How OLED Demand Could Boost Samsung, Other Asia-Based Peers

A new report by HSBC analyst Ricky Seo takes an in-depth look at the booming organic light-emitting diode (OLED) business. Seo believes that the recent strength in OLED will continue in coming years and Samsung Electronics Co Ltd SSNLF and other Asian manufacturers will be the major beneficiaries.

OLED utilization increasing
Seo points out that OLED utilization by Samsung Display and Chinese smartphone makers continues to trend higher and higher. “On September 2, Huawei introduced a high-end smartphone model called ‘Mate S,’ using full high-definition OLED panel for the first time, and we expect more Chinese smartphone makers to shift to OLED from LCD given its superior performance and lowering premium to 10-20% over LCD from 30-40% in 2014, in general terms,” Seo explains.

HSBC is projecting that OLED utilization at Samsung Display will eclipse 80 percent in Q3.

Capacity expansion coming
As OLED utilization continues to expand, Seo believes it’s only a matter of time before companies like Samsung begin to expand their OLED capacity. “We believe Samsung will continue to expand OLED capacity to stay ahead of the cost curve and gain market share in the small panel segment before Chinese panel makers can do the same,” he writes.

Who wins?
Seo names Samsung and its OLED-producing subsidiary Samsung Display as the top beneficiary of the OLED revolution. HSBC likes the valuation of Samsungs Korean-listed shares, which currently trade at only 7.7x projected 2015 price/earnings (PE).

In addition to Samsung, HSBC likes OLED equipment makers Wonik IPS and SFA and suppliers Duksan Neolux, Wonik Materials and Soulbrain.