[Click eStock] LG Display Enters OLED Profit Cycle... Target Price Upward Revision

[Asia Economy Reporter Lee Seon-ae] KB Securities announced on the 18th that it has raised the target price of LG Display to 37,000 KRW, an increase of 12.1%, while maintaining a buy rating.

This is because the OLED business is expected to enter a profitable cycle for the first time in 8 years, leading to upward revisions of controlling shareholder net profit for 2021 and 2022 by +19.1% and +18.7%, respectively, compared to previous estimates. In particular, the large OLED panels, which started operations in 2013, are expected to achieve a meaningful turnaround to profitability for the first time in 8 years from the second half of 2021, driven by double-digit ASP (Average Selling Price) increases and volume growth. Additionally, the small and medium OLED panel business, which began operations in 2017, is estimated to return to profitability in the second half of this year due to a surge in orders for Apple iPhone 13 panels, marking a turnaround after 4 years.

Operating profit for the second quarter of 2021 is expected to increase by +35.5% quarter-on-quarter (turning profitable year-on-year) to 708.8 billion KRW, surpassing the consensus operating profit estimate (468 billion KRW) by +51.5%, signaling an earnings surprise and the highest performance in 4 years since the second quarter of 2017. Especially, third quarter operating profit is estimated at 804.5 billion KRW, with both large and small-medium OLED segments turning profitable simultaneously, exceeding the consensus operating profit (611 billion KRW) by +31.7%, indicating a continued earnings growth trend. Therefore, LG Display’s operating profit for 2021 is highly likely to approach 3 trillion KRW.

LG Display’s operating profit in 2021 is expected to surpass the previous record high (2.46 trillion KRW in 2017), achieving the highest operating profit in the company’s history (2.61 trillion KRW). Nevertheless, the stock price has shown weakness due to concerns over continued OLED losses in the second half and expectations of an LCD peak in the second quarter, resulting in an increase in short selling volume (20 million shares accumulated since May 3, accounting for 5.6% of issued shares).

Researcher Kim Dong-won of KB Securities stated, "From the second half of this year, the OLED business is expected to enter a profitable cycle for the first time in 8 years, and LCD panel prices are expected to continue rising due to increased demand for commercial PCs and large TV panels, so concerns are likely to be unfounded. In particular, LG Display is expected to expand new large OLED customers among global TV set manufacturers, which bodes well for flexible profit growth in the OLED business going forward."