PREVIEW-LCD makers set for strong Q3; focus on outlook

* What: Q3 earnings for leading LCD panel makers

* When: From Thursday, Oct. 15

* Q3 profits likely jumped, focus on coming quarters

* LCD prices turned weaker but low inventory to help

* Korea's Samsung, LG Display underperform benchmark since end-Aug

By Rhee So-eui

SEOUL, Oct 13 (Reuters) - Leading flat screen makers in South Korea and Taiwan are likely to report a jump in quarterly profit after strong demand and a shortage in raw materials boosted prices, while investors will eye the outlook as a slowdown looms in a sluggish global economic recovery.

Shares of top player Samsung Electronics (005930.KS) and No.2 LCD maker LG Display (034220.KS) have recently underperformed Korea's benchmark KOSPI .KS11 on worries over weaker profitability.

"We had a strong rebound this year, but investors will remain cautious about future momentum until the global economy shows clearer signs of a recovery," said Park Hyun, an analyst at Prudential Investment & Securities.

On Thursday, LG Display kicks off the earnings season for the highly cyclical flat screen industry.

Over the past year, makers of liquid crystal display (LCD) screens have managed to recover quickly from a severe slowdown, riding largely on the popularity of flat-screen TVs. A shortage of key glass input sped the rebound in panel prices until late in the third quarter, boosting margins for manufacturers.

Samsung will probably see its LCD business post consolidated operating margins of about 16 percent in the third quarter, up from 3 percent in the second quarter, while LG Display is set to report quarterly net more than doubled, both on the year and on the quarter.

In Taiwan, AU Optronics (2409.TW) and Chi Mei Optoelectronics 3009.TW are also seen swinging to profits.

Screen prices have however trended down since late September as demand slows.

At LG Display, analysts expect average LCD prices to fall by 6 to 7 percent in the fourth quarter, after having risen by around 12 percent in July-September.

"LCD prices will keep falling through February," said Park Sang-hyun, an analyst at HI Investment & Securities. "But inventory is low this year and I think LCD companies will be able to have a soft landing."

MILDER DOWNTURN LIKELY

Falling TV set prices and shrinking margins at TV makers will put pressure on panel prices for the rest of the year, but many analysts expect the price drop will be milder than in previous downturns.

"We believe the LCD industry will likely see healthier fundamentals in the longer term, with industry-wide disciplined inventory and utilisation control," said James Kim, an analyst at Nomura.

While margins are set to fall in the fourth quarter and the first quarter of 2010, many analysts say most LCD firms will likely remain in the black throughout the weak season.

The outlook is bright on the demand side, as lower prices encourage consumers to replace old cathode-ray tubes with sleek LCD models. LG Electronics (066570.KS), the world's second-biggest TV brand, expects its LCD TV sales to jump nearly 50 percent in 2010. [ID:nSEO292816]

Shares in LG Display have fallen 10 percent since the end of August on worries over the weakening profit momentum. A majority of analysts surveyed by Thomson Reuters still rate the stock a "buy" or "strong buy" on cheap valuations.

Samsung Electronics declined 3 percent since end-August, while the KOSPI .KS11 was nearly flat. AU shares fell 3 percent and Chi Mei gained 3 percent versus a 11 percent rise in the Taipei market .TWII. Company Estimated Q3 Year ago Qtr ago Date

profit profit/(loss) profit/(loss) LG Display 798 bln won 295 bln won 302 bln won Oct. 15 AU Optronics 5.8 bln T$ 860 mln T$ (6.6 bln T$) Oct. 22 Chi Mei 260 mln T$ (4.0 bln T$) (8.8 bln T$) Oct. 26 (Additional reporting by Baker Li in TAIPEI) (Editing by Clarence Fernandez)