Shares of the nation’s major flat-panel makers extended their losses yesterday amid market concerns over an industry glut and weaker-than-expected sales last month.
AU Optronics Corp (AUO, 友達光電), the world’s third-largest liquid-crystal-display (LCD) maker, saw its share price drop near its lower limit, or 6.9 percent, to NT$41.80, while its major rival, Chi Mei Optoelectronics Corp (CMO, 奇美電子), dipped 6.8 percent to NT$30.35 on the Taiwan Stock Exchange.
Shares of Chunghwa Picture Tubes Ltd (中華映管), the nation’s third-largest LCD maker, dropped 3.3 percent to NT$7.55. Innolux Display Corp (群創光電), a flat-panel making unit of Hon Hai Group (鴻海集團), plunged 6.5 percent to NT$52.20, and HannStar Display Corp (瀚宇彩晶) declined 5.8 percent to NT$9.80.
With selling pressure on panel makers intensifying throughout the day, LCD stocks significantly underperformed the benchmark TAIEX, which declined by a mere 0.05 percent yesterday.
AUO’s disappointing sales last month “compounded reports yesterday [Tuesday] that CMO had lowered its backend LCM [liquid crystal module] utilization to prevent industry bloating, pushing share prices sharply lower for a second day,” SinoPac Securities Corp (永豐金證券) analyst Jesse Knutson said in a note to investors yesterday.
On Tuesday, AUO reported preliminary consolidated sales of NT$36.73 billion (US$1.21 billion) last month — its lowest monthly sales in the past 12 months. Last month’s sales represented a decline of 17.2 percent from the previous month and a drop of 5.7 percent year-on-year, the company said in a statement.
On Monday, CMO reported NT$29 billion in consolidated sales last month, down 14 percent from the previous month but up 28 percent from a year earlier, it said in a stock exchange filing.
While AUO revealed on Tuesday that it might cut output this quarter to curb falling prices, Knutson said the market was speculating that a cut in panel production could actually worsen sector profitability rather than stimulate a demand recovery.
“We remain wary of the sector’s outlook in the second half,” Knutson wrote, citing factors such as the likely oversupply next year, weakening sector gross margin and expectations of a slow pick-up in demand.
Moreover, an alliance between the world’s top five TV brand makers is expected to make it more difficult for Taiwanese panel makers, the analyst said.
Jeffrey Su (蘇志凱), a Taipei-based analyst at Merrill Lynch & Co, said in a research report yesterday that there was no good news for panel makers in the near term.
Su said he expected the sector’s momentum to remain weak this month. He has a “neutral” rating on AUO with a target price of NT$56 and an “underperform” rating on CMO with a target price of NT$32.
BNP Paribas Securities (Taiwan) Co said in a note yesterday that more data points had emerged supporting its bearish view on the panel sector, with LCD makers canceling driver IC orders by between 15 percent and 20 percent.
The brokerage has “hold” ratings for both AUO and CMO.
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