LG Display Co., Ltd.

LPL Details

LG Display Co., Ltd. (NYSE: LPL) is a Korean firm that makes and sells display panels for televisions, laptop computers, desktop monitors, tablets, and mobile devices. It is a global leader in display technologies such as thin-film transistor OLED and liquid crystal displays (LCDs). It has manufacturing plants in Korea and China and back-end assembly plants in Korea, China, and Vietnam. As of November 02, 2021, the company's market capitalization stood at USD 5.99 billion, with 715.63 million American Depository Shares (ADS) listed and outstanding (every two ADS representing one ordinary share).

Latest News:

• Earns Global Gaming Certifications: LPL announced on October 7, 2021, that its OLED TV screens had obtained worldwide gaming certifications. LPL received Intertek's Qualified Superior Gaming Performance accreditation and TÜV Rheinland's High Gaming Performance Gold certification, making it the only display firm to acquire credentials from the United Kingdom and Germany.
• Collaboration with Kakao Mobility: LPL announced a partnership with Kakao Mobility, a Korean mobility platform firm, on September 13, 2021, to develop an intelligent parking lot in Seoul, Korea, featuring the company's superior Transparent OLED displays.

Q3FY21 Results:

• Progress in Revenues: LPL witnessed an increase in revenues by 7.21% to KRW 7,223.20 billion in Q3FY21 (ended September 30, 2021) from KRW 6,737.65 billion in Q3FY20, due to increased shipments of its panels for IT products.
• Sharp uptick in Bottomline: LPL recorded a massive increase in net income to KRW 463.47 billion in Q3FY21 vs. KRW 11.12 billion in Q3FY20.
• Improvement in EBITDA: In Q3FY21, EBITDA was KRW 1,696 billion, up from KRW 1,228 billion in Q3FY20.

Key Risks:

• Customer Concentration Risk: LPL's top ten main clients, LG Electronics Inc., its largest shareholder, accounted for a significant portion of its annual revenue. As a result, if the company's financial strength is unduly reliant on a few consumers for sales, its financial strength may be impacted in the future.
• Decline in ASPs: Due to technological breakthroughs and cost reductions, the display panel's average selling prices (ASPs) have generally decreased. Moreover, they are predicted to continue, irrespective of industry-wide cyclical variations. However, suppose the ASPs of its display panels fall faster than its ability to reduce manufacturing costs. As a result, its financial conditions and cash flows could be adversely affected.

Outlook:

• Q4FY21 Estimates: LPL announced on October 27, 2021, that panel shipments in Q4FY21 are likely to climb by mid-10% compared to Q3FY21.
• FY21 Estimates: LPL anticipates the TV industry to grow, and it plans to meet its annual sales goal of 8 million OLED panels in FY21 and set a new yearly profit record.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

LPL Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

LPL’s stock price has fallen 20.27% in the past six months and is currently trading at the lower-band of the 52-week range of USD 6.32 to USD 12.31. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 60.57. We have valued the stock using the Price/Earnings multiple-based relative valuation methodology and arrived at a target price of USD 10.13.

Considering the company robust track record, market dominance, robust operations, new collaborations, and current valuation, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 8.38, down 0.48% as of November 02, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.  

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