"LGD to return to profitability in Q3; second-half operating profit to rise sharply from first half" Daishin Securities

[The Financial News] LG Display is expected to return to profit in the third quarter of this year from the previous quarter, helped by increased OLED panel supplies. However, earnings are expected to fall short of market expectations amid a decline in the won-dollar exchange rate and slowing demand for information technology (IT) devices.
According to Daishin Securities on the 20th, LG Display's third-quarter revenue is estimated at 6.56 trillion won and operating profit at 245.1 billion won. Revenue would rise 16.9% from the previous quarter but fall 5.7% from the same period a year earlier. Operating profit is expected to turn from a loss in the previous quarter to a profit, but to decline 43.1% year on year.
The operating profit estimate is below both the 325 billion won forecast issued last month and the market consensus of 300.3 billion won. The decline in the exchange rate and weaker demand for major IT products are cited as factors behind the lower earnings outlook.
The average won-dollar exchange rate in the third quarter fell 5.6% from the previous quarter, while the rate at the end of September was also down 12.5% from the end of June, weighing on profitability. In addition, rising prices for memory semiconductors and key raw materials are leading to higher prices for finished goods, constraining demand for TVs, smartphones, PCs and other products. This is seen as slowing panel sales and putting downward pressure on supply prices.
Increased supplies of mobile OLED panels to major North American customers and an expanded market share are positives. The rising share of premium models is also expected to continue improving the sales mix toward higher-value-added products.
Second-half operating profit is projected to rise sharply to 501.3 billion won from 39 billion won in the first half.
Analyst Park Kang-ho said, "Second-half operating profit will be down 16.9% year on year, but profitability fundamentals are improving as OLED accounts for a larger share of revenue and workforce efficiencies ease the burden of fixed costs." He estimated that "annual operating profit will grow to 540.3 billion won this year and 741.4 billion won next year, following a return to profit last year with operating profit of 517 billion won."
[email protected] Kim Hak-jae Reporter