Kiwoom Securities reported that on September 15, LG Display faces increased short-term earnings pressure due to unfavorable external factors such as falling exchange rates and 'chipflation.' However, the firm anticipates that robust OLED shipments will serve as a foundation for a future rebound in stock prices. The company has resumed coverage with a 'buy' rating and a target price of 11,000 won.
Analyst Kwon Min-kyu stated, "LG Display's revenue for the third quarter of this year is expected to be 6.6745 trillion won, and operating profit is projected to be 257.2 billion won, representing declines of 4% and 40%, respectively, compared to the same period last year. Operating profit is expected to fall short of the market consensus of 429.1 billion won."
The main reasons for the poor performance include a sharp drop in exchange rates, cost pressures from chipflation, and a decrease in demand for certain products due to rising set prices. As of September 14, the average quarterly exchange rate of the won against the dollar has fallen by 5% compared to the previous quarter and by 14% from its peak. The increase in semiconductor component prices has led set manufacturers to pass on cost burdens to consumer prices, resulting in anticipated declines in demand for IT and wearable products.
Nonetheless, OLED shipments are expected to remain strong. Kiwoom Securities forecasts that mobile OLED shipments in the second half of the year will increase by 15% compared to the previous year. The firm expects to benefit from aggressive shipping policies by North American mobile clients, while delays in the market entry of Chinese panel manufacturers will help maintain LG Display's position as a key supplier.
Sales of large OLEDs are also expected to rise, with shipments projected to increase by 16% year-on-year, driven by strong sales and demand for OLED monitors. The IT LCD business is reportedly improving profitability through a better mix of high-value products.
Kwon noted, "The current stock price has adjusted by 47% from its peak, placing it at a low of 0.7 times the expected book value per share (BPS) for this year. The trigger for a stock price rebound will be strong sales from North American mobile clients and a trend of easing chipflation." He added, "Despite the unfavorable environment, maintaining strong shipment volumes will provide a basis for a rebound when market conditions improve."
* This article has been translated by AI.
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