AU Optronics sales soar, lead LCD stocks higher

AU Optronics Corp (友達光電) led shares of liquid-crystal-display (LCD) makers higher after the company posted record monthly sales and prices increased for panels used in computer monitors and notebooks.

The world's third-largest LCD maker rose 3.5 percent to close at NT$50.50 yesterday on the Taiwan Stock Exchange, the biggest gain in more than two weeks, outranking a 0.01-percent increase on the nation's benchmark TAIEX.

South Korea's LG.Philips LCD Co, the second-biggest LCD maker, and Taiwan's Chi Mei Optoelectronics Corp (奇美電子) also rose.

On Thursday, AU Optronics said its sales last month increased 89 percent from a year earlier to NT$44.1 billion (US$1.33 billion) and Chi Mei said its revenue last month rose 69 percent to NT$29.5 billion.

Citigroup Global Markets yesterday rated AU Optronics with a "buy" recommendation, citing the company's more controlled capital expenditure and sustainable cash flows, a research note released yesterday showed.

Citigroup said there was a legitimate concern about the LCD industry's exposure to the US market rattled by recent subprime mortgage problems.

"However, other regions have been showing decent strength ... Besides, TV prices have become more affordable than ever, so perhaps TV demand will be much less sensitive to any potential credit risks," Citigroup said.

Prices of 17-inch monitor panels climbed 2.3 percent in the first half of September from a month earlier, and laptop panels measuring 15.4 inches rose 2.9 percent, according to Taipei-based WitsView Technology Corp (聯景科技), which tracks price movements twice a month.

"Demand for notebook and monitor panels remains robust and prices are likely to continue rising until October, maybe even into November," said Jeff Kim, an analyst at Hyundai Securities Co in Seoul. Kim rates the LCD industry "overweight."

A shortage of computer screens drove up prices and helped Seoul-based LG.Philips post a profit for the three months ended June 30, its first in five quarters.

The company's operating profit, or sales minus the cost of goods sold and administrative expenses, may exceed 500 billion won (US$533 million) in each of the two remaining quarters this year because of higher panel prices, said Lee Hak-moo, an analyst at Mirae Asset Securities Co in Seoul.

LG.Philips shares rose 4.7 percent to 42,650 won, while Tainan-based Chi Mei gained 2.1 percent to NT$33.70.

Industry leader Samsung Electronics Co, also the world's biggest computer-memory chipmaker, closed unchanged at 575,000 won, after falling as much as 1.6 percent.

The DRAMexchange Index, which tracks prices of the most widely used computer-memory chips, fell 1.9 percent yesterday, extending declines to 3.6 percent this week, told Taipei's DRAMexchange.com (集邦科技), Asia's biggest spot market for chips.