LG Display to make turnaround in Q2 on rebounding panel price

LG Display Co., South Korea’s leading panel maker, is expected to have fared better than originally feared in the first quarter of 2016, thanks to the improvement in oil prices and a rebound in panel prices on concerns of supply shortage after Taiwanese production was interrupted by an earthquake last month. 

Prospects had been poor early this year due to a fall in large-size display prices, prolonged global economy slowdown, and reduced demand in IT devices in emerging countries struggling under the oil price slump. 

The bottoming out of prices of oil and panels following an earthquake that took toll on rivaling Taiwanese panel makers helped LG Display’s outlook. The slow progress in yield rates from its local rival Samsung Display Co.’s plant in Suzhou in China also aided performance of the world’s largest panel producer. 

“We originally expected the company to incur an operating loss of 235.8 billion won in January-March, but we now see the red number to stop at 91.4 billion won,” said Kwon Sung-ryul, an analyst at Dongbu Securities Co. 

Analysts now believe LG Display could return to profit from the second quarter. 

Shinhan Investment Corp. forecast that LG Display would post an operating loss of 85 billion won in the first three months of the year and make 49 billion won in operating income in the subsequent three months. 

Prices of panels bigger than 50 inches have stabilized from this month and those of smaller sizes also are expected to pick up. The 32-inch panel price has already rebounded. 

“As the prices of large-size panels drops, demand is shifting to bigger displays, “ said Lee Sang-un, an analyst at Yuanta Securities Korea Co. 

The 55-inch LCD TV panel price plunged to $400 this year from $700 last year, but cheaper prices would boost shipments to 70 million units from 40 million and help the company generate profit from the second quarter, he said. 

Moreover, the display and TV makers are in for a boon from the 2016 Summer Olympics in Rio de Janeiro, Brazil, that kicks off in August. The average selling price of TV panels is expected to gain about 7 percent on year in the third quarter on new TV releases. The company’s cost-cutting efforts also would pay off. Marketing and management cost this year is expected to be scaled down by 6 percent from last year to 2.54 trillion won this year. 

Bright prospects in the automotive display also bolster the company’s outlook. LG Display supplied about 11.5 million panels for automobiles last year to customers including Continental AG, Panasonic Automotive Systems, Hyundai Mobis and LG Electronics. It already has been supplying LCD panels and could mass-produce plastic organic light-emitting diode (POLED) panels in the first half of next year. German luxury automaker Mercedes-Benz is expected to release 2018 version of the E-Class sedans embedded with LG Display’s POLED panels.

By Kim Je-lim