Display Supply Chain Consultants (DSCC) has updated its report covering the financial health of all publicly traded companies in the display supply chain with eight additional companies –
• Coherent
• Nitto Denko
• Orbotech
• Sharp
• Sony
• Tokyo Electron
• UDC
The Display Supply Chain Financial Health Report provides its clients with all of the critical data (income statements, balance sheet, cash flow, industry metrics), insights, market commentary and guidance released by publicly traded display supply chain companies in their quarterly earnings reports, stock exchange filings, press releases and conference calls along with unbiased analysis from DSCC analysts within 48 hours of their earnings calls.
Company analysis is provided in PowerPoint presentations while the financial and industry data is incorporated into pivot tables which makes comparisons by company, metric, layer of the supply chain, country, etc. extremely easy. In addition, the results are aggregated which results in the creation of industry averages across all financial and industry metrics.
This press release includes summaries for 15 companies as the panel suppliers’ data was aggregated in the last release and is now broken out separately. As indicated below, panel suppliers and equipment manufacturers are showing tremendous improvement in their financial health and near-term outlook.
· 3M
Revenues flat Y/Y, net income up 3% on cost savings, improved business segment mix
Electronics & Energy sales down 8% Y/Y, but operating margin improved to 24%
E&E exited renewable energy backsheet business in Q4 2015, lowered revenues but improved profits
· AUO
o Exceeded Q3’16 L/A shipment flat guidance with shipments up 3% Q/Q.
o Exceeded ASP guidance of up mid-to-high single digits with 9% ASP growth.
o Q3’16 operating margins were 2X expectations at 7%.
o AUO’s inventories fell 1% Q/Q and 28% Y/Y to a recent low and days of inventory were the lowest since 2009 at just 33 days. Inventories remain lean across the supply chain with many rush orders.
o For Q4’16, guided to revenues flat to up on higher ASPs and sustained demand. Expects blended large-area ASPs up mid-to-high single digits and material costs down 1.5% -2%. Large panel shipments expected to be down mid-single digits on capacity limitations and demand for larger sizes.
o For 2017, expects area demand up 3% – 5% with limited supply growth. No major concerns for 1H’17.
· BOE Technology
o BOE’s revenues reached a new record high of $2.9B, up 34% Q/Q and 36% Y/Y as prices rebounded and costs fell.
o Gross profits more than doubled Q/Q for the 2nd consecutive quarter, rising 107% Q/Q and 31% Y/Y to $535M, a record high. Gross margins reached 18%, the highest since Q3’15.
o Operating income was positive for the first time since Q2’15. Operating margins were 3%, also the highest since Q2’15.
o Capex was $1.255B, up 121% Q/Q and 145% Y/Y on expansion of its 8.5G and 5.5G fabs and construction of its 10.5G fab.
o Free cash flow was -$683M.
Coherent
Revenues rose 14% Q/Q and 11% Y/Y to a new high of $248M
Operating margins jumped from 12% to 19% on 83% Q/Q and 22% Y/Y growth.
Adjusted EBITDA reached 27% in Q3’16, well ahead of its long-term goal for the company of 19% – 23%.
Microelectronics revenues, which include FPDs, rose 24% and 29% Y/Y to $144M or 58% of company revenues.
Bookings slowed to $252M in Q3’16, but its backlog continued to rise, although just slightly to $890M.
Management indicated the pipeline of future bookings remained strong as OLED spending will remain high for the next couple of years and already booked $100M in the first month of the current quarter.
Its FPD shippable backlog, which it defines as systems expected to ship in the next 12 months, backlog rose 7% Q/Q and 282% Y/Y to a record $382M.
It guided to Q4’16 revenues rising 3% – 7% Q/Q to $255-$265M with comparable gross margins as the previous quarter.
CSOT
CSOT revenues reached a record high of $928M in Q3’16, up 27% Q/Q and 28% Y/Y.
Its net margins reached 12%, up from 8%. The highest value since Q3’15 and one of the highest in the industry.
CSOT revealed glass substrate input reached 769K in Q3’16, up 21% from 638K in Q2’16. Q1’16 – Q3’16 reached 2.01M, already ahead of 1.92M in 2015.
