LG Display Co., Ltd.

LPL Details

LG Display Co., Ltd. (NYSE: LPL) is a South Korean manufacturer and distributor of display panels for televisions, laptop computers, desktop monitors, tablets, and mobile devices. LPL is a world leader in display technologies such as thin-film transistor liquid crystal (LCD) and organic light-emitting diode (OLED) displays. It has production facilities in South Korea and China, as well as back-end assembly facilities in South Korea, China, and Vietnam. LPL has 715.63 million American Depository Shares (ADS) listed and outstanding (every two ADS representing one ordinary share).

Latest News:

• Showcase New OLED Solutions: LPL stated on December 22, 2021, that it will demonstrate how its flexible OLED technology generates many lifestyles at CES 2022. Virtual Ride and Media Chair are two innovative product concepts that the company will present to the public. LPL expects to emphasize the strong potential of OLED to build new markets with these products incorporating flexible OLED screens.

Q3FY21 Results:

• Growth in Revenues: Due to higher shipments of its panels for IT devices, LPL saw a 7.21% increase in revenue to KRW 7,223.20 billion in Q3FY21 (ended September 30, 2021) from KRW 6,737.65 billion in Q3FY20.
• Boost in Bottomline: LPL's net income soared to KRW 463.47 billion in Q3FY21, compared to KRW 11.12 billion in Q3FY20.
• Improvement in EBITDA: In Q3FY21, EBITDA was KRW 1,696 billion, up from KRW 1,228 billion in Q3FY20.

Key Risks:

• Customer Concentration Risk: LG Electronics Inc., LPL's largest shareholder, accounted for a considerable amount of the company's annual revenue. As a result, if a company's financial strength is overly dependent on a small number of customers for sales, the company's financial strength may be harmed in the future.
• Decline in ASPs: The average selling prices (ASPs) of display panels have generally reduced as a result of technological improvements and cost reductions. Furthermore, they are expected to continue, despite industry-wide cyclical fluctuations. Assume, however, that its display panels' ASPs are falling faster than its ability to lower manufacturing costs. As a result, the company’s financial situation and cash flow may be jeopardized.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

LPL Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

LPL stock price has surged 15.81% in the past three months and is currently trading at the mid-band of the 52-week range of USD 7.25 to USD 12.31. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 63.89. We have valued the stock using the Price/Earnings multiple-based relative valuation methodology and arrived at a target price of USD 8.96.

Considering the uptick in the stock price, current valuation, and technical indicators, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 9.67, up 0.83%, as of December 23, 2021, at 10:15 AM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

Cirrus Logic, Inc.

CRUS Details

Cirrus Logic, Inc. (NASDAQ: CRUS) is a leader in low-power, high-precision mixed-signal processing solutions for the country's most successful mobile and consumer applications. The products of the company are divided into two categories: audio and mixed-signal. CRUS sells its products all over the world, with China and the United States accounting for the majority of the company's sales.

Latest News:

• CFO Retirement: Thurman Case, the chief financial officer (CFO) of CRUS, declared his intention to retire on November 1, 2021. Mr. Case will remain in his position and try to guarantee a smooth transition after a thorough search to find his replacement.

Q2FY22 Results:

• Growth in Topline: The company reported YoY growth of 34.14% in net sales to USD 465.89 million in Q2FY22 (ended September 25, 2021) from USD 347.33 million in Q2FY21 (ended September 26, 2020).
• Increase in Net Income: The company's net income increases to USD 85.10 million in Q2FY22 from USD 59.49 million in Q2FY21.
• Cash and Debt Position: As of September 25, 2021, the company had cash and cash equivalents of USD 394.89 million with no outstanding debt.

Key Risks:

• Customer Concentration Risk: Apple Inc., CRUS's only end customer, purchased through numerous contract manufacturers and accounted for roughly 80% and 82% of the company's total net sales in Q2FY22 and Q2FY21, respectively. As a result, the loss of this customer could have a negative impact on the company's bottom line.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CRUS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

CRUS' share price has surged 14.80% in the past month and is currently leaning towards the higher-band of its 52-week range of USD 71.11 to USD 103.25. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 67.50. We have valued the stock using the Price/Earnings multiple-based relative valuation methodology and arrived at a target price of USD 85.03.

Considering the uptick in the stock price in a short period, current valuation, associated risk, and technical indicators, we believe the decent business fundamentals are adequately reflected at current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 92.36, up 1.62%, as of December 23, 2021, at 1:54 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV.  

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.