How LG Display's 'Unique' Position Makes It A Buy

• LG Display Co Ltd. (ADR) LPL shares have declined steadily so far in 2015 and are down 29 percent year-to-date.
• Cowen’s Robert W. Stone initiated coverage of the company with an Outperform rating and a price target of $13.50.
• LG Display is poised to enjoy a premium position in the 4K UHD upgrades, Stone stated.

Analyst Robert Stone mentioned that the HIS projected revenue from total flat panel display, or FPD, to record a moderate 3.5 percent CAGR during 2015-19. While the growth of TVs, PCs and smartphones is dependents mostly on replacement cycles, newer technologies are expected to grow at a fast pace.

“[W]e estimate 4K/UHD should account for ~40% of total TV units by 2018E, vs. ~10%,” Stone wrote.

LG Display, a leading player in the displays segment, holding around 28 percent of the global market share, is expected to enjoy a premium position in 4K/UHD upgrades, as it is the only supplier of OLED TV panels.

The company is also expected to emerge as a key player in the flexible AMOLEDs, since they displace LCDs in mobile, automotive and wearables, Stone mentioned.

LG Display’s current stock valuation reflects the near-term concerns over LCD TV supply and demand, Stone said. He added that the company’s gross margins are expected to bottom at 14 percent in 1Q16 due to a weaker TV market and less seasonal strength in mobile.

“We project further GM and OM improvement in 2017-18E, with OM reaching 6.3 and 6.6%, respectively, as OLED TV turns profitable and flexible OLED ramps,” the Cowen report stated.