Silicon Works (108320) expects an OLED TV effect after surprise at 2Q (LG, LG Display, LG Electronics)

We maintain BUY and our recommendation. Increase the target price from 50,000 to 52,000 won

– Increase TP to W52,000 (W / E from 14x to 12MF EPS from W3,704). We believe that the OLED TV semiconductor offering will boost earnings growth in 2018-2020.

– Based on the residual profit model Long-term intangible value per share W54,000 Should outperform the OP of 2Q18 by W10.5bn. Improved product mix targeted by TDDI for mobile

– Profits exceeded expectations due to the fact that TDDI (Touch Display

Driver IC) sales are increasing. Although TDDI is not a product applied to OLED smartphones, it is a single chip product with touch chip functionality added to the existing DDI, which helps in improving the product mix . As a result, the OP margin went from 2.0% in the first quarter to 5.9% in the second quarter. 16.4 billion won in the third quarter and 21.8 billion won in the fourth quarter

– Time controller semiconductor sales for OLED TVs, acquired by LG Electronics, will contribute to sales from 3Q09, which is expected to increase annual sales by about 20 billion won. CI OLED TV semiconductor sales will continue to contribute to 2H11. Based on 2018, OLED TV Driver IC semiconductor shipments are estimated at 3mn units. On a total business turnover of 791.6 billion won in 2018, OLED TV semiconductor sales are expected to reach 115.5 billion won (15% of the turnover).

The pull effect of OLED TV profits is larger than expected. Sales forecasts of over $ 100 billion a year from 2018

– The profit and share price of Silicon Works are determined by the activity of semiconductors for OLED, and investors are more likely to expect semiconductors OLED as OLED TVs. As the company provides IC drivers to OLED display customers in China as well as domestic OLED display customers, growth is on both sides

– However, it is thought that the activity of semiconductors for OLED TVs is actually driving the growth of the company's profits. After the transfer of LG Electronics business, LGE simultaneously provided Driver ICs and Timing Controllers LG Display plans to ship OLED TV panels (3mn units in 2018, units of 4mn in 2019 and units 7mn in 2020)

– Silicon Works' OLED TV semiconductor sales are expected to reach 115.5 billion won in 2018, 138.6 billion won in 2019 and 179.6 billion won in 2020