[Click eStock] LG Display, Stock Rebound Possible with Supply-Demand Improvement through Chinese LCD Panel Production Cuts

[Asia Economy Reporter Lee Seon-ae] While the profitability improvement of LG Display's OLED division continues to be positive, the stock price is still following the downturn in the LCD market. It is analyzed that the stock price could rebound if supply and demand improve through production cuts by Chinese LCD panel manufacturers.

On the 30th, Kim Sowon, a researcher at Kiwoom Securities, said about LG Display, "The company's stock price continues to weaken as it is further pressured by the 'steeper-than-expected decline in LCD TV panel prices.'" He added, "As LCD TV panel prices have recently dropped sharply, the possibility of production cuts by some LCD panel manufacturers has emerged, and with the added factor of power shortages in China, plans to reduce production at Chinese LCD factories have also been mentioned. If this situation materializes, LCD supply and demand could improve to some extent." He continued, "Even considering the weakness in LCD TV panel prices, the current stock price is at a 12-month forward price-to-book ratio (PBR) of 0.5 times, which is considered an undemanding level," and maintained a "buy" investment rating with a target price of 28,000 KRW.

The consolidated results for the third quarter are expected to show sales of 7.5 trillion KRW (+8% QoQ, +11% YoY) and operating profit of 691.4 billion KRW (-1% QoQ, +321% YoY), which is expected to fall short of both the company's forecast and market consensus. This is due to weaker-than-expected demand for LCD TV panels and IT panel shipments falling below forecasts because of component supply shortages.

Unlike the weak demand for LCD TV panels, demand for OLED TV panels remains solid, with shipments of approximately 2 million units in the third quarter, showing signs of profitability improvement. Additionally, POLED panels are expected to contribute positively as the effect of new product launches by North American customers is reflected, leading the OLED division to record generally favorable results. Researcher Kim emphasized, "The continued profitability improvement of the OLED division and the still robust demand for IT panels are positive factors."