Market fretting over tumbling panel prices… LG Display shares rallied in June,which we attribute to optimism over the company’s OLED investments—not to hikes inpanel prices and resultant improvements in operating profit. Indeed, shares slid 5% whenthe firm posted an operating profit of over KRW1t for 1Q but then leapt 23% even though2Q results were certain to come in weaker q-q. Shares then started sliding in mid-July onworries of accelerating price declines of large-sized panels. Few expect LCD panel pricehikes that started in mid-2016 to persist through 2H. We believe declines in panel pricestriggered profit taking on the stock, which had surged to 1x P/B on OLED momentum.    …and slowing demand: Risk factors in 2H include an acceleration of panel pricedeclines if TV and mobile markets turn out weaker than expected. Yet, we think paneldemand from both markets will pick up in the seasonally strong half (barring inventoryissues at set makers) considering market prices have fallen somewhat after a dearth ofdemand in July. Meanwhile, it is a stretch to assume that LGD’s product prices will fall asmuch as market prices do, given the company’s: 1) TV-use portion of panel sales was46% in 2Q17, with 60-70% of that coming from in-favor UHD panels; and 2) blended ASPshould rise q-q on an expanding mobile-use portion of panels. Still, there whether setmakers’ panel demand will recover to usual levels is uncertain.    Cutting target to KRW39,000 but maintaining BUY: A historical P/B trendshows that fears of falling LCD panel prices were reflected in every downward phase of acycle. Shares have recently neared the lower end of their historical P/B band, so smartmoney is likely to start mulling the timing of an upturn. Expecting short-term share pricemovements to be limited amid growing market fears, we cut our target price toKRW39,000 but keep our earnings forecasts intact. We arrive at our new target byremoving a 10% premium we had applied for the OLED business to balance increasedrisks of LCD panel price declines. That said, we expect fears to be short lived for thecyclical stock and thus believe extended corrections provide a buying opportunity for longterm investors. We maintain BUY.

声明：如本站内容不慎侵犯了您的权益，请联系邮箱：wangshiyuan@epins.cn 我们将迅速删除。