LCD Shares: More Gains Or Is The Boom Over?

The display industry is recovering from one of its worst downturns as billions of dollars from China's stimulus package and resilient North American markets help boost demand for televisions and computers. South Korea's LG Display Co Ltd (034220.KS), the world's No 2 player, has risen more than 60 percent so far this year and third-ranked Taiwan's AU Optronics Corp (2409.TW) has climbed nearly 40 percent as earnings recovered and output returned to normalcy in the second quarter.
 
Samsung Electronics (005930.KS), the world leader in LCD screens and TV sets, added to the bullish tone on Monday when it forecast strong second-quarter profits. Analysts attributed this to likely high margins in LCD TVs.
 
But with some concerns over a likely oversupply in the sector later in 2009 as makers from Samsung to smaller Taiwanese rivals ramp up capacity, can the industry still shine in the second half?
 
SAMSUNG, LG DISPLAY TO GAIN
 
LCD names linked to TV powerhouses, such as Samsung and LG Display, are set to gain further, analysts and fund managers said. On top of their strong customer base, South Korean makers are also better positioned to secure glass than Taiwanese rivals hit by shortages in raw materials.
 
"Consumer spending is holding up in key markets such as the United States and China," said Kim Hyung-wook, a fund manager at KB Asset Management.
 
Japan's LCD-related shares such as Sharp Corp (6753.T) and Sony Corp (6758.T) are expected to lag as Korean rivals grab more market share.
 
Many in the sector are betting on sustained strength, pointing to healthy sales of LCD TVs in North America, as well as a boom in purchases of TVs in China, helped by government subsidies.
 
Last month, research firm DisplaySearch raised its forecast for 2009 LCD TV sales, predicting a 21 percent rise in shipments.
 
Fund managers said the current shortage in glass used for LCD panels could keep output in check and support prices.
 
Suppliers of glass for large TV panels are struggling to meet demand after they scaled down output late last year when panel makers were slashing production.
 
"The glass shortage can linger into the fourth quarter and LCD prices should continue rising until September," said Nam Dae-jong at Midas Asset Management.