Leading LCD makers in South Korea and Taiwan are headed for a robust first half this year on improving demand for flat screen TVs, but performance for the last quarter of 2009 is likely to be hit by seasonal weakness and a strong currency.
The liquid crystal display (LCD) industry rebounded from a downturn last year thanks to China's TV-buying spree and a shortage of key glass output that kept screen prices firm.
The outlook is bright for the next few quarters as strong Chinese demand for screens used in televisions is lifting the sector from the seasonal downturn much earlier than expected.
We are heading into strong sales season in China, starting from the Lunar New Year holidays to the labor day, said Mirae Asset Securities analyst Lee Hak-moo.
There are also the Super Bowl, the Winter Olympics and the World Cup lined up in the coming months. Those sports events can bolster TV demand and could bring strength in the first half.
DisplaySearch recently upgraded its global LCD TV shipment forecast for 2010 to 171 million units, a 22 percent increase over the 2009 estimate.
China is a hot growth engine for the global flat panel TV market as the transition from cathode ray tube to LCD and plasma TVs continues to drive market growth, the research firm said.
China is set to become the world's biggest LCD TV consumer in 2011 and LCD makers are pumping in billions of dollars to build factories to capitalize on its huge potential.
But LCD makers' earnings deteriorated in October-December after peaking in the third quarter as seasonal weakness dented panel prices.
The stronger Korean won is also expected to have weighed on earnings at Samsung Electronics Co Ltd and LG Display Co Ltd, the world's top two producers of LCD screens.
No. 2 player LG Display is set to report an operating profit of 445 billion won ($394 million) in the fourth quarter, according to Thomson Reuters I/B/E/S.
But according to StarMine SmartEstimates, which predicts future earnings by putting more weight on recent forecasts of top-rated analysts, LG Display's operating profit is likely to show a downside surprise of 21 percent.
Taiwan's AU Optronics Corp is expected to swing to a small profit in Oct-Dec from a year-ago loss, according to Thomson Reuters I/B/E/S.
On a consolidated basis, Samsung's LCD business will likely swing to an operating profit margin of about 8 percent in the fourth quarter from a loss of 5 percent a year ago, but down from a 15 percent profit margin in July-September, according to analysts. Samsung reports earnings on Jan 29.
In the past two months, LG Display shares have jumped 30 percent and Samsung's have risen 12 percent, compared with a 6 percent gain in Seoul's broader market.
AU climbed 26 percent versus a 7.5 percent rise in the Taiwan benchmark.
Beside the confidence in Chinese demand, analysts also bet the global economic recovery would increase demand for larger LCD TVs in developed markets over the longer term.
30-inch level TVs were the mainstream in 2009. When the economy recovers on a fuller scale, demand will grow for bigger 40-inch levels -- likely from the second half, said Park Hyun, an analyst at Prudential Investment & Securities.
Company Estimated Q4 Year ago Qtr ago Date
profit profit/(loss) profit/(loss)
LG Display 445 bln won (288 bln won) 904 bln won January 20
AU Optronics 353 mln T$ (26.6 bln T$) 7.4 bln T$ January 28
NOTE: Estimates are based on data from Thomson Reuters I/B/E/S. LG Display's figures are for consolidated operating profit and forecasts for AU are based on net profit.
(Editing by Anshuman Daga)