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Now a good time to buy panel stocks
􀂄 Demand to expand at a double-digit CAGR in 2009-15
We expect demand for display panel for all applications to rise at a double-digit CAGR in
2009-15, thanks to strong new purchases and replacement demand in both developed and
emerging markets.
􀂄 Local brands dominate China market, Taiwan panels capture local brands
Taiwan panel vendors, especially CMO (3009.TW, NT$16.75, OP) and AUO (2409.TW,
NT$30.85, OP) which boast a dominant 50% share of the China market, should benefit from
the booming China LCD-TV market thanks to alliances with local Chinese TV makers that
hold a market share of above 80%.
􀂄 Panel price downtrend not as bad as expected
We do not expect panel quotes to drop sharply in 4Q09 as disciplined capacity control at
glass and panel makers and growth momentum from the Chinese New Year shopping
season will mitigate the panel price downtrend. Industry surveys indicate Korean LCD panel
makers enjoyed margins of 20% in September, while Taiwanese LCD panel makers’ margins
were 15%.
􀂄 We remain positive on the LCD sector
We are confident market demand will be strong in 4Q09 on a strong recovery in spending in
developed markets, a boost from government subsidies in China, and on the Chinese New
Year shopping season. We reiterate our positive view on the LCD sector and have
maintained our Outperform ratings on AUO, CMO and Innolux (3481.TW, NT$39.05, OP).
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