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LGE’s Exit from Smartphones Props Up Q121 Results
LGE’s position in the TV market should improve on growing OLED TV shipments at the HE (TV) division (2021E forecast 4.11mn units, doubling YoY). In particular, LGE should gain market share as global competitors are burdened by rising LCD panel prices and panel shortages. In 2H21, the VS (automotive components) division should turn profitable given a growing weighting of EV components and lamps, as well as normalizing order intake (backlog of KRW60tn).
2021E OP will surge 42% YoY to KRW4.6tn on brisk earnings at the HE and H&A divisions and the shutdown of the MC business. NP is forecast to grow 51% Y/Y to KRW3.0tn backed by an earnings turnaround at LG Display. Samsung Electronics’ upcoming entry into the OLED TV market in 2022 should bolster the overall size of the global TV market and positively impact LGE’s OLED TV business.
LGE’s share of the North American TV market has climbed from 16% in 2020 to over 20% in 1Q21 while global rivals have lost substantial market share. LGE’s OLED TV business has benefited from stable OLED TV panel supplies from LG Display as well as the shrinking price gap between LCD and OLED panels (from five times to only two times), while competitors have faced both LCD shortages and higher prices. Going forward, LGE’s OLED TV lineup should grow from four sizes (55”, 65”, 77”, 88”) to six, given the expanding demand for 41” and 48” gaming purpose models. 2Q21E OP of KRW1.2tn, +138% Y/Y
We forecast 2Q21 OP will surge 138% YoY (-22% Q/Q) to KRW1.2tn, which would be the best 2Q results in 12 years (KRW1.2tn in 2Q09), as:
(1) H&A OP should jump 26% YoY on peak seasonal demand for air conditioner units: and
(2) HE OP should balloon 80% YoY on increasing OLED TV shipments.
On a divisional basis, we forecast H&A OP at KRW791.5bn, HE OP at KRW203.1bn, BS OP at KRW147.2bn, and VS at -KRW68.2bn.
LGE recently left the smartphone market as smartphones have been consistently generating losses for the company even they tried multiple strategies to turn the situation around. With LG even attempting and failing to sell off their business, closing shop was imminent. Now, the big picture is clear, thanks to LG publishing their Q1 2021 results. Through the first quarter of 2021, their device sales actually managed to increase through all of their other branches, except for their smartphone division (via GSMArena). These numbers don’t reflect the moment they announced their drop out of the smartphone market. LGE had sales of KRW998.7 billion (~$901 million USD) worth of phones through Q1 2021, which is roughly the same amount as they sold last year. However, their losses amounted to KRW280 billion (~$252 million USD). By contrast, all other LG divisions managed to increase their revenue considerably, putting their total revenue at KRW18.8 trillion.
LGE’s position in the TV market should improve on growing OLED TV shipments at the HE (TV) division (2021E forecast 4.11mn units, doubling YoY). In particular, LGE should gain market share as global competitors are burdened by rising LCD panel prices and panel shortages. In 2H21, the VS (automotive components) division should turn profitable given a growing weighting of EV components and lamps, as well as normalizing order intake (backlog of KRW60tn).
2021E OP will surge 42% YoY to KRW4.6tn on brisk earnings at the HE and H&A divisions and the shutdown of the MC business. NP is forecast to grow 51% Y/Y to KRW3.0tn backed by an earnings turnaround at LG Display. Samsung Electronics’ upcoming entry into the OLED TV market in 2022 should bolster the overall size of the global TV market and positively impact LGE’s OLED TV business.
LGE’s share of the North American TV market has climbed from 16% in 2020 to over 20% in 1Q21 while global rivals have lost substantial market share. LGE’s OLED TV business has benefited from stable OLED TV panel supplies from LG Display as well as the shrinking price gap between LCD and OLED panels (from five times to only two times), while competitors have faced both LCD shortages and higher prices. Going forward, LGE’s OLED TV lineup should grow from four sizes (55”, 65”, 77”, 88”) to six, given the expanding demand for 41” and 48” gaming purpose models. 2Q21E OP of KRW1.2tn, +138% Y/Y
We forecast 2Q21 OP will surge 138% YoY (-22% Q/Q) to KRW1.2tn, which would be the best 2Q results in 12 years (KRW1.2tn in 2Q09), as:
(1) H&A OP should jump 26% YoY on peak seasonal demand for air conditioner units: and
(2) HE OP should balloon 80% YoY on increasing OLED TV shipments.
On a divisional basis, we forecast H&A OP at KRW791.5bn, HE OP at KRW203.1bn, BS OP at KRW147.2bn, and VS at -KRW68.2bn.
LGE recently left the smartphone market as smartphones have been consistently generating losses for the company even they tried multiple strategies to turn the situation around. With LG even attempting and failing to sell off their business, closing shop was imminent. Now, the big picture is clear, thanks to LG publishing their Q1 2021 results. Through the first quarter of 2021, their device sales actually managed to increase through all of their other branches, except for their smartphone division (via GSMArena). These numbers don’t reflect the moment they announced their drop out of the smartphone market. LGE had sales of KRW998.7 billion (~$901 million USD) worth of phones through Q1 2021, which is roughly the same amount as they sold last year. However, their losses amounted to KRW280 billion (~$252 million USD). By contrast, all other LG divisions managed to increase their revenue considerably, putting their total revenue at KRW18.8 trillion.
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