LG Display Co., Ltd.

Hello, I'm Heo Seok, Director of LG Display IR Room. I would like to thank everyone who attended this quarter's performance announcement conference call. Today's conference call includes CEO Kim Sung-Yeon of CFO, management of management, Lim Seung-Min, Auto Marketing, Son Ki-Hwan, Business Intelligence, Lee Ki-Young, Large Marketing, Lee Tae-Jong, Medium Marketing, Lee Won-Jae,

Good afternoon. This is Brian Ho in charge of LG Displays IR. On behalf of the company, let me thank all the participants at this conference call. Today, I'm joined by the CFO, Sung Hyun Kim, Seung Min Im, Senior Vice President of Corporate Planning, Ki Hwan Son, Vice President of Auto Marketing, Ki Young Lee, in charge of Business Intelligence, Tae Jong Lee, in charge of Large Display Marketing, Wonjae Lee in charge of medium display marketing, and Yongwon Kim in charge of small display marketing.

The conference call will be conducted in both Korean and English.

Please refer to the Provisional Earnings Release Today or the IR Event section in the company's website for more details on the financial results of Q4 2023.

Before we begin the presentation, please take a moment to read the disclaimer.

아직 외부 감사인의 감사가 완료되지 않은 상태에서 투자자 여러분의 편의를 위하여 작성된 자료임을 안내드립니다. Please note that today's results are based on consolidated IFRS standards prepared for your benefit and have not yet been audited by an outside auditor.

4분기 매출은 모바일형 OLED 패널과 연말 성수기 수요 대응을 위한 TV, I will start with Q4 business results. Revenue increased 55% QOQ to 7.396 trillion won, driven by increased shipment of OLED panels for mobile and medium and large panels for IT and TVs to meet the seasonal demand. Our work on the business structure upgrade is now showing visible impact with higher share of OLED-centered high-value ad products.

Profitability improved thanks to continued activities on cost innovation and operational efficiency. The company turned to profit in Q4 for the first time in seven quarters, posting an operating profit of $132.1 billion.

Next, let's take a look at the share price and the share price per area. The share price per area in the fourth quarter recorded 5.6 million square meters, which increased by 17% compared to the previous quarter, and the share price per area Next is area shipment and ASP per square meter.

Area shipment in Q4 was 5.6 million square meters, up 17% QOQ. ASP per square meter rose 32% to $1,064.

Mobile new product panel drop has increased, and the sales share of mobile and other sectors has increased by 16% compared to the previous quarter by 44%. The sales share of other business sectors has decreased relatively due to the increase in mobile sector. The sales share of TV sector has decreased by 18% by 5% compared to the previous quarter, and the sales share of IT sector has decreased by 31% by 9%. Next is revenue breakdown by product segment. Mobile and others took up 44% of the total revenue, up 16 percentage points.

on the back of increased panel shipment for new mobile products. The surge in mobile segment relatively lowered the revenue mix of other product groups. TV panels revenue mix was 18%, down 5 percentage points from the previous quarter, and IT was 31%, down 9 percentage points. Auto was 7%, down 2 percentage points. OLED products revenue mix was 57%, up 15 percentage points from the previous quarter, owed to growth in panel shipment from mobile and TV.

Next is the balance sheet and the main indicators. While the stock price continues to minimize the stock, the maturity sales have expanded, and it recorded 2,5280 billion won, which decreased by 8,210 billion won compared to the previous quarter. The cash assets are 3,1630 billion won. Next is on the financial position and key metrics. Inventory was 2.528 trillion won, decreased by 821 billion QOQ as the company kept up efforts to minimize inventory and expanded seasonal sales.

Cash and cash equivalents stood at 3.163 trillion won. Debt-to-equity ratio was 308%, lower by 14 percentage points from the previous quarter. Current ratio and net debt-to-equity ratio were unchanged from the previous quarter.

In the basic income, 4.870 trillion won, in terms of investment savings and interest rates, 9,240 trillion won decreased compared to the previous quarter, 기말 현금은 3조 1,630억 원을 기록했습니다. Cash flow at the end of the quarter was 3.16 trillion won, decreasing by 924 billion from the 4.087 trillion QOQ due to investment execution and repayment of borrowings. Next is on Q1 guidance. With panel shipment expected to decline across the products due to seasonality, area shipment is projected to decline by 10% level.

with ASP per square meter falling by mid-20% level.

Last, let me turn to the December 18, 2023 decision on capital increase to explain about the background, purpose, and future steps. OLEG's business competitiveness and The decision was made to strengthen the financial stability of the future and to strengthen the financial stability of the future. Currently, the total number of stocks issued is 357,815,700, and the number of new stocks to be issued is 14,218,430, and the total number of stocks issued since the rise will be equivalent to 500 million, which is the total number of stocks issued by the party.

