The writer is an analyst of KB Securities. He might be reached at firstname.lastname@example.org. — Ed.
International chief in OLED shows: Ranked first in TVs and cars, second in cell phones
— In accordance with abroad media report (GSM Enviornment) on June 1, the growth of functions for OLED is predicted to speed up from 2022 (i.e., from cell phones to iPads, laptops, TVs, and cars). LG Show, whose world market share for OLED panels stays unequalled, has been increasing quickly on this enterprise area, from TVs and cell phones to EVs. LG Show at present: (1) instructions a market share of 100% for large-sized OLED TV panels; (2) boasts unequalled presence out there for automotive OLED panels with 94% share; and (3) ranks second for small-/medium-sized OLED panels (i.e., cell phones) by way of market share (8.4% in 1Q21 vs. 4.5% in 1Q20), regardless of the corporate being a late mover.
Marketplace for automotive OLED panels to surge 12-fold over subsequent 5 years; EVs to function accelerant
— We count on the marketplace for automotive OLED panels to surge 12-fold over the following 5 years (from KRW55.7bn in 2020 to KRW292.2bn in 2023 and KRW665.9bn in 2025), which ought to present a tailwind for LG Show provided that the corporate at present holds a 94% market share and KRW10tn value of order backlog. The growth of the EV market ought to function an accelerant for progress out there for automotive OLED panels. In its software to EVs, an OLED panel affords a number of benefits over its LCD counterpart, as the previous consumes considerably much less energy, affords extra stability due to its polyimide layer, and is extra possible for curved show. Furthermore, market entry by late movers is prone to show tough given the excessive entry limitations for automotive OLED panels (i.e., greater than three years from improvement until manufacturing). We count on LG Show to see a rise in provide of automotive OLED panels to North American and European automakers as the corporate has begun supplying OLED panels for the 2022 Mercedes-Benz S-Class (12.8”) in addition to the Cadillac Escalade this 12 months.
2H21 earnings to leap to highest degree since 2016 — We forecast LG Show 2H21 OP at KRW965.3bn, the best degree since 2H16 (OP of KRW1.2tn). We count on the corporate’s OLED section to swing into the black in 2H21 on the again of: (1) ASP hikes on surging demand for large-sized OLED panels; in addition to (2) greater utilization charges for small-/medium-sized OLED panels amid elevated provide of OLED panels for iPhone 13. OLED ought to account for 43% of company-wide OP in 2H21, permitting LG Show to boast a differentiated revenue construction in comparison with its opponents in China and Taiwan.
Prime beneficiary of OLED market growth; SEC’s entry into OLED TVs to catalyze growth of enterprise ecosystem
— We count on Samsung Electronics (SEC) to enter the OLED TV market in 1Q22, since: (1) the set maker would wish to diversify its product portfolio so as to enhance profitability (i.e., a 1.5x hole in OP margin between OLED and LCD TVs); and (2) OLED TVs can be important for securing better market share within the premium TV section, notably in Europe and Japan. OLED is prone to grow to be an irreversible development due to the growth of its functions. We consider LG Show, which affords a full lineup of OLED panels (i.e., large-sized, small-/medium-sized, automotive), to be the prime beneficiary of this progress in downstream markets.