For LG Display, hope over worries

Shares of LG Display, the world`s No. 2 maker of liquid crystal display panels, are bouncing back as a "soft landing" is expected for the industry.

Although panel prices are expected to fall in the fourth of this year and first quarter of next year because of low seasonal demand, the declines are not expected to be as severe as feared, analysts said.

LG Display, along with its arch rival Samsung Electronics, is also better placed to weather the cycle, thanks to its cost competitiveness and stable customer base.

Since early Sept. LG Display shares dropped on worries about panel price falls, and oversupply as resurgent panel makers scrambled to boost output. But as the price drop was as not as drastic as expected, LG shares started to rebound this month.

"Demand is stronger than expected," an LG Display spokesperson said.

"Sharp falls are unlikely (in the coming quarters)," he said.

LG Display chief financial officer James Jeong also said in October that a fourth-quarter slowdown will be more moderate than in previous years because of the tight inventory levels of TV makers and possible output cuts by panel makers.



Echoing Jeong`s comments, Kim Sung-in, an analyst at Kiwoom Securities said "LG Display is expected to make a soft landing in the fourth quarter of 2009 and the first quarter of 2010."

He forecast that LG Display will post a record-high profit in 2010, saying its profit will improve after bottoming out in the first quarter.

The LCD industry, which was hit by the global recession, has been recovering quickly, boosted by reductions in production and utilization rates, combined with better-than-expected panel demand from China`s television market. But panel prices turned lower at the end of September.

"...this down cycle might be the shortest in history (just one quarter), and that our prediction of good prospects for panel makers in 2010 will be realized," DisplaySearch said in a blog posting last week.

"In 2010, capacity growth will be small, but demand will be strong due to economic recovery and China. This will encourage many panel buyers to follow a strategy of pre-buying to establish panel inventory from Q1 2010," it said.

LG Display this year made aggressive investments despite the global recession, which helped the panel supplier cope with better-than-expected demand, especially from China, and increase its market share. The company invested 3.1 trillion won to build its eighth-generation LCD production plant in Paju, Gyeonggi Province, and another 1.3 trillion won to expand its 6th-generation line in Gumi, North Gyeongsang Province. LG Display also plans to spend about 3.27 trillion won to expand its eight-generation plant in the latter half of next year.

LG Display enjoyed the biggest rise in market share among major LCD panel manufacturers in the third quarter. It`s shares jumped to 24.2 percent in the third quarter, from 20.2 percent a year ago. Samsung`s shares increased from 26.4 percent to 27.3 percent during the period. LG competes closely with its cross-town rival Samsung for the top position in the LCD panel market.

Driven by rises in both panel prices and shipments, LG Display, which had posted two consecutive losses in the fourth quarter and first quarter of this year, turned around in the second quarter, and posted a record-high profit in the third quarter.

LG Display`s operating profit reached 904 billion won in the July to September period, a 315 percent jump from a quarter ago and 256 percent surge from a year ago.

(hjjin@heraldm.com)



By Jin Hyun-joo