Benign Beats Bad
LG Display (LPL) reported 1Q sales of 6.06 trillion won (~$4.24b US), down 22.6% q/q but up 15% y/y. Operating profit was 33.5 billion won ($23.4m US), making it the 2nd profitable (operating) quarter in a row and the first time in 8 years that the company produced a profit in the 1st quarter, typically a weak quarter for panel sales. The operating profit far exceeded expectations (loss of 30.7b won) with the outperformamce based on pre-tariff pull-in orders for both TVs and mobile displays. As LG Display is ending large panel LCD TV panel production, the pull-ins (WOLED TV panels) caused the company’s percentage of OLED revenue to increase from 47% to 55% in 1Q. Shipment area increased 1% y/y, but as the company closed the sale of its Guangzhou, China LCD panel fab at the end of the quarter, expectations are for a ~20% drop in shipment area in 2Q. The offset to the shipment area decrease is a roughly 20% increase in selling price/area, as the less profitable LCD fab panel pricing will fall away in 2Q.
While the press focused on the company’s return to profitability in what is usually a weak quarter, we do note that company did report a net loss, although down considerably from the previous quarter. The sale of the company’s Guangzhou large panel LCD fab to Chinastar (pvt) will improve profitability as (2023) the Guangzhou fab carried a 4.5% net margin. The proceeds ($1.416b US) will, in part, be used to lower the company’s debt, although the payment schedule has not be revealed (The comment was “…a substantial amount will be received in 1H…”
The Q&A was, as expected, focused on tariff questions, which have little to do with LG Display as they do not ship displays directly to the US, but the company did state that they have not seen any major change in plans from customers and have not seen any increases in component price or any difficulty with availability. That said, they did point to two display growth drivers that were part of expectations for the 2025 year, the end of Windows™ 10 and an overall replacement cycle for IT products, both of which they indicated have been super ceded by tariff questions. There was little specific detail about plans for products other than the generic ‘watch carefully and continue to focus on profitability’, although in this environment, we did not expect much detail.
All in it was a relatively benign call with better than expected operating profit, but laden with caveats about the potential for volatility as the US trade situation develops. Other than very general comments, there was little said about how much of the Guangzhou proceeds will be used to reduce debt, although management did reiterate that their earlier 2025 spending plans (low to mid 2 trillion won) plans were still valid (2.2 t won last year). We give credit to management for sticking to a strict cost reduction program and getting close to actual net profitability, although we would have liked to hear more about their actual plans for each product segment, rather than the vanilla commentary on the call.
While the press focused on the company’s return to profitability in what is usually a weak quarter, we do note that company did report a net loss, although down considerably from the previous quarter. The sale of the company’s Guangzhou large panel LCD fab to Chinastar (pvt) will improve profitability as (2023) the Guangzhou fab carried a 4.5% net margin. The proceeds ($1.416b US) will, in part, be used to lower the company’s debt, although the payment schedule has not be revealed (The comment was “…a substantial amount will be received in 1H…”
The Q&A was, as expected, focused on tariff questions, which have little to do with LG Display as they do not ship displays directly to the US, but the company did state that they have not seen any major change in plans from customers and have not seen any increases in component price or any difficulty with availability. That said, they did point to two display growth drivers that were part of expectations for the 2025 year, the end of Windows™ 10 and an overall replacement cycle for IT products, both of which they indicated have been super ceded by tariff questions. There was little specific detail about plans for products other than the generic ‘watch carefully and continue to focus on profitability’, although in this environment, we did not expect much detail.
All in it was a relatively benign call with better than expected operating profit, but laden with caveats about the potential for volatility as the US trade situation develops. Other than very general comments, there was little said about how much of the Guangzhou proceeds will be used to reduce debt, although management did reiterate that their earlier 2025 spending plans (low to mid 2 trillion won) plans were still valid (2.2 t won last year). We give credit to management for sticking to a strict cost reduction program and getting close to actual net profitability, although we would have liked to hear more about their actual plans for each product segment, rather than the vanilla commentary on the call.
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