49”+ production accounted for 49% of its output and its 55” share reached 21%, #1 in China.
It also claimed Wuhan T3, its 6G LTPS fab, has “smoothly” started production, focused on 5.2” and 5.5” full HD panels with narrow borders.
Innolux
Revenues rose 14% Q/Q while falling 15% Y/Y to $2.35B, the highest since Q4’15.
Gross profits grew more than 5X in Q3’16, but were down 18% Y/Y. Gross margins reached 12%, the highest since Q3’15. Operating profits returned to the black after 3 consecutive quarterly losses.
Innolux had a large 23.6” order in Q3’16 for a single customer which helped boost the 20”-29” share to 18% of revenues and prevented it from maximizing profitability as TV panel prices have risen faster than monitor prices. Its 23.6” volumes will return back to normal in Q4’16.
Blended prices per m2 rose 14% Q/Q while falling 15% Y/Y to $330, the highest since Q4’13.
Inventories were down 2% with days of inventory falling to a recent low of 34 days.
In Q4’16, expects large-area shipments to be down mid-single digits with ASPs up double-digits. Expects all fabs to be fully loaded and IT demand to be at least as good as Q3.
Expects 7-8% area growth in the TV market in 2017.
LG Display
LG Display’s revenues exceeded expectations by 5%, rising 19% Q/Q while falling 2% Y/Y to $5.99B, the highest since Q4’15.
Gross profits rose 60% Q/Q while falling 6% Y/Y. Operating profits rose 662% Q/Q and 1% Y/Y to $288M, the highest since Q2’15 and exceeded guidance by 5%.
Shipments and capacity reached record highs. Its utilization reached the highest level since Q4’15.
ASPs were up 10% Q/Q, ahead of expectations.
It may have been hampered by the inability to raise TV panels by market averages to its parent and largest TV customer LGE. In addition, it was likely unable to raise OLED TV panel prices. Furthermore, it is still losing money in OLED TV panels. It expects OLED TV panels to generate positive EBITDA from 2H’16 through 2018 and not contribute to operating profits until 2019 on their high depreciation burden.
For Q4’16, LG Display expects profits to improve significantly on iPhone 7 panel demand with S/M panel and unit revenue share rising in Q4. Shipments on an area basis to remain flat. 10% revenue growth projected with gross profits up 22%.
Believes there is some risk for 32” price reductions from December to March. Expects larger TV panel prices, 40”-55”, to stop rising from December and stay flat to slightly downward through March.
Expects panel production capacity to be flat in 2017 vs. demand up 5%.
Believes more supply may come offline when 10.5G fabs ramp in 2019.
Nitto Denko
Revenues decreased 12% Y/Y in yen terms, but increased 4% Y/Y in US$.
Net income improved Q/Q on strength of Optronics segment.
Optronics revenue increased 17% Q/Q in yen terms, operating margin recovered to 9%.
Orbotech
Revenues of $205M were slightly ahead of guidance of $200-$208M. It was a record quarter for Orbotech and their first quarter above $200M in quarterly revenues, up 5% Q/Q and 7% Y/Y.
Gross margins rose to a recent high at 46.9%. Gross profits, operating income, pre-tax profit, net income and adjusted EBITDA all established new quarterly records in Q3’16.
FPDs had the fastest Q/Q growth of all its segments and the highest Y/Y growth of its 3 largest categories
Record FPD equipment bookings of $100M in Q3’16. Most will be delivered in Q2’17. Includes 10.5G and flexible OLEDs.
New products for flexible OLEDs gaining significant acceptance. Have 7 OLED customers in flexible pilot production, and 2 others that haven’t started production yet. Have test, inspection and repair in all those customers.
For Q4’16, expect PCB, FPD and semiconductor to each grow Q/Q in Q4’16 resulting in another record quarter with revenues at $214-$224M. 2017 revenues expected to be $805-$815M.
Samsung Display
Samsung Display’s revenues rose 14% Q/Q while falling 2% to $6.3B, the highest since Q3’15 and the highest in the display industry.
We estimate OLEDs accounted for a 57% share, down from 61% in Q2’16. OLEDs were up 17% Y/Y while LCD revenues were down 19% Y/Y.
