LCD TV Panel Prices to Remain High Throughout 1H21
The authors are analysts of Shinhan Investment Corp. They can be reached at johnsoh@shinhan.com and chank@shinhan.com, respectively. -- Ed.
Strong iPhone 12 sales and iPhone 13 expectations
Apple’s iPhone 12 sales are stronger than market expectations. Shipments of OLED panels for iPhone are estimated to surge 60-80% YoY to 160mn-180mn units in 2021 (vs. 100mn units in 2020). An added boost is expected from the launch of iPhone 13 models slated for 2H21, which should appeal to the consumers with new display and camera features.
LCD TV panel prices to remain high throughout 1H21
The uptrend in LCD TV panel prices will likely continue throughout 1H21 due to parts supply shortages (DDIC, etc.), which were further worsened by the recent power outage at Japan’s Nippon Electric Glass. In particular, we expect a continued shortage of 65-inch and larger LCD TV panels, with TV makers launching aggressive efforts to expand mini-LED TV sales.
2021 operating profit forecast at KRW144.5bn (+35.5% YoY)
Despite weak seasonality, Silicon Works likely saw stronger demand for POLED-use non-memory semiconductors from strategic clients in 4Q20. The company is expected to have logged a solid operating profit of KRW37.1bn (-23.6% QoQ, +47.3% YoY) on sales of KRW360.1bn (-1.9% QoQ, +47.8% YoY) for 4Q20, surpassing the consensus estimate of KRW34.8bn.
In 2021, sales of POLED-use non-memory semiconductors to strategic clients are forecast to climb 71.5% YoY to 44.71mn units. Sales of OLED TV-use non-memory semiconductors should also jump 71.7% YoY to 7.87mn units. We believe earnings will continue on an uptrend in 2021, with sales of KRW1.36tr (+17.6% YoY) and operating profit of KRW144.5bn (+35.5% YoY).
Retain BUY and raise target price by 13.7% to KRW83,000
We raise our target price for Silicon Works by 13.7% to KRW83,000 in view of: 1) upbeat display market conditions (OLED momentum, strong LCD TV panel prices, etc.); 2) 2021 full-year operating profit forecast at KRW144.5bn (+35.5% YoY); and 3) reduction in cost burden on diversification of foundry partners. Our revised target price is based on 2021F EPS of KRW7,328 and a target PER of 11.3x. Silicon Works shares are currently trading at2021F PER of 8.7x, undervalued vs. Taiwanese peers Novatek Microelectronics (16.0x) and Himax Technologies (22.7x). We thus see further upside for the shares going forward.