Mon, Jul 20, 2009 - Page 12 News List

HSBC raises outlook for AU Optronics

TURNAROUND Benefiting from higher panel prices, the company is expected this quarter to end a streak of three quarterly losses since the fourth quarter of last year


AU Optronics Corp (友達光電), the world’s third-largest maker of liquid-crystal-display (LCD) panels, may post stronger-than-expected earnings for the second half of the year, following rival LG Display Co Ltd’s optimistic forecast for the third quarter, HSBC Securities said in a report.

South Korea-based LG Display’s second-quarter earnings far exceeded HSBC’s estimate.

LG Display’s forecast of a 15 percent quarter-on-quarter increase in shipments this quarter is also more optimistic than HSBC’s projection of 11 percent growth, HSBC analyst Frank Su (蘇穀祥) said in the report, issued last week.

Su said this reaffirmed HSBC’s view that inventory was healthy and recovering demand could boost rebounding panel prices, alleviating key concerns about the industry.

Su said he did not expect LG Display’s new investment in an 8.5-generation plant to cause a supply glut anytime soon as the boost in capacity would only raise the global supply by 2 percent next year.

These positive signals supported “our call that AU Optronics will turn around staring in the third quarter of 2009, with potentially better earnings prospects for the second half [of the year],” Su said.

Benefiting from the recovery, Hsinchu-based AU Optronics is expected to earn NT$8 billion (US$244 million) in the third quarter, he said.

That would end three consecutive quarterly losses since the fourth quarter of last year, when a combination of oversupply and the economic slump took a toll on its business.

For the full year, the company may lose NT$7.95 billion, he said, better than the average forecast of NT$35.53 billion in losses.

Su raised his price-to-book ratio target for AU Optronics from 1.2 times to 1.5 times, raising the target price from NT$42 to NT$52.

The new target price implies an upside of about 38 percent over the next 12 months compared with the stock’s closing price of NT$38.2 last Friday.

Su said he had applied a 20 percent discount to the peak cycle compared with the past few uptrends in the LCD industry, factoring in greater macro-economic uncertainty.

HSBC gave an “overweight” rating for AU Optronics and LG Display, however, and rated Chi Mei Optoelectronics Corp (奇美電子), the nation’s No. 2 LCD panel supplier, as “neutral.”

AU Optronics is scheduled to release second-quarter financial results on Thursday. The company may report NT$7.5 billion in losses for last quarter, compared with NT$20.33 billion in the first quarter, Su said.

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