’ below-average inventory levels in LCD TV panels this month. We expect prices to continue to rise in September/October.
Proportion of online TV sales to surge above 30% amid pandemic
SEC and LGE should see their combined proportion of online TV sales surge to over 30% (vs. 20% in 1H20, 10% in 2019) based on the following: (1) Consumers have veered toward online purchases amid the pandemic; (2) Revenge spending backed by government stimulus money and built-up savings is skewed toward durables such as consumer electronics; (3) As more and more people opt to work from home, use of OTT services (e.g., YouTube) via large TVs has been increasing. Also, students participating in distance learning via TVs have added to TV demand. The shift to online sales has reduced retail costs (e.g., promotions and product displays), leading to profitability improvement.
For 3Q20, we estimate SEC’s CE OP at KRW833.4bn, marking the highest level since 2Q16 (KRW1.03tn), and LGE’s HE OP at KRW246.4bn, doubling QoQ. Notably, our forecast for LGE’s combined H&A/HE OP of KRW825.0bn marks the highest level since 3Q17 (KRW885.6bn).
Top picks: SEC, LGE, Hansol Chemical
For 2H20, we expect premium-TV shipments for SEC (QLED TVs) and LGE (NanoCell, OLED TVs) to jump over twofold HoH, boosting earnings for SEC’s CE and LGE’s HE. The companies’ combined 2H20 TV shipments is estimated to surge 54% HoH to 43mn units. Meanwhile, we expect LG Display to significantly reduce its operating loss to KRW61.8bn in 3Q20 (vs. operating loss of KRW517.0bn in 2Q20). The increase in demand and shift to online sales should translate into continual price increases for LCD TV panels. Our top picks are SEC, LGE and Hansol Chemical; all three companies are forecast to see earnings improve markedly in 3Q20, backed by brisk TV sales.