LGD raises rating outlook “stable”… “LCD supply and demand improvement”
Credit rating outlook from “negative” to “stable”
Profitability improvement due to LCD supply and demand improvement
Alleviate volatility in performance through OLED quality competitiveness and production efficiency
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In particular, financial stability is expected to gradually improve on the back of the recovery of operating cash output and ease of investment burden.
LGD's financial stability quickly weakened until 2019 as most of the expanded investment required to convert its business structure to OLED due to the decline in cash output due to sluggish LCD performance relies on external borrowing. Looking at the degree of dependence on borrowings, it increased from 19.2% at the end of 2017 to 38.1% at the end of 2019, and total borrowings increased from 5.6 trillion won at the end of 2017 to 1.3 trillion won at the end of 2019.
In 2020, large-scale OLED-related investments were settled, and CAPEX decreased (average annual average of 7.600 billion won in 2017-2019 ? 3 trillion won in 2020). As a result, the financial burden, which has recently increased rapidly (dependence on borrowings at the end of 2020, 40.4%, total borrowings of 1,420 trillion won) has not been alleviated.
However, the researcher said, “Considering the prospect of continued LCD supply and demand favorable to panel makers for the time being, the growth of the OLED business, LGD's improved quality and technological response, and the secured demand base, the investment burden has eased compared to 2018-2020 after 2021. It is predicted that the company will show a gradual improvement in financial stability based on the ability to generate EBITDA and improved pre-depreciation operating income.”
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