2Q21 OP of KRW708.8bn to Top Market Consensus by 33%
The author is an analyst of KB Securities. He can be reached at jeff.kim@kbfg.com. -- Ed.
Prices of LCD panels to diverge in 2H21
— According to Display Supply Chain Consultants (Jul 13), the price of 32” LCD TV panels should fall 23% from its Dec peak (price of 75” LCD TV panels to fall 6%). We forecast LCD panel prices to diverge by type, as: (1) prices of small-/mid-size LCD TV panels (32”, 43”, 50”) should retreat by 20% (average) until year-end while the prices of large-size LCD TV panels (55”, 65”, 75”, 85”) should fall by less than 5% (average), and (2) prices of PC monitor LCD panels should continue their uptrend on the back of enterprise PC demand and a growing no. of remote workers.
2Q21 preview: OP of KRW708.8bn to exceed market consensus by 33%
— We forecast 2Q21E OP at KRW708.8bn (+35% QoQ; turn to profit YoY), which is 33% above the market consensus (KRW533.0bn). This would mark LGD’s best quarterly result since 2Q17. For 3Q21, we believe the large-size OLED panel business will turn profitable for the first time in its eight-year history. Coupled with increasing OLED shipments this year, the earnings turnaround should generate additional growth momentum for LGD.
Solid fundamentals support KRW2tn OP even if LCD prices fall
— Even if LCD panel prices fall in 2H21, earnings should remain mostly intact based on the following:
(1) Prices of LCD monitor panels (which account for 60-70% of LCD panel OP) should remain robust in 2H21.
(2) Prices of small-/mid-size LCD panels should decline in 2H21 but account for only 20-30% of LCD OP.
(3) The OLED business should offset any LCD earnings weakness given a turnaround in large-size OLEDs and earnings growth for small-/mid-size OLEDs.
In 2022, prices of TV and PC LCD panels should diverge. As such, we believe LGD will be able to generate OP of KRW2tn (KRW500bn per quarter), even if prices of small-/mid-size LCD panels decline an avg. 20% in 2H21.