Shares of LG Display nose-diving on weak earnings

By Nam Hyun-woo

LG Display is struggling to find a point for a rebound, with the price of its stock continuing to drop amid a bleak outlook for the first half of this year.

The company stock ended at 25,700 won on Tuesday, down 1.72 percent from the previous day, extending its losing streak to seven trading sessions. During Tuesday's session, it plunged to 25,400 won, which was its lowest in 52 weeks.

LG Display has been on a serious downturn this year, made worse by institutional and foreign investors' offloading. In every trading day in March, institutional investors net sold LG Display, while the stock price ended higher or stayed flat in only four sessions this month.

With the freefall, panicked individual investors are in dismay, leaving comments questioning “what's wrong with the company” or blaming short sellers. Even analysts at brokerages cast a dim outlook for LG Display, saying it is “approaching its bottom.”

LG Display's dive came after its earnings in the fourth quarter last year were revealed. The world's largest supplier of liquid crystal displays (LCDs) posted 7.13 trillion won ($6.65 billion) in sales, up 2 percent year-on-year, but saw its operating profit drop to 44.5 billion won, down 92 percent during the same period.

This was attributable to the worldwide panel price decline. LG Display's overall profit structure is in sync with LCD panel prices. LCD panels, which are used in all electronic devices from smartphones to televisions, enjoyed brisk sales for a while and allowed LG Display to rake in huge profits.

Since the latter half of last year, however, oversupply has been dragging down the prices.

The prices for LCD TV panels dropped an average 4.1 percent monthly during the fourth quarter of last year, and this trend is continuing in the first quarter of this year, declining on average 3 percent monthly.

The question is the outlook for this quarter. In the latter half of this month, the price for a 55-inch LCD TV panel remained relatively stable, down 0.54 percent from two weeks earlier, but the price for 65-inch panels showed a 4.44 percent decline during the same period, more than the 2.48 percent decrease in the first two weeks of this month.

“The sales for 65-inch high-end panels account for a lot in LG Display's overall sales,” Hana Financial Investment analyst Kim Hyun-soo said. “This will likely deal a blow to LG Display.”

Kim assumed that LG Display's sales will fall to 6 trillion won in the first quarter, down 16 percent from the previous quarter and operating profit will contract by 50 percent from three months earlier to 22 billion won.

He said LG Display's profitability has weakened from the previous quarter as the LCD panel prices continue to decline, along with the firm suffering losses in its mobile organic light-emitting diode business.

Other analysts also said the uncertainties for LG Display are expected to be resolved after April at the earliest.

“Given the panel inventory of the three global TV makers' (Samsung Electronics, LG Electronics and Sony) is expected to reach a normal level from April, the price decline of LCD panels is likely to slow down,” KB Securities analyst Kim Dong-won said.