20170118-三星证券-Meaningful_demand_a_must_this_year_53页_1mb

OLED Sector Update Summary

Core Content

This document provides an update on the OLED sector, focusing on supply and demand dynamics, key players, and investment recommendations as of January 18, 2017.

Main Points

• OLED Demand Outlook: The report emphasizes that meaningful demand is crucial for the OLED sector in 2017. While 2016 saw a significant increase in OLED equipment orders, the expected increase for 2017 is a 14.7% drop to 180,000 sheets, indicating a slowdown in demand growth. The report suggests that if Chinese firms do not continue expanding capacity, or if new OLED formats like foldable displays do not reach mass production, equipment shares may have already priced in demand expectations.

• OLED Supply: Korean panel makers, particularly Samsung Display, have been increasing their OLED capacity, with Samsung Display converting some LCD lines to OLED production. Chinese panel makers, such as BOE, CSOT, and GVO, are also expanding their capacity, but the report highlights the uncertainty around their ability to scale effectively.

• Investment Recommendations:

  • SKC KOLON PI: Target price set at KRW17,000 (26.4% upside), with a BUY recommendation due to its domestic monopoly in PI film and potential to become a second vendor for PI varnish for Samsung Display.
  • SFA Engineering: Target price raised to KRW90,000 (32.4% upside), with a BUY recommendation.
  • Innox: Initiated coverage at BUY with a target price of KRW33,000 (37.5% upside), due to its potential in the flexible OLED market.
  • Duksan Neolux: Target price cut to KRW28,000 (6.9% upside), with a HOLD recommendation.
  • AP Systems: Downgraded to HOLD with a target price of KRW30,000.
  • Tesna: Not rated, but the report suggests monitoring its potential for recovery.

Key Information

• OLED Order Cycle: The OLED equipment order cycle peaked in 2016, driven by Apple's adoption of OLED displays. The report notes that orders in 2017 are expected to be lower, with a focus on the potential for future growth if new OLED formats are introduced.

• Market Cap vs Orders: The report compares the market cap of OLED equipment firms with their new orders, indicating that shares typically move ahead of earnings and in sync with order momentum.

• OLED Value Chain: The value chain includes various segments such as equipment, materials, and parts. The report highlights that while materials vendors may see growth, they also face risks depending on the specifications of the end products.

• Company Reports: The document includes detailed reports on major OLED players, such as Samsung Display, BOE, and others, with information on their capacity investments and customer relationships.

Tables

OLED Capacity and Investment by Country

Valuation Table

Conclusion

The report underscores the importance of demand in the OLED sector and highlights the risks associated with overreliance on Chinese panel makers. It recommends focusing on materials and component suppliers, particularly those in Samsung Display's supply chain, and advises caution with equipment stocks due to the anticipated slowdown in order growth.