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1、 abc Global Research Korean TV makers set to drive Ultra High Definition (UHD) TVs in 2013 Benefits of UHD TV: accelerates size migration and converges with mobile devices Revitalises traditional LCD food chain; pushes back AMOLED TV introduction Looming price war in large size TVs: We believe there
2、 was a price war among LCD TV makers for larger size (55”) TVs during the Thanksgiving holiday season as Vizio cut the price of its 60” model to below USD700 (see Asia LCD: Supply shortage coming, 27 September). We expect Korean LCD TV makers to follow suit; otherwise they risk losing market share i
3、n the US. UHD TV the next wave in LCD TVs: We expect Korean LCD TV makers to drive UHD TVs starting from CES 2013 as they provide various benefits, including 1) a shorter viewing distance such that 60” TVs better fit a normal room size, 2) superior picture quality for a better viewing experience and
4、 3) convergence with mobile devices such as smartphones and tablets given no deterioration of picture quality. ASP should improve for high-end TV makers: The benefits of UHD TV should be enough to drive a replacement if the price is right. We estimate UHD TV pricing could be set at a 40% premium to
5、current high-end LED TVs, which could trigger replacement demand in the high-end segment. As a result, we estimate UHD TVs will take 2% and 6% share of the overall LCD TV market in 2013 and 2014 respectively, and drive ASP and margin improvement for high-end TV makers such as Samsung Electronics (an
6、 Asia Super Ten stock) and LGE. Reiterate OW(V) on LGE and LGD and remain cautious on the Korea OLED food chain: We think increased demand for UHD TVs will improve ASP and margins, however selectively for the high-end TV makers. In contrast, the lowering in priority of OLED TVs by Korean TV set make
7、rs may slow capacity additions by OLED panel suppliers, which could pose a downside risk to the OLED food chain, including Duksan Hi-Metal (UW V). Telecoms, Media otherwise bargaining power will shift to panel makers. We believe UHD TVs will be pushed in 2013 given that they provide several benefits
8、 to justify the premium over traditional TV sets. In contrast to OLED TVs which were regarded as the “killer application” during CES 2012, UHD TVs do not require new technology in equipment and materials, which can be implemented with the current existing technology and facilities. % of UHD TV out o
9、f 50” LCD TV 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 2013e2014e2015e % of UHD out of 50“ above Source: HSBC estimates Investment summary UHD TV set to drive replacement demand in 2013 Benefit to Korean TV makers for early mover advantage, but OLED becomes less attractive We advise buying Samsung and LGE
10、, but are cautious on the Korea OLED food chain 3 Telecoms, Media however, there have been endless efforts by TV set makers to launch “killer applications” in order to encourage replacement demand. During 2007-09, LED TV was a big hit that triggered replacement demand in conjunction with analogue di
11、gital conversion. LED TV was superior to CRT or PDP in terms of its form factor in that it provided a slimmer design and better picture quality in addition to being more environmentally friendly. LED TV has been very popular among flat panel TVs. Consumers who purchased LED TVs remained satisfied wi
12、th their TVs although TV set makers offered various additional functions including 3D, internet connectivity and a faster refresh rate. As a result, its replacement in the developed markets has slowed significantly. This is one of the reasons why panel producers are shifting their focus to mobile di
13、splay where the growth rate is much faster than conventional TV demand. Korean TV set makers tried to counter the weakening LCD TV demand by offering OLED TV in 2012, however, they faced Bigger size needs UHD TV UHD TV could be a killer application in the LCD TV market in 2013; set to boost replacem
14、ent demand in high-end TV market UHD TV enables size migration as it shortens viewing distance and provides more smart functions Likely to benefit margins on the back of its higher ASP TV market trend 0 60 120 180 240 300 20042005200620072008200920102011201220132014 CRT PDPLCD-HDLCD-FHDLED-LCD 3D-LE
15、DUHDOLED PDP TV introduction Analog to digital (HD) conversion Full HD introduction LED introduction 3D TV introduction UD TV introduction CRTPDP LCD-HD LCD-FHD LED-LCD 3D-LED (m units) UHD OLED TV introduction Source: DisplaySearch, HSBC estimates 6 Telecoms, Media however, the expansion plans to G
16、8 have not been made due to excessive capital requirements. Although Samsung could introduce a 55” OLED TV in 4Q12, we think that it is unlikely to be a fully commercialised base yet and the benefits to material suppliers should be limited. Obstacles to OLED growth OLED panel makers face challenges
17、to expanding their OLED business from smartphones to tablets. As price competition among tablet makers has intensified, prospects for the adoption of AMOLED panels in tablets look increasingly remote given they are 40% more expensive than conventional LCD panels. We note that the 7” Nexus 7 tablet c
18、reated by Google in collaboration with Asus has been very well received partly because of its low price point of USD199. Other companies, like Apple and Microsoft, are expected to launch their own low-cost tablets soon. We continue to hold the view that movie viewing makes better use of AMOLED than
19、internet browsing or document viewing, given it takes advantage of AMOLEDs faster pixel response times. As a result, we think consumers are less willing to pay a premium for AMOLED tablets, given their overall tablet usage pattern is not focused on movie viewing. All in all, we believe AMOLED is unn
20、ecessary for use as computer monitors and is likely to skip screen sizes of 7-55”. Less for OLED Too late to commercialize now, another attempt may occur in 2014 Picture quality is better, but less than UHD Reiterate UW(V) on Duksan Hi-Metal (077360 KS, TP KRW15,000 from KRW19,000) 13 Telecoms, Medi
