LG Display Records Large 2Q Loss but... Turnaround Expected in Second Half

[Asia Economy Reporter Song Hwajeong] LG Display recorded a large-scale loss in the second quarter of this year, but there is a forecast that a turnaround will be possible in the third quarter.

According to the Financial Supervisory Service's electronic disclosure system on the 25th, LG Display posted sales of 5.307 trillion KRW and an operating loss of 517 billion KRW in the second quarter. Researcher Lee Sunhak of Hanwha Investment & Securities analyzed, "The operating loss was larger than market expectations," adding, "Due to the ongoing impact of the global novel coronavirus (COVID-19), both TV retail stores and production plants faced shutdown situations, causing a sharp decline in TV panel shipments." The relatively better-performing OLED panels also decreased by about 30% compared to the previous quarter, which was negative.

Sales exceeded market expectations due to the impact of online classes and the spread of remote work caused by COVID-19. Researcher Jang Junghoon of Samsung Securities explained, "The reason sales exceeded expectations was that the shipment area-weighted average price was $654, which rose 15% from the previous quarter and 43% year-on-year," adding, "This is the highest quarterly figure since 2014, driven by increased sales of high-value-added monitor and tablet panels due to the expansion of online classes and remote work after the outbreak of COVID-19." In the second quarter, the proportion of laptop and tablet panels was 29%, and including monitors, it reached 52%.

There is a forecast that a turnaround will be possible in the second half of the year. Researcher Lee said, "From July, the Guangzhou OLED plant began full-scale operation, approximately 15 million P-OLED panels will be supplied to North American customers, and the supply of TV LCD panels, whose distribution inventory was depleted during the first half, will be actively carried out," adding, "Accordingly, the shipment area in the third quarter is expected to increase by 23% compared to the previous quarter, and the average selling price (ASP) is expected to rise by 6%." He added, "Due to an increase in depreciation expenses by more than 200 billion KRW, the operating profit turnaround is expected in the fourth quarter."

There is also a forecast that a profit turnaround could be possible as early as the third quarter. Researcher So Hyuncheol of Shinhan Financial Investment said, "Operating profit in the third quarter is expected to be 42 billion KRW, marking a turnaround to profit after seven quarters, and operating profit in the fourth quarter is expected to be 261 billion KRW, indicating the company will emerge from the crisis," adding, "Due to the surge in demand for large TVs centered in North America since early June, LCD TV panel prices have rebounded, and the price strength is expected to continue until the end of the year. The LOED business, which had been a burden for LG Display, is normalizing, so a stock price rally is anticipated."