[Click eStock] "LG Display, Negative Impact from Volume Decline Greater than Panel Price Increase"

[Asia Economy Reporter Eunmo Koo] DB Financial Investment analyzed that although LG Display's LCD TV panel prices in February rose sharply, the negative impact from volume decline is greater than the price increase in the short term.

According to market research firm IHS, LCD TV panel prices surged significantly in February. The price of 32-inch open cell panels increased by 12.5% compared to January, and 55-inch products rose by 8.8%, marking the highest monthly increase in the past three years.

On the 25th, DB Financial Investment analyst Sungryul Kwon stated in a report that the negative impact from volume decline outweighs the price increase in the short term. Kwon explained, "This panel price increase occurred because panel manufacturers' losses have fallen to the EBITDA breakeven point, prompting active price hikes. Additionally, TV manufacturers' excess inventory was cleared by the end of last year, increasing the need for inventory buildup. Furthermore, China, which accounts for 55% of global production, was severely affected by COVID-19, leading to strong price increases."

Due to supply-demand imbalance, panel price increases are expected to continue for the time being. Kwon forecasted, "However, from LG Display's perspective, production disruptions occurred at Chinese factories, the normal operation timing of large OLED lines has been delayed, and mobile product volumes have significantly decreased, so operating losses in Q1 this year are expected to be larger than anticipated." The current market consensus for LG Display's Q1 operating loss is 350 billion KRW, but losses beyond this should be considered.

It is evaluated that the challenges LG Display needs to resolve are gradually being addressed. Kwon said, "By reducing LCD TV panel production capacity by about 30% this year, LCD TV losses will be cut by one-third. Although the start of operations is somewhat delayed, once the Guangzhou large OLED line is operational, an operating profit improvement effect of 300 billion KRW can be expected from large OLED."