Kiwoom Securities projected on October 26 that LG Display will continue to face profitability challenges due to currency declines and rising semiconductor prices. However, considering the potential for increased orders from major clients and the possibility of improved performance next year, the firm maintained its 'buy' rating and target price of 11,000 won.
Research analyst Kwon Min-kyu noted, "LG Display's third-quarter revenue was 6.277 trillion won, and operating profit was 250.6 billion won, representing declines of 10% and 42%, respectively, compared to the same period last year. The operating profit slightly fell short of the market consensus of 259.1 billion won."
The primary reasons for the poor performance were identified as currency declines and 'chipflation.' Although shipments of large and mobile organic light-emitting diodes (OLED) remained robust, profit margins were negatively impacted by the sharp drop in currency value and rising costs of semiconductors.
By business segment, large OLEDs showed healthy shipment trends driven by demand for monitors and premium TVs. Smartphone panel shipments also saw a slight increase compared to the previous year, but profit margins are estimated to have declined due to rising semiconductor and memory prices. In contrast, the IT liquid crystal display (LCD) and OLED segments struggled due to decreased demand for high-priced products.
The unfavorable external environment is expected to persist into the fourth quarter. Demand for finished products is anticipated to weaken due to rising semiconductor prices, currency declines, and pressure to lower panel prices, which are expected to burden profitability. Consequently, Kiwoom Securities has revised its fourth-quarter revenue and operating profit forecasts downward by 3% and 15%, respectively.
However, next year is expected to see an increase in market share among clients and a rise in large OLED shipments focused on monitors. Kiwoom Securities estimates that LG Display's operating profit will reach 955.1 billion won next year, a 61% increase from this year's projected 593.5 billion won.
The attractiveness of LG Display's stock, which has fallen in value, is viewed positively. As of the close on October 23, LG Display's stock price was 7,150 won, with a price-to-book ratio (PBR) of approximately 0.57 times the expected book value per share (BPS) for this year. This is below the five-year average of 0.71 times.
Kwon stated, "The stock has adjusted by 57% from its peak, and concerns about weak demand and uncertainty have largely been reflected in the price. While it is a time of endurance, conditions are being established for a rebound should external circumstances change."
* This article has been translated by AI.
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