21、a reiterate UW(V) rating 15 Telecoms, Media therefore, we are reiterating our Overweight (V) rating. Potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated. Risks Downside risks to our investment vi
22、ew: delayed launch of flagship smartphones and TVs and slower-than-expected recovery in demand for consumer electronics. Soulbrain Valuation Our target price of KRW60,000 is based on one-year forward target PB multiple of 2.0x which is closer to the peak valuation. It implies a 9.6x 2012e PE, below
23、the five-year historical average of 14.3x. Under our research model, for stocks with a volatility indicator, the Neutral band is 10ppts above and below the hurdle rate for Korea stocks of 10.5%. Our target price of KRW60,000 implies a potential return of 23.7%, which is above the Neutral band; there
24、fore, we are reiterating our Overweight (V) rating. Potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated. Risks Downside risks include: a further delay in copper etchant sales to Samsung Electroni
25、cs and mainstream adoption of OLED technology in TVs. LGE: Summary of SOTP valuation (KRW bn) 2012-13e EBITDA EV/EBITDA (x) EV Comments +Total EV 3,046 5.9x 18,039 Home entertainment 1,131 5.2x 5,880 Applying 30% premium to the lowest 2012e EV/EBITDA multiple of Japanese peers given LGEs 2nd largest
26、 market share in LCD TV market (Sony, Sharp, Panasonic) Mobile handsets 445 10.0x 4,448 Applying average multiple of peers (Motorola Mobility Holdings and HTC) Appliance 824 4.1x 3,380 Applying average 2012 EV/EBITDA multiple of peers (Electrolux and Whirlpool) Air conditioner 646 6.7x 4,331 Applyin
27、g the multiple to Daikan Industries given LGEs strong competitiveness in CAC market -Net debt (less) 2,263 +Stake in subsidiaries 4,092 37.9% stake in LGD 3,412 LGDs Market Cap of KRW9.9trn with 15% discount 49% stake in LG Innotek 680 LGIs Market Cap of KRW1.8tr with 15% discount Target mkt cap 19,
28、867 Total # of shrs (thou) 180,066 Target price (KRW) 110,000 Source: HSBC estimates 16 Telecoms, Media therefore, we rate LGD stock Overweight (V). Potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indi
29、cated. Risks Downside risks relate to the highly volatile nature of the LCD industry. An inventory correction would be highly negative to the share price. Duksan Hi-Metal Valuation We base our target price of KRW15,000 on a 15.7x target multiple (its five-year average one- year forward PE). We belie
30、ve a five-year average one-year forward PE multiple better captures the companys specific business momentum compared to a peer multiple, especially in OLED materials versus peers, as most chemical companies are not overly focused on OLED materials. Duksan was established as a solder ball producer in
31、 1995 and started expanding its business into OLED materials five years ago. It trades at 20.0x 2013e PE and 2.5x 2013e PB. Under our research model, for stocks with a volatility indicator, the Neutral band is 10ppts above and below the hurdle rate for Korea stocks of 10.5%. Our target price of KRW1
32、5,000 implies a negative potential return of 22%, which is below the Neutral band; therefore, we reiterate our Underweight (V). Potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated. Risks Upside r
33、isks include: 1) an earlier-than-expected launch of OLED TVs due to competition between Samsung Electronics and LG Electronics; and 2) resumed investment by Samsung Display due to stronger-than-expected demand from OLED TVs and OLED tablets. 17 Telecoms, Media and 2) from time to time to identify sh
34、ort-term investment opportunities that are derived from fundamental, quantitative, technical or event-driven techniques on a 0-3 month time horizon and which may differ from our long-term investment rating. HSBC has assigned ratings for its long-term investment opportunities as described below. This
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38、 infer its contents from the rating. In any case, ratings should not be used or relied on in isolation as investment advice. Rating definitions for long-term investment opportunities Stock ratings HSBC assigns ratings to its stocks in this sector on the following basis: For each stock we set a requi
39、red rate of return calculated from the cost of equity for that stocks domestic or, as appropriate, regional market established by our strategy team. The price target for a stock represents the value the analyst expects the stock to reach over our performance horizon. The performance horizon is 12 mo
40、nths. For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated, must exceed the required return by at least 5 percentage points over the next 12
41、months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock must be expected to underperform its required return by at least 5 percentage points over the next 12 months (or 10 percentage points for a stock classified as Volatile*). Sto
42、cks between these bands are classified as Neutral. Our ratings are re-calibrated against these bands at the time of any material change (initiation of coverage, change of volatility status or change in price target). Notwithstanding this, and although ratings are subject to ongoing management review
43、, expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarily triggering a rating change. 20 Telecoms, Media HK The Hongkong and Shanghai Banking Corporation Limited, Hong Kong; TW HSBC Securities (Taiwan) Corporation Limited; CA HS
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45、ijing Representative Office; The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Securities (South Africa) (Pty) Ltd, Johanne
46、sburg; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv; US HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC Mxico, SA, Institucin de Banca Mltiple, Grupo Financiero HSBC; HSBC Bank Brasil SA Banco Mltiplo; HSBC Bank Australia Limited; HSBC Bank Argentina
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