OLED Key to Metaverse’s Virtual Reality   

The author is an analyst of KB Securities. He can be reached at  jeff.kim@kbfg.com. -- Ed.

 

OLED key to metaverse’s virtual reality       

We maintain BUY and our TP of KRW25,000 (0.6x 2022E P/B) on LG Display. The company should gain from (1) its leadership in the OLED panel market (No. 1 in large-size OLED panels; No. 1 in automotive OLED panels; No. 2 in small-/mid-size OLED panels), as the proliferation of metaverse devices (e.g., AR, VR, XR) relies on OLED displays to produce virtual reality, and (2) its large-size OLED business, which is expected to turn a profit in 4Q21 (first time since production launch in 2013), offsetting the earnings decline attributable to falling LCD panel prices. 

Metaverse ETFs to increase their weighting for LG Display       

We see metaverse ETFs increasing their weighting for LG Display (already incl. in TIGER Fn Metaverse ETF) for the following reasons:

(1) Companies closely working with LG Display (e.g., Apple, Microsoft, Facebook, Google) plan to release various metaverse devices in 2022 that are likely to employ OLED panels to produce photo-realistic images.

(2) Thanks to their rapid response times, high definition and lightweight, OLED panels are recognized as the optimal display for flawless image transition during vertical/lateral head movements. 

Entrance of Samsung Electronics into OLED TV market to create opportunities for expanded ecosystem

We believe Samsung Electronics will eventually enter the OLED TV segment, as the declining global TV market is being offset by continually rising demand for premium OLED TVs (2021E +30% YoY). We expect LG Display’s OLED TV panel business to post 4Q21 OP of KRW144.9bn (6.8% OPM), which suggests 2022 OLED TV profit margin guidance (in mid-single digits) should easily be met. Furthermore, the company’s earnings sensitivity to declines in LCD panel price should ease as revenue contribution from its large-size OLED unit should rise (19% in 2021E→24% in 2022E) while revenue proportion from its large-size LCD TV panel unit should fall (16% in 2021E→9% in 2022E). 

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