Operating income rose 671% Q/Q and 14% Y/Y to $909M, the highest since Q2’13.
Operating margins jumped from 2% to 14%, also the highest since Q2’13.
OLED operating profits were up an estimated 63% Y/Y while LCD operating profits were down more than 70% Y/Y. OLED margins were more than 7X higher than LCDs.
2017 Display capex plan is $9.7B, more than 2X that of 2015 on increased OLED spending.
Sharp
o For Q3’16, revenues down 25% Y/Y in yen terms, down 11% Y/Y in US$ terms
o Operating profit down 20% Y/Y, operating margin near zero
Expects operating income for fiscal 2017 of $250M vs. a prior year loss of $1.4 billion and analysts estimates of $64M on numerous structural reforms and synergies with the Hon Hai Group. 2017 will be Sharp’s first operating profit in 3 years.
Sony
Revenues up 6% Y/Y in US$ terms, down Y/Y in yen
Net income down 82% Y/Y, as stronger yen hurt profitability, especially in Semiconductor group
Mobile Communications business improved to break-even, focusing on high-end segment
Home Entertainment segment sustained strong profits, operating margin 7%.
Sumitomo
Sales declined Y/Y in yen terms, but increased 1% in US$ terms. operating profit, net income declined Y/Y on stronger yen.
Operating margins of IT-Related Chemicals segment stable Q/Q at 1%.
Polarizing film selling prices fell in Q3, touchscreen panel prices fell but volume increased.
Tokyo Electron
TEL reported its highest revenues since Q1’14, up 38% Q/Q and 11% Y/Y to $1.99B on dramatic semiconductor growth to foundry, DRAM and 3D NAND manufacturers. Gross, operating and pre-tax profits were the highest in at least 3 years while net profits were the highest since Q1’15.
FPD equipment dropped 48% Q/Q but was up 21% Y/Y to $82M. FPDs only accounted for 4% of Q3’16 revenues.
FPD operating profits were just $5M, translating to a 6% operating profit margin. The limited revenues are making it difficult to boost operating margins.
FPD orders were strong in Q2’16 at $149M, up 49% Y/Y. However, in Q3’16, FPD equipment orders fell 55% Q/Q and 35% Y/Y to $67M.
TEL’s FPD backlog is at a recent high of $419M, up 25% Q/Q and 35% Y/Y.
Strong Q3’16 results caused TEL to revise its fiscal year forecast upward. FY’17 revenues were increased by 7% from 714B to 762B yen.
TEL’s FY’17 operating income forecast was increased 13% from 124B to 140B yen.
Won etch and coater/develop business at 10.5G. Expecting to win 100% of coater/developer business and 70% of dry etch business at 10.5G. New high-density plasma source for dry etching small/medium LTPS panels adopted by multiple customers.
UDC
o Revenues down 23% Y/Y on lower emitter sales, licensing flat
o Net loss of $1.5 million, compared to $7 million net profit in Q3 2015
o Acquired contract research firm Adesis in Q3 for $33 million
Over the next week, we will be adding:
· HannStar
· Japan Display
· Jusung
· NEG
· Nikon
· TPK
· ULVAC
· Wonik IPS
· And more
Companies covered in this report include:
· Equipment – Applied Materials, AP Systems, Avaco, Canon (Tokki), Coherent, Jusung, LIG Invenia, Nikon, Orbotech, SFA Engineering, SNU Precision, Terasemicon, TES, ULVAC, Viatron Technologies, V-Technology, Wonik IPS and Y.A.C.
· Materials – 3M, Asahi Glass, Corning, Idemitsu Kosan, LG Chem, Merck, NEG, Nitto Denko, Toppan, Toray, TPK and UDC.
· Panels – AUO, BOE, CPT, CSOT, HannStar, Innolux, JDI, LG Display, Samsung Display, Sharp and Tianma
· OEMs – Compal, Foxconn, Pegatron, Quanta and TPV
· TVs and Phones – Apple, Changhong, Haier, Hisense, LGE, Samsung, Sharp, Sony and TCL
· Retailers – Amazon, Best Buy, Costco and WalMart
