To The Moon

$LG Display(LPL)$

Earning Overview

​In the fourth quarter of 2024, LG Display reported revenues of approximately KRW 7,832.9 billion, a 15% increase compared to the previous quarter and a 6% year-over-year growth. This rise was primarily driven by a significant expansion in smartphone panel shipments. The company achieved an operating profit of KRW 83.1 billion, marking a notable turnaround from the operating loss of KRW 469 billion in Q1 2024. This improvement is attributed to a strategic focus on OLED-centric business upgrades and rigorous cost-saving measures.

For the full year of 2024, LG Display experienced a substantial profit improvement of approximately KRW 2 trillion, despite facing mid-KRW 100 billion one-off expenses in both Q3 and Q4. This annual progress underscores the company's effective execution of its OLED-centric strategy and operational enhancements.

Fundamental Analysis

If LG Display is reporting negative income for 3 continues years, A slowdown in consumer electronics or TV sales (LG Display’s main market) can lead to a reduction in orders for display panels. If the TV market or smartphone market contracts, LG Display’s sales could suffer. Economic slowdowns or recessions in key markets (like the U.S., Europe, or China) could reduce consumer spending on electronics, impacting LG Display's revenue and leading to losses.

LG Display has a large amount of debt, rising interest rates or increasing debt service costs could significantly reduce profitability. High interest expenses could outpace earnings, leading to negative income.

Guidance

Sale of Chinese LCD Plant

In September 2024, LG Display agreed to sell its large liquid crystal display (LCD) plant in Guangzhou, China, to TCL's LCD unit CSOT for approximately $1.54 billion. This transaction, expected to be finalized in March 2025, aligns with LG Display's strategy to focus on more competitive organic light-emitting diode (OLED) operations. The sale aims to enhance business competitiveness and financial stability by reducing exposure to the weakening LCD market.

Introduction of New OLED Products

At CES 2025, LG unveiled its new OLED evo lineup, featuring enhanced brightness and AI-powered personalization. The lineup includes various models with refresh rates ranging from 60Hz to 480Hz, catering to diverse consumer preferences. Additionally, LG introduced the world's first bendable 5K2K OLED gaming monitor, the UltraGear GX9 Series, offering immersive gaming experiences with flexible curvature and high-resolution displays.

LG Display's recent strategic decisions, such as exiting the Chinese LCD market and emphasizing OLED technology, suggest a focus on higher-margin products and operational efficiency. These moves aim to position the company for improved financial performance in 2025 and beyond. However, the success of these strategies will depend on market reception to new products, competitive dynamics, and global economic conditions.​

Free Cash Flow

Risks and Challenges

Market Conditions and Demand Fluctuations

Weak Consumer Demand: LG Display primarily supplies OLED and LCD panels for smartphones, TVs, and other electronics. A slowdown in consumer demand for these products, particularly smartphones and TVs, could lead to reduced sales of panels, impacting overall revenue.

Economic Downturn: A global or regional economic slowdown can reduce consumer spending, leading to lower demand for devices that require display panels, impacting LG Display’s sales.

Price Pressure and Competition

Increased Competition: The display panel market is highly competitive, with companies like Samsung Display and Chinese manufacturers offering similar products. Intense competition could drive down prices for display panels, affecting revenue growth.

Price Wars: If LG Display faces pressure to reduce its prices to maintain market share, it may experience lower revenue despite stable or increasing sales volume.

Price Volatility: The higher beta and volatility of LG Display stock indicate a more unpredictable market sentiment. Investors may experience higher returns, but they also face the risk of sharp price declines if the company faces challenges or if the broader market declines.

Competition: The growing competition from other display manufacturers, particularly from Chinese companies, poses a risk to LG Display’s market share and profit margins.

Market sentiment

Recently, LG Display has gained attention due to its price momentum. As mentioned earlier, it has shown notable price increases, with a 16.8% price change over the last 4 weeks and a 2.6% gain over the past 12 weeks. This indicates investor optimism and a strong upward trend in its stock price.

Beta: The stock has a relatively high beta of 1.34, meaning it is more volatile than the broader market. Investors with a higher risk tolerance might be drawn to the stock for its potential higher returns, while those risk-averse might see this as a sign of greater uncertainty.

Analysts' outlooks on LG Display often reflect a mixed sentiment. Some analysts may see the company as having strong growth potential due to its focus on OLED technology, which is more profitable than the declining LCD market. Others might be cautious about the competitive pressures from rival display manufacturers and potential market saturation in the consumer electronics space.

LG Display has historically been seen as a leader in the OLED panel market, especially for TVs and smartphones. However, some market analysts express concerns over its reliance on the increasingly competitive OLED segment and price pressures from Chinese competitors.

OLED Growth Potential: Investors are generally optimistic about the future of OLED technology, especially for TVs and smartphones. As OLED technology becomes more popular, LG Display stands to benefit from its position as one of the leading suppliers. However, the company must continue to innovate and deal with cost pressures to remain competitive.

LCD Decline: The decline of the LCD market poses challenges for LG Display, which has been transitioning its focus to OLED. The sale of its LCD manufacturing plant in China is a strategic move to reduce its exposure to this declining segment.

Conclusion

FY2024 is good year for LG Display, a leading manufacturer of display panels, is a subsidiary of LG Electronics. In 2024, LG Electronics reported consolidated revenues of KRW 87.74 trillion and an operating profit of KRW 3.43 trillion, marking the highest annual revenue in the company's history.

Achieved a compound annual growth rate of over 10% over the past four years, driven by strategic shifts including subscription services, Direct-to-Consumer (D2C) initiatives, and expansion of Business-to-Business (B2B) operations. Faced challenges in the second half of the year due to global shipping cost surges and one-time inventory rationalization costs, impacting profitability.​

overall performance provides insight into the company's trajectory, specific financial details for LG Display's 2024 fiscal year, such as revenue, operating profit, and segment performance, are not publicly disclosed in the available sources. Buy at current level is Risky.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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