(Recasts with comments and details)
By Baker Li
TAIPEI, April 22 AU Optronics (2409.TW), the
world's No.3 LCD maker, posted a first-quarter profit well
ahead of market expectations, as stronger demand and rising
prices for its screens pulled the Taiwan firm out of a
downcycle a year ago.
A robust showing in 2008 has been widely anticipated as the
Beijing Olympic Games in August is set to fuel demand for LCD
TVs, and AU (AUO.N) is also planning to build a new
state-of-the-art LCD plant by 2012 to tap future growth.
Despite concerns over a slowing U.S. economy, research firm
DisplaySearch said demand for laptop PCs that use liquid
crystal displays (LCDs) will also be strong from emerging
markets, including China, Brazil, Russia and India, in the next
AU gave a mixed outlook for its shipments and prices of PC
and TV panels in the current quarter, but analysts say new
technology could be a long-term trigger, including LCDs that
use power-saving light-emitting diode (LED) backlight or full
high-definition technology on desktop monitors to allow
consumers to watch television programs.
That would bode well for AU, Chi Mei Optoelectronics
3009.TW and two bigger South Korean rivals, LG Display
(034220.KS) and Samsung Electronics (005930.KS).
"In my crystal ball, I'd say visibility of the LCD industry
is clear because it's a growing market," said Kevin Yang,
president of Taiwan's Paradigm Asset Management Co Ltd, which
oversees T$30 billion ($990 million) in client assets.
"TV is a very promising sector and the pie is getting
bigger and bigger," said Yang, whose company owns shares of AU
and Chi Mei, Taiwan's two biggest LCD makers.
AU Optronics Corp, which supplies LCDs to top PC sellers
such as Dell Inc DELL.O and Hewlett-Packard Co (HPQ.N) and
some TV brands, booked January-March net profit of T$26.98
billion despite a stronger Taiwan dollar resulting in a foreign
That was a swing from a year-ago loss of T$5.1 billion and
marked the company's second best quarterly profit.
The profit beat a T$15.2 billion forecast according to
Reuters Estimates, but fell short of the record T$33.1 billion
profit in the fourth quarter, when consumers shopped for more
PCs and thinner TVs that use LCDs in the run-up to Christmas.
AU's results came after the Taipei stock market closed on
Tuesday. Its stock rose 0.2 percent to T$58.40 while the main
TAIEX share index .TWII dropped 0.5 percent.
Given the industry's strong outlook for 2008, Merrill Lynch
has an "overweight" rating on the LCD sector, including "buy"
ratings on AU, LG Display and Samsung Electronics.
Tight supply is possible in the second half and it is too
early to be pessimistic over 2009 after major LCD makers focus
more on profitability and returns on equity, instead of
aggressive output expansion," Merrill said in a note.
This month, LG Display Co, the world's No.2 LCD maker,
posted a record quarterly operating profit, but said Sony
Corp's (6758.T) aggressive pricing strategy could affect screen
prices and sales in the second quarter. [ID:nSEO169222]
AU expects shipments and prices of PC and TV panels to be
mixed in the second quarter, with PCs faring better.
"On the IT side, demand is healthy and I would be
cautiously optimistic for the second quarter and third
quarter," Vice Chairman H.B. Chen told an investor conference,
where he announced a longer-term plan to build a new factory
using more advanced 10th generation or higher technology for
AU has not yet decided the location of the new factory and
investment figures, said Chen, whose company sells about half
of its panels for thin televisions.
Global shipments of LCD TVs will top 100 million units this
year, up from 78.5 million in 2007, according to research firm,
AU's net profit is expected to rise by two-thirds to T$77
billion in 2008, but the profit could fall to T$66 billion in
2009, according to Reuters Estimates.
AU shares fell 17 percent in the first quarter compared
with a flat broader market. Smaller local rival Chi Mei, whose
quarterly earnings are due on April 29, dropped 12 percent in
the same period.
(Editing by Anshuman Daga and Ken Wills)