[Click eStock] "LG Display, Worst is Over... Investment Rating Upgraded to 'Buy'"

[Asia Economy Reporter Lee Myunghwan] Kiwoom Securities announced on the 6th that it has upgraded its investment opinion on LG Display from 'Neutral' to 'Buy,' citing that the company's stock price is passing its bottom. The target price was maintained at the previous 18,000 KRW.

Kiwoom Securities projected LG Display's consolidated sales for the third quarter of this year to be 6.3 trillion KRW, down 12% year-on-year, with an operating loss turning negative at 555.3 billion KRW. These figures are below both Kiwoom Securities' initial estimates and market expectations. Looking at the sales forecast by business division, TV is expected at 1.9 trillion KRW, IT at 2.7 trillion KRW, and mobile and others at 1.7 trillion KRW.

The reasons for the poor performance include continued inventory adjustments by companies due to weak demand caused by inflation, and delays in shipments of plastic organic light-emitting diode (POLED) panels for some iPhone 14 models. At the same time, the slowdown in global TV demand, including Europe, intensified, and the decline in LCD panel prices exceeded expectations.

Kiwoom Securities forecast LG Display's sales for this year to decrease by 14% year-on-year to 25.7 trillion KRW, with an operating loss turning negative at 1.2 trillion KRW. This figure significantly underperforms initial expectations. The shipment of iPhone 14 POLED panels, originally scheduled for the third quarter, was delayed but is expected to normalize from the fourth quarter, according to Kiwoom Securities. Considering weak demand and LCD sales prices, it is difficult to expect profitability in the fourth quarter as well.

However, Kiwoom Securities diagnosed that LG Display's stock price is passing its bottom. Despite the lack of short-term momentum due to this year's IT demand slowdown and poor performance, the current stock price is at a historical low level with a 12-month forward price-to-book ratio (PBR) of 0.36 times. They also analyzed that expectations for inventory accumulation by companies entering the year-end peak season and stabilization of LCD TV panel sales at the current price level will support the stock price floor.

Kiwoom Securities forecast a reduction in losses in LG Display's LCD business division and a resumption of growth in the OLED business division next year. In particular, they predicted that the OLED business division's sales ratio will reach 50% for the first time. Kim Sowon, a researcher at Kiwoom Securities, said, "The worst period is passing, and performance improvement and revaluation as an OLED company are expected next year," advising, "We recommend increasing exposure with a long-term perspective."