"LG Display Faces Profitability Pressure from Falling Exchange Rate; Target Price Cut"

[Financial News] Daishin Securities expects LG Display to face profitability pressure from the decline in the won–U.S. dollar exchange rate. It maintained its “buy” rating but lowered its target price from 17,000 won to 12,000 won. However, it said profitability could improve over the medium to long term.
Daishin Securities researcher Park Kang-ho said on the 17th, "LG Display’s third-quarter operating profit is estimated at 325.3 billion won. Although the company is expected to swing to an operating profit from the previous quarter, it will likely fall short of the market consensus of 404.5 billion won," adding, "Revenue is expected to rise 18.8% from the previous quarter to 6.67 trillion won."
The projected weakness in operating profit is attributed to the decline in the won–U.S. dollar exchange rate, along with rising semiconductor and key raw-material prices. Park explained, "As of the 15th, the average won–U.S. dollar exchange rate had fallen 4.6% from the second quarter, which will weigh on profitability," adding, "In addition, selling prices for IT devices have risen because of higher semiconductor and key raw-material prices."
However, the company’s growing market share in North America and the increasing proportion of organic light-emitting diode (OLED) revenue are viewed positively.
Park observed, "Over the medium to long term, LG Display’s market share among its strategic customers in North America is increasing. Depreciation expenses for OLED panels are declining, and the expansion of OLED revenue as a share of total sales supports the outlook for improved profitability," adding, "In the first half of next year, the impact of the off-season is expected to be minimized as in the past, easing the burden of fixed costs and increasing the likelihood of improved profitability."

[email protected] Lim Sang-hyeok Reporter