The company decided on paid-in capital increase with the objectives of strengthening our OLED competitiveness, solidifying the foundation for sustainable growth, and enhancing financial stability. Total number of shares currently outstanding is 357,815,700, And the number of new shares to be issued is 142,184,300, which will bring the total number of shares after capital increase to 500 million shares or the authorized stock under the company's Articles of Incorporation. Capital increase rate corresponding to the rights issue is 39.74%.

The capital increase is a decision to enhance competitiveness of our small and medium OLED business and operational stability of our large OLED business while responding to the rapid growth of the OLED market

and to strengthen our financial security.

Funds raised from the capital increase will be 1.43 trillion based on the first indicative subscription price.

which is planned to be used for facilities, operations, and debt repayment.

IT-specific OLED fan and mobile-type plastic OLED production line expansion will be used as resources for the completion of the expansion of the mobile-type OLED production line and vehicle OLED facility.

First, the company plans to invest approximately $416 billion in facilities and technology to strengthen the basis for future growth of small and medium OLED. Namely, it will be for finalization of the IT-dedicated OLED fab, expansion of plastic OLED line for mobile, and expansion of automotive OLED facilities.

$6,220 billion of the funding will be used as operating funds for purchase of raw materials in preparation for the increase in customer volume of new OLED products and customer volume of global customers. This year, the increase in the amount of OLED products on all products will greatly increase the purchase volume of OLED raw materials, as the increase in the amount of OLED sales will be expected. We will continue to strengthen the stability of production and operation by strategically securing resources for the expansion of the OLED business.

Another $622 billion will be used for operating expenses, including the purchase of raw materials in preparation for new OLED products for global customers and increased customer volume. Sharp increase in raw material procurement is expected this year, as OLED revenue mix is expected to rise with growing OLED volume across all products. We will strengthen stability of our production and operations by proactively securing financial resources needed for OLED business expansion. And the remaining, around 394 billion won, will be used to repay debt and strengthen our financial stability. With the scale of financing we currently anticipate, the company's debt-to-equity ratio is projected to fall from 308% at the end of Q4, or before the capital increase, to around 260% afterwards. I will talk about the schedule.

And about the timeline,

Offering method is allocation to shareholders followed by public offering of forfeited shares. The first indicative subscription price has been determined at $10,071 as of January 23rd, applied with a 20% discount. The second indicative subscription price will be determined on February 29th, and the definitive subscription price will be determined on the same day. at the lower of the first and second indicative subscription prices.

Existing shareholder subscription will be held from March 6th to 7th,

followed by public subscription from the 11th to 12th of the same month. New shares will be listed on March 26. For more details, please refer to the already disclosed material event report and the securities registration statement.

Next, CFO Sung Hyun Kim will walk us through the key highlights. Hello, I'm CFO Kim Sung Hyun.

Good morning and afternoon. This is the CFO, Sung Hyun Kim. Thank you for joining our conference call.

We continue to study the business strategy and make efforts to improve our business performance. In particular, we have launched a high-end business structure that focuses on price innovation over the past few years, and the results are gradually being displayed. The company will continue to establish a stable revenue structure by strengthening competitiveness and business foundation in all areas of OLED business, such as TV, IT, mobile, and car use.

The industry as a whole is faced with a challenging time for macroeconomic uncertainties and market volatility. Despite the external challenges and market conditions, the company is relentlessly working to improve our business performance. We are reviewing our business strategy against changes in the environment, our internal capabilities, and future risks in each of our business segments. We have been, in particular, trying to upgrade our business structure for several years now with focus on cost innovation, and the results are becoming increasingly visible. We will keep strengthening our competitiveness and business foundation in all areas of OLED, including TV, IT, mobile, and automotive, to secure a stable revenue structure and enhance corporate value.

By business, in large OLED, we plan to further expand our position in the premium TV market

and improve profitability by boosting our customer portfolio, centered on ultra-high resolution and ultra-large products, as well as cost innovation in yield, productivity, and material cost.

In the IT OLED sector, we are preparing a mass production system with excellent durability and performance, such as long-term, high-intensity, and low-power. When mass production starts this year, In IT OLED,

Preparation continues on schedule for mass production and supply structure using tandem OLED technology that provides outstanding durability and performance such as long life, high luminance, and low power. Once mass production starts within the year, it will significantly strengthen our fundamentals by upgrading our business structure. In mobile OLED, revenue mix of high-value ad products has grown based on increased production capacity. The company will keep expanding our market share in high-end smartphones this year.

Next is the auto business sector. The company is continuously improving its business performance based on high-end LTPs LