India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
MacqTech
TFT-LCD – EU fines unveiled
Event
ƒ European Union (EU) issued fines for a total of €649m (US$864m) to six LCD
panel manufacturers (CMI, LGD, AUO, CPT, Hannstar and Samsung) for antitrust activities from Oct 2001 to Feb 2006. While this could negatively impact
near-term sentiment, we note some of the makers have already pre-booked
legal provisions; our fundamental view on the LCD sector remains positive.
Impact
ƒ CMI and LGD receive largest fines. CMI received the largest fine (€300m)
and had not made any previous legal provisions for the EU case, thus we see
risk of a large provision and the share price could see pressure, in our view.
LGD was fined €215m (US$286m) for its activities as well. LGD had
previously provisioned a total of Won270bn (US$239m), but it is split between
the EU anti-trust case and class-action lawsuits from the private sector.
ƒ AUO also fined, Samsung exempt. AUO was fined €117m (US$155m), but
had provisioned US$322m back in 4Q09 for legal issues related to the US
and EU cases. Hannstar and CPT were fined €9m and €8.1m each. Samsung
was not fined as a reward for its “informant” status in the LCD case.
ƒ Panel makers can appeal the decision. AUO and LGD have indicated they
are considering to appeal the EU ruling, which could take about a 2-year legal
process and result in reduced fines if successful, and they do not expect any
major impact on current operations. CMI and CPT have not yet decided what
to do.
ƒ Corning (GLW) revises up 4Q. Separately, Corning raised 4Q glass volume
guidance from ‘flat to down’ to flat QoQ, citing improved UTIL rates in Taiwan
but lowered UT rates from Korean panel makers (down 5-10% QoQ versus
flat to down slightly previously). This is consistent with our checks showing
slight improvement from AUO and a larger jump at CMI (for China, concern of
labour shortage, and Sony order preparations). GLW also saw US BF TV
demand as in line and noted TV units saw YoY growth in Nov for the first time
since Apr due to attractive pricing, and it believes supply chain inventories
continue to be worked down in 4Q (16.0-16.5 weeks versus 15-20 normally).
Outlook
ƒ Overall, while sentiment could see a short-term hit from the EU fines, our
fundamental view on the sector remains positive. The sharp ASP declines
witnessed in key components like LCD panels in 2H10 (also DRAM) are a key
enabler for the current attractive TV retail price points, in our view, and should
help move unit volumes in the holiday peak season. Corning’s comments
overnight are consistent with this view.
ƒ With a decent sell-through, we see a bottoming out and recovery in cyclical
sectors such as TFT-LCD in 1H11. We like LGD and AUO amongst panel
makers, and Radiant (6176 TT, OP), Novatek (3034 TT, OP-Jimmy Hsu),
Asahi/NEG (Michiko Kayika) and Chipbond (6147 TT, OP - Michael Liu) in the
LCD supply chain
No comments:
Post a Comment