[Into the Stocks] LG Display Targeted by Short Selling, Can It Defend with Earnings?

[Asia Economy Reporter Minji Lee] Concerns are emerging that LG Display may be hampered by short selling. The stock price, which had shown an upward trend amid strong performance expectations due to the booming LCD and OLED (organic light-emitting diode) markets, has shown sluggishness since the resumption of short selling. However, experts believe that since LG Display has been undervalued for a long time and its performance is solid, the impact of short selling is unlikely to persist.

◆ LGD becomes a target for short selling = On the 6th, LG Display's stock price fell about 1.4% since the beginning of this month. It decreased by 13.2% compared to this year's peak (April 26). Reflecting expectations that the LCD boom and profitability in the OLED sector would improve, the stock price surged about 48% from 18,550 won at the beginning of the year to 27,600 won. Since then, concerns over short selling have grown, and the stock price has shown a slight downward trend.

According to disclosures by the Korea Exchange, more than 25% of the total trading volume was short selling for two consecutive days from the 3rd to the 4th after short selling resumed. On the 3rd, out of the total trading volume of 169.9 billion won, 49 billion won (28%) was short selling, and on the 4th, out of 104.3 billion won, 26.5 billion won (25%) was short selling. As of the 4th, LG Display ranked among the top 15 KOSPI stocks in short selling volume. The ranking included Samsung Card (56%), Ottogi (43%), Hyundai Marine & Fire Insurance (42%), Hanjin Kal (41%), Hanwha (36%), Dongseo (34%), and GS Retail (33%).

The loan balance quantity and amount have also reached record highs this year. LG Display's loan balance quantity and amount are 42.84 million shares and 1.0261 trillion won, respectively. The loan balance ratio compared to the total listed shares of 357.85 million shares is 11%. In terms of loan transaction amounts, the ranking is Samsung Electronics (15.2043 trillion won), SK Hynix (6.9564 trillion won), Celltrion (2.9813 trillion won), and LG Display (1.0261 trillion won).

Loan transactions refer to borrowers paying certain fees and collateral to institutions to borrow stocks and later returning the same stocks to the lenders. Although not all loan balances are used for short selling, an increase in loan balances generally means an increase in the volume available for short selling, which raises the possibility of stock prices falling due to concentrated short selling attacks in the future.

◆ Experts say “No significant impact from short selling” = Although the stock price has slightly declined due to short selling, securities firms advise using this as a buying opportunity. They also explain that despite the significant increase in short selling transactions, the impact on the stock price is not as large as feared.

Dongwon Kim, a researcher at KB Securities, said, “For the influence of short selling to continuously lead to a stock price decline, the earnings momentum must be weakening while the valuation is overvalued. LG Display has a price-to-book ratio (PBR) of 0.68, indicating undervaluation, so the possibility of sustained short selling is limited, and the short selling issue is merely short-term noise from a supply-demand perspective.”

Expectations of continued earnings growth also reduce concerns about short selling. The rising prices of LCD panels and increased shipments of OLED TV panels are raising expectations for strong performance. According to financial information provider FnGuide, LG Display is expected to record sales of 6.8 trillion won and operating profit of 419.2 billion won in the second quarter. Sales are expected to grow by 28%, and operating profit is expected to turn positive. Although sales of OLED mobile panels to North American customers will decline due to the expiration of new product effects, the increase in OLED TV panel shipments is expected to be greater.

Hyunsoo Kim, a researcher at Hana Financial Investment, said, “With the rise in panel prices in the LCD sector, high profitability is likely to be maintained, and a turnaround in the OLED sector is expected in the second half of the year. The OLED business had been valued lower than Taiwanese LCD competitors due to losses, but this trend will also be resolved.” LG Display’s annual sales are expected to grow 20% year-on-year to 29.752 trillion won, with operating profit turning positive at 1.9943 trillion won.

◆ Securities firms sharply raise target prices = Securities firms have unanimously raised their target prices for LG Display. The highest target price offered was 36,000 won, with most suggesting prices around 32,000 to 35,000 won. Jeong Wonseok, a researcher at Hi Investment & Securities who proposed the highest price, emphasized, “The OLED TV segment, estimated to account for more than 70% of total TV sales, will turn profitable next year due to customer diversification. The company’s long-standing efforts to shift its large panel business strategy from LCD to OLED will be reappraised.”

However, some opinions advise caution in investing. NH Investment & Securities, the only firm to issue a neutral investment opinion, set LG Display’s target price at 25,000 won. They expect the LCD business to face declining performance in the second half due to the strengthening market dominance of Chinese companies and a high-to-low price trend for panels.

The small- and medium-sized OLED business is expected to face intensified competition as Chinese companies begin supplying panels to global smartphone manufacturers. Gojungwoo, a researcher at NH Investment & Securities, explained, “The strengthening of mini LED product strategies by TV manufacturers will negatively affect the operating environment for large OLEDs, making it difficult to expect continuous profit improvement.”

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