AUO
AU Optronics (2409.TT) reported 1Q sales of NT$81.5b (~$2.77b US), down 12.4% q/q and down 1.7% y/y, Gross margins declined from 18.9% in 4Q (28.7% at peak in 2Q ’21) as did net margin, which was 6.3%, down from 12.7% in the December quarter and down from 14.3% in 1Q ’21. None of this is surprising given the state of the display space, as we have noted previously. 2nd quarter guidance for AU Optronics reflects some of the impact of the Russian invasion of Ukraine and Chinese COVID-19 lockdowns, but the company cautioned that the impact may not be fully reflected in the forecasts, which are for area shipments to be down by low single digits q/q after a 7% decline in 1Q. Blended ASP (m2 basis) is expected to be down by mid to high single digits, after declining 6.3% ((m2 basis) in 1Q.
AUO management indicated that aside from the continuing shortages that most panel producers have been facing, transportation issues for both raw materials and finished product continue to make predicting 2Q more difficult than usual. Chinese COVID-19 lockdowns have also affected the company’s production fabs in Suzhou and Kunshan, where some operations have been limited or suspended due to the lockdowns, although overall inventory levels have been increasing to higher than normal levels as demand weakened during the quarter and brands lowered panel purchase targets.
We believe while AUO’s quarter is indicative of the difficulties facing panel producers currently, they have been able to mitigate some of the impact by having shifted production goals to more premium products and away from generic panel production, where competition from Chinese panel producers is fierce. These niche products have helped stabilize AUO’s results for the last quarters but as with all panel producers overall demand will drive both pricing and profitability, so AUO’s results this year and next will be slightly less driven by the global macro environment than some, but will need an improving environment to achieve y/y sales and income growth.
AUO management indicated that aside from the continuing shortages that most panel producers have been facing, transportation issues for both raw materials and finished product continue to make predicting 2Q more difficult than usual. Chinese COVID-19 lockdowns have also affected the company’s production fabs in Suzhou and Kunshan, where some operations have been limited or suspended due to the lockdowns, although overall inventory levels have been increasing to higher than normal levels as demand weakened during the quarter and brands lowered panel purchase targets.
We believe while AUO’s quarter is indicative of the difficulties facing panel producers currently, they have been able to mitigate some of the impact by having shifted production goals to more premium products and away from generic panel production, where competition from Chinese panel producers is fierce. These niche products have helped stabilize AUO’s results for the last quarters but as with all panel producers overall demand will drive both pricing and profitability, so AUO’s results this year and next will be slightly less driven by the global macro environment than some, but will need an improving environment to achieve y/y sales and income growth.
RSS Feed