LG Display sees sharp upturn in stock price
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By Kim Yoo-chul
Investors are always looking for stocks in companies that have beaten or will beat market consensus at earnings season, and LG Display will clearly be one such company.
Helped by tightened supply and growing demand for LCD panels with ultra-high definition (UHD) viewing quality, LG Group’s display affiliate is expected to report stronger profits throughout this year, pushing its stock prices higher and further, said leading research firms.
The general outlook for LG remained stable.
The Bank of America revised up its target on LG Display from “neutral” to “buy,” while Nomura Securities upgraded its rating for the company from “reduce” to “neutral.”
Barclays Capital presented an “overweight” position on the display leader, while Deutsche Bank joined the ranks of the leading investment banks by upgrading its rating on the LG affiliate from “hold” to “buy.”
Analysts and investment banks expect LG Display to report more than 450 billion won in operating profit for the second half of this year, which is far better than previous years.
“Our brighter outlook on LG Display is due to its ability to generate much cash from the conventionally strong LCD business. Also, LG Display’s OLED display product portfolio from small to mid-sized ones is getting balanced,” Kim Dong-won at Hyundai Securities said in a report, Thursday.
Shares of LG Display were up 30 percent since June this year on expectations of such impending positive factors.
The company’s management also remained positive.
“We are seeing achievements on the OLED side as well. For large-size OLEDs, there were improvements in yield, productivity and shipments. With higher consumer awareness of OLED TVs and based on the visibility and acceptance we have gained, we started a product lineup with various different customers. As such, it seems that we are entering a virtuous cycle,” LG Display CFO Kim Sang-don told investors in a conference call on the company’s second quarter earnings.
Panel price movement is considered the barometer to gauge the profitability of all display companies, as it is subject to macroeconomic factors as top panel manufacturers increase their output if consumers buy more consumer electronic goods.
“The display industry is now trending toward surprising tightness in the second half of 2016. Supply is expected to tighten still further in 2017,” said IHS, a leading research firm.
“Capacity growth is restricted, as manufacturers adopt new and more complicated processes in some factories, and more importantly close fewer productive facilities.”
The IHS added LG’s efforts to shut down older and less-profitable display fabrication lines are also helping the industry see balance.
Panel prices for medium- and large-sized LCDs, in which LG Display has strengths, remain stable.
Challenging factor?
But LG is asked to expand its presence in the small-sized OLED business segment, which has long been dominated by its chief rival Samsung Display, whose market share in the segment is a stunning 96 percent.
LG Display, which has been focusing on producing large-sized OLED panels for use in televisions, is accelerating its efforts to grow its small-sized OLED business as it plans to invest up to 2 trillion won to build a new such fabrication line at its display complex in Paju.
It also plans to construct a new plastic OLED production line in the country’s southern industrial city of Gumi with 1.36 trillion won, aimed at supplying curvy OLED panels to new Apple iPhones and premium mobile devices by Chinese makers.
“LG Display is looking good. Its stock prices will go further up if Apple’s upcoming new iPhone, which has been for the latter half of this year, sells well above expectations,” said a senior fund manager at a Europe-based investment bank by telephone.
LG Display has been the display supplier for Apple since the late Apple founder Steve Jobs praised LG’s displays as a “retina display,” however, its rival Samsung is ramping up.
Samsung is said to win the first-batch curved OLEDs to be adopted by Apple. LG and Japan Display are ready to steal the limelight by ramping up, said officials.