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. Not sure if this involves their 55" panels or not.Samsung Display likely to resume OLED capex soon
OLED 5.5G expansion likely for A2 not A3
Hopes have grown for OLED capacity expansion to resume since the official
launch of Samsung Display (SD) on Jul 1, there is some uncertainty regarding this
plan. We recently visited equipment makers in SD’s supply chain to confirm if 5.5G
OLED capex will resume soon. We found some changes to the plan compared to
earlier expectations. Specifically, we now expect capacity to increase at the A2 fab
(tentatively named A2E) rather than the A3 facility. But, we do not believe there will
be any significant capacity changes regardless of the line. However, 8G capex is
likely to be delayed as the A2E space was originally designed for 8G lines.
We expect the new 5.5G lines to adopt flexible and laser induced thermal imaging
(LITI) process technologies used at the A2P3 line. We believe this is likely as the
thin-film process is close to resolving technological difficulties that have prevented
flexible displays and delayed 5.5G OLED capex. We believe LITI-based highresolution
displays and flexible technologies are essential to reinforce the
differentiation strategy at Samsung Electronics (SEC)’s smartphone business and
to ensure SD’s OLED competitiveness.
Additional 5.5G and 8G OLED lines to built at A3 facility.
We expect the A3 facility, designed for only 5.5G capacity, will house both
additional 5.5G OLED expansion and 8G lines going forward, as 5.5G capex will
take place at the A2 fab in 2H12. As such, there are concerns over 8G OLED
capex delays as mass production lines will likely be built at the A3 facility. But, we
still expect shares of OLED equipment players taking part in the expansion to rally
from 1H13 as mass production should begin from 2014.
OLED expansion likely on small- and mid-sized panel demand in 2013
We maintain our view that 5.5G OLED equipment will be ordered in 3Q12 as
additional OLED capacity is required to ramp up in 1H13 as SEC’s smartphone
sales will outpace existing SD’s 5.5G OLED capacity. Stripping out SEC, smalland
mid-sized panel sales account for around 40% of SD’s total capacity, but this
should fall sharply, slipping below 30% from 2Q13. As such, we expect 5.5G capex
OLED equipment shares to rally as orders resume, SFA Eng top pick
We expect OLED equipment shares to rally as SD resumes orders from 3Q12.
Shares are trading at an average 8-9x 2012 PE on concerns over capex delays.
Despite these worries, we maintain a positive view as the capex cycle should
extend from 5.5G to 8G. Specifically, we maintain SFA Engineering (SFA) as our
top pick, with a BUY rating and W80,000 TP given the company’s experience in
supply OLED equipment to SD. Of note, SFA currently trades at 8.8x 2012 PE.