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LG display: Prime beneficiary of expanded application of OLED

According to overseas media report (GSM Arena) on June 1, the expansion of applications for OLED is expected to accelerate from 2022 (i.e., from mobile phones to iPads, laptops, TVs, and automobiles). LG Display, whose global market share for OLED panels remains unrivaled, has been expanding rapidly in this business space, from TVs and mobile phones to EVs. LG Display currently: (1) commands a market share of 100% for large-sized OLED TV panels; (2) boasts unrivaled presence in the market for automotive OLED panels with 94% share; and (3) ranks second for small-/medium-sized OLED panels (i.e., mobile phones) in terms of market share (8.4% in 1Q21 vs. 4.5% in 1Q20), despite the company being a late mover.

Market for automotive OLED panels to surge 12-fold over next five years; EVs to serve as accelerant

We expect the market for automotive OLED panels to surge 12-fold over the next five years (from KRW55.7bn in 2020 to KRW292.2bn in 2023 and KRW665.9bn in 2025), which should provide a tailwind for LG Display given that the company currently holds a 94% market share and KRW10tn worth of order backlog. The expansion of the EV market should serve as an accelerant for growth in the market for automotive OLED panels. In its application to EVs, an OLED panel offers several advantages over its LCD counterpart, as the former consumes substantially less power, offers more stability thanks to its polyimide layer, and is more feasible for curved display. Moreover, market entry by late movers is likely to prove difficult given the high entry barriers for automotive OLED panels (i.e., more than three years from development till production). We expect LG Display to see an increase in supply of automotive OLED panels to North American and European automakers as the company has begun supplying OLED panels for the 2022 Mercedes-Benz S-Class (12.8”) as well as the Cadillac Escalade this year.

2H21 earnings to jump to highest level since 2016 — We forecast LG Display 2H21 OP at KRW965.3bn, the highest level since 2H16 (OP of KRW1.2tn). We expect the company’s OLED segment to swing into the black in 2H21 on the back of: (1) ASP hikes on surging demand for large-sized OLED panels; as well as (2) higher utilization rates for small-/medium-sized OLED panels amid increased supply of OLED panels for iPhone 13. OLED should account for 43% of company-wide OP in 2H21, allowing LG Display to boast a differentiated profit structure compared to its competitors in China and Taiwan.

Prime beneficiary of OLED market expansion; SEC’s entry into OLED TVs to catalyze expansion of business ecosystem

We expect Samsung Electronics (SEC) to enter the OLED TV market in 1Q22, since: (1) the set maker would need to diversify its product portfolio in order to boost profitability (i.e., a 1.5x gap in OP margin between OLED and LCD TVs); and (2) OLED TVs would be essential for securing greater market share in the premium TV segment, particularly in Europe and Japan. OLED is likely to become an irreversible trend thanks to the expansion of its applications. We believe LG Display, which offers a full lineup of OLED panels (i.e., large-sized, small-/medium-sized, automotive), to be the prime beneficiary of this growth in downstream markets. BusinessKorea

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