[Click e Stocks] "LG Display, Q4 Earnings Improvement Expected"

[Asia Economy Reporter Song Hwajeong] DB Financial Investment maintained its 'Buy' rating and a target price of 30,000 KRW for LG Display on the 9th, stating that although the company's third-quarter performance fell short of expectations, it is expected to improve in the fourth quarter.

Kwon Seongryul, a researcher at DB Financial Investment, said, "LG Display's operating profit in the third quarter was 529 billion KRW, which was below expectations, but considering that the main reason was the deferred sales due to parts supply shortages, operating profit is expected to improve to 668.7 billion KRW in the fourth quarter." Despite the continued decline in TV LCD panel prices, the increase in large OLED shipments, profitability improvement, the turnaround to profitability of plastic OLED (POLED), and the realization of deferred sales of IT products are expected to increase operating profit by more than 20% quarter-on-quarter in the fourth quarter.

The contribution of OLED to earnings is expected to grow significantly. Over the past three years, LG Display has made considerable efforts to reduce earnings volatility caused by TV LCDs, increase the added value of IT LCDs, and boost the earnings contribution of large and small OLEDs. Researcher Kwon said, "The sales structure, which had a 25% share of TV LCD and 17% OLED in 2019, will change next year with TV LCD decreasing to 14% and OLED increasing to 40%." He added, "While OLED previously recorded large-scale losses that reduced profits, it has entered a profitability trend since the second half of this year, and with improved profit margins next year, its contribution to operating profit will also increase." TV LCD will focus on the Guangzhou plant as the main production site and concentrate on ultra-large TVs in Korea, which are less affected by market conditions, minimizing volatility.

LG Display's stock price has risen 12% over the past month, supported by institutional buying. Researcher Kwon said, "Investors seem to highly appreciate the structural change from focusing solely on TV LCD prices to a stable earnings structure centered on OLED and IT LCD." He added, "In this context, the 2022 price-to-earnings ratio (PER) of 7.6 times and price-to-book ratio (PBR) of 0.5 times are eye-catching valuation indicators."