Likely to Supply 7mn Panels to SEC Next Year
The author is an analyst of KB Securities. He can be reached at jeff.kim@kbfg.com. -- Ed.
Revise up TP by 12% to KRW28,000; Reiterate BUY
We revise up our TP by 12% from KRW25,000 to KRW28,000 (based on 0.69x 2022E P/B) and reiterate BUY for LG Display (LGD) as we reflect upward revisions of 8.3% and 16.4% to 2022E and 2023E NP (attributable to controlling interests), respectively, given the following:
(1) Shares in LGD look set for a re-rating on improved earnings visibility as the company is reportedly set to supply LCD and OLED panels (worth KRW3tn annually) to Samsung Electronics (SEC) beginning next year (Chosun Ilbo, Dec 21).
(2) LGD’s OLED panels are likely to be used for Apple’s next-generation products (i.e., metaverse XR headsets, Apple Car); Apple accounts for around 41% (KRW12tn) of LGD’s overall revenue (based on 2021E figures).
LGD likely to supply 7mn panels (20% of total capacity) to Samsung Electronics next year
LGD is expected to supply large-sized LCD/OLED panels for a total of 7mn panels or 20% of its overall capacity (value of around KRW3tn or 11% of LGD’s 2022E revenue) to SEC next year. Given SEC’s limited QD-OLED panel capacity, an LGD-SEC partnership for large-sized OLED panels is likely to continue for more than three years. As of December 2021, SEC is expected to have already completed product development and planning for OLED TVs for which LGD’s WOLED panels are likely to be employed, indicating that the rollout (in North America and Europe) is likely to be in 1H22 (nine years since SEC’s initial entry into the OLED market back in 2013).
Value of new businesses not yet priced in; Shares have ample upside
We see shares in LGD as having room for additional upside, as share price has yet to reflect the value of new business opportunities with SEC and Apple: (1) We believe the stock, trading at 0.55x 2022E P/B (vs. 10-year historical average of 0.6x), is undervalued. (2) We have not factored in the likely deal with SEC or the value of new business opportunities with Apple (i.e., metaverse XR devices, Apple Car) in our TP of KRW28,000 (based on 0.69x 2022E P/B). Since deals with SEC and Apple are likely to take the form of long-term (more than three years) supply contracts, the establishment of strategic partnerships with these companies is anticipated for LGD.