LG Display Turns Profitable After 2 Years... "Q4 Looks Good Too"

Korea Investment & Securities Raises Target Price from 19,000 KRW to 22,000 KRW

[Asia Economy Reporter Geum Bo-ryeong] LG Display has succeeded in turning a profit after two years, raising expectations that this performance improvement will continue for the time being.

According to LG Display on the 26th, the company's operating profit for the third quarter of this year turned positive at 164.36 billion KRW. Sales recorded 6.737646 trillion KRW, a 16% increase compared to the previous year. This is the first time LG Display has posted a profit in seven quarters. The results also significantly exceeded market expectations, showing an 'earnings surprise.'

The novel coronavirus infection (COVID-19) had a significant impact on LG Display's performance improvement. As the non-face-to-face (untact) atmosphere such as remote work and online classes continued worldwide, demand for relatively profitable IT product groups such as monitors and laptops was strong. In addition, demand for TV replacement also increased.

Jeong Won-seok, a researcher at Hi Investment & Securities, explained, "In the third quarter, the average price of liquid crystal display (LCD) TV panels rose by about 17%, the highest ever, turning the LCD TV panel sector, which had recorded large losses until the previous quarter, into profit." LG Display initially planned to stop LCD panel production within this year but is reportedly extending production.

Organic light-emitting diode (OLED) panel supply for North American smartphone customers has begun. LG Display is supplying plastic OLED (POLED) displays for the iPhone 12. As panel shipments have become full-scale, the increase in operating rate and alleviation of fixed cost burdens have clearly improved profitability.

It is analyzed that stable profits will be generated in the fourth quarter as well. Hanwha Investment & Securities estimated LG Display's fourth-quarter performance at 7.1 trillion KRW in sales and 184.8 billion KRW in operating profit. This is because the POLED supply volume is maximized during this period, and the price of LCD panels for TVs is expected to rise until next month. Positive factors remain, such as an increase in large OLED volume.

Korea Investment & Securities raised LG Display's target stock price from 19,000 KRW to 22,000 KRW. Kim Jeong-hwan, a researcher at Korea Investment & Securities, said, "Now is a turning point where profit normalization becomes clear," adding, "It is expected to receive the valuation of 2017, which was a turning point for profit decline in the past."

The remaining concern is the exchange rate variable. Since the average won-dollar exchange rate is expected to fall by about 4% compared to the previous quarter, the operating profit margin is likely to be lower than expected. As of this day, the won-dollar exchange rate entered the 1,120 KRW range.

This content was produced with the assistance of AI translation services.