[Click eStock] "LG Display enters panel price decline phase... Target price down 19%"

Yuanta Securities Report

[Asia Economy Reporter Minji Lee] Yuanta Securities maintained a buy rating on LG Display but lowered the target price by 19% to 25,000 KRW, citing the entry of LCD panel prices into a declining phase.

In the third quarter, LG Display recorded sales of 7.2 trillion KRW and an operating profit of 528.9 billion KRW. Operating profit decreased by 24.6% compared to the previous quarter and fell short of market expectations by 5.6%. Although the price per unit area rose 6.8% due to mix improvement, shipment area declined by 5.6%. The decline in performance is attributed to the drop in LCD TV panel prices. The average panel price in the third quarter fell by about 19%. Additionally, delayed sales of IT products and POLED due to parts supply disruptions, as well as increased fixed costs from the Guangzhou WOLED plant operation, also contributed to the earnings decline.

The fourth-quarter performance is expected to depend on the resolution of parts supply issues. Kim Kwangjin, a researcher at Yuanta Securities, said, “As the decline in LCD TV panel prices continues, the profit contribution from the LCD TV segment is expected to further decrease,” adding, “The key factor will be whether the deferred sales of IT products and POLED sales to U.S. clients are reflected.”

If the deferred sales are reflected normally, the fourth-quarter estimated sales are expected to increase by 16.5% from the previous quarter to 8.4 trillion KRW. Operating profit is projected to grow by 31.9% to 697.8 billion KRW, indicating possible earnings growth. With a sharp increase in POLED supply, the profit contribution from the OLED segment is estimated to rise to about 34%. However, if parts supply disruptions persist and revenue recognition is further delayed, a downward revision of estimates will be inevitable.

Yuanta Securities presented operating profit estimates of 2.4507 trillion KRW for this year and 1.7703 trillion KRW for next year, lowering previous estimates by 5.7% and 24.9%, respectively. Researcher Kim Kwangjin explained, “While the possibility of further decline is limited, new momentum such as stabilization of profitability in the OLED segment and expansion of client base will be necessary for structural stock price growth.”