Panel prices remain weak in second half of JuneExcluding several 40-inch panels, LCD panel prices fell for the second half of June. Believing that panel prices will continue to slide in 3Q15, we maintain our Neutral rating towards the sector.
39.5/40/42-inch TV panel prices remain stable, while others continue to decline- On Jun 22, the display research institute WitsView announced LCD panel prices for the second half of June, with the average LCD panel price falling 0.9% h-h (half month to half month) to US$92.- In detail, the average TV panel price dropped 0.6% h-h to US$167, displaying a similar trend to that seen in the first half of June. Of note, the 40-inch and 42-inch panel prices have remained flat for 6 months and 12 months, respectively.- Meanwhile, the average monitor panel price decreased 1.5% h-h to US$73, with prices downtrending across the board.- Elsewhere, the average notebook panel price slipped 1.1% h-h to US$37 (includes mainstream panels (14-inch and 15.6-inch)).
LCD panel price drop to sustain in 3Q15- Owing to continued weak demand for TVs and the resulting panel oversupply, we expect TV panel prices to drop slightly in 3Q15. In particular, panels experiencing oversupply are likely to drop significantly. Moreover, due to sluggish TV demand, we believe that set makers will adopt conservative purchase strategies. Thus, TV panel prices are expected to decline through mid-3Q15 (a traditional low season).- With regards to IT panel (monitors and notebooks) prices, increased capacity—led by the start of operations at new fabs—is expected to weigh on ASPs. Meanwhile, we predict that demand will remain sluggish, with consumers opting to delay purchases ahead of the upcoming release of Microsoft’s ‘Windows 10’ (OS) and Intel’s ‘Skylake’ (CPU). Despite lackluster IT set demand, we do not expect set makers to engage in intense competition. As such, pre-emptive demand is unlikely to be seen.
Maintain Neutral rating for display industry- Given the sluggish outlook for the LCD industry (led by the ongoing downtrend in panel prices and the slowdown in demand), we maintain our Neutral rating towards the display industry.- We continue to spotlight LG Display (LGD) as our sector top pick. Currently, it appears unlikely that the play will register solid quarterly results due to weak industry fundamentals. Moreover, the firm appears to lack the momentum to make a share price rebound. Against this backdrop, we believe that it is important to wait for the company’s shares to find a bottom. As it is hard to anticipate an improvement in supply-demand conditions, we recommend taking a P/B-oriented approach towards LGD. Specifically, pointing out the company’s competitiveness in the OLED market, we suggest adopting a long-term trading buy approach (targeting historical-low P/Bs) towards the panel maker.
*Source: NH Investment & Securities Co.