[Click eStock] LG Display Reports Operating Loss in Q1... Business Structure Reorganization Needed

by Lee Seonae

Published 03 Apr.2023 07:59(KST)

Updated 03 Apr.2023 08:28(KST)

Ebest Investment & Securities maintained a 'Neutral' investment rating and a target price of 18,000 KRW for LG Display on the 3rd. This decision is based on the expectation that the operating loss in the first quarter will fall short of market estimates, coupled with ongoing concerns about long-term growth potential.

Nam Dae-jong, a researcher at Ebest Investment & Securities, analyzed, "LG Display's first-quarter sales this year are expected to decrease by 33% from the previous quarter to 4.9 trillion KRW, with an operating loss of 1.2 trillion KRW, continuing the deficit and falling short of the market estimate of 900 billion KRW." He added, "Despite the recent turnaround in LCD TV panel prices, the sales in the LCD TV segment sharply declined due to the impact of business restructuring, and overall demand weakness caused a significant drop in sales."

To overcome the cash flow crisis, LG Display recently borrowed 1 trillion KRW from LG Electronics and plans to raise more than 2 trillion KRW additionally through borrowings and advance payments from financial institutions and customers. Interest expenses are also expected to expand to 700 billion KRW, so it is judged necessary to quickly secure cost competitiveness and focus on increasing sales. A positive point is that inventory assets decreased by 1.6 trillion KRW from the previous quarter to 2.9 trillion KRW in the fourth quarter of last year, and are expected to decrease further in the first quarter of this year, with the proportion of material purchases relative to sales also expected to decline.

Researcher Nam stated, "Although cash flow concerns have eased, the PBR (price-to-book ratio) based on this year's expected performance is 0.8 times due to the recent stock price increase, which is at the upper end of the average range, so the valuation merit is not high." He added, "Further restructuring and strengthening competitiveness in the OLED TV segment are necessary in the future, and planning and strong execution for this must accompany these efforts."