Shares Rise for LCD Makers
LG.Philips Surges;
Industry Still Has
Bumpy Road Ahead
By YUN-HEE KIM
June 27, 2006
HONG KONG -- Shares in Asia's major makers of liquid-crystal displays rose on bargain hunting after a recent selloff and on hopes industry conditions will improve following announcements that companies have scaled back production amid high inventories.
A report from Merrill Lynch, which upgraded LG.Philips LCD Co. to "buy" from "sell," also helped boost LCD stocks.
Merrill Lynch analyst Daniel Kim said in a report issued yesterday that "the recent collapse in the [LG.Philips LCD] share price has rendered the stock too cheap to overlook."
"The current woes in the [thin-film transistor] LCD industry should be viewed as a blessing in disguise, since [eighth generation] fab investments are likely to be postponed and should allow LG.Philips LCD to become more shareholder friendly," the report said. Thin-film-transistor liquid-crystal displays are the main components used in flat-panel computer monitors and television sets.
The LCD sector has been battered recently after companies such as LG.Philips LCD and Taiwan's AU Optronics Corp. issued second-quarter profit warnings, citing high inventories. Those and other LCD makers, such as Taiwan's Hannstar Display Corp., have since announced they are cutting LCD production to help relieve overcapacity.
Mr. Kim said companies are sensibly managing output and inventory, and manufacturers are resisting taking "below-cost" price orders from their customers. "While the pace of panel price erosion is slowing...the sustained fall in monitor and TV panels in the second half should lead to healthy demand, clearing the entire inventory in channels," he said.
But some analysts say industry fundamentals haven't turned around.
"The stocks are recovering today [Monday] because they are considered cheap after the recent selloff. But not much has changed in terms of the outlook for the LCD industry -- it's still going to be a tough third quarter for manufacturers," said Hyun Sik Moon, an analyst at Meritz Securities in Seoul.
In Seoul trading yesterday, LG.Philips LCD led the gains as its stock closing up 6.8% to 32,400 won ($33.89). Shares of Samsung Electronics Co. -- the world's largest LCD maker by revenue -- rose 2.5% to 582,000 won. AU Optronics gained 1.8% to 44.60 New Taiwan dollars (US$1.36) in Taiwan, while rival Chi Mei Optroelectronics gained 3.8% to NT$36. Sharp Corp. rose 2% to 1,804 yen (US$15.47) in Tokyo.
"LCD prices continue to fall," said Min Hee Lee, an analyst at CJ Investment Securities in Seoul. "I expect many companies to post losses in the second quarter and into the third quarter as well."
According to Taiwan-based market-research firm WitsView Technology Corp., the average selling price of a 17-inch (43-centimeter) monitor panel fell to US$104 on June 20 from US$120 April 20, while the price for a 32-inch LCD TV panel fell to US$410 from US$475.
"Based on the sharp price decline, vendors surely will find it hard to remain profitable," said Henry Wang, chief executive, of WitsView. But he said the inventory situation should start to improve as many panel makers have begun to lower their factory utilization rates.
online.wsj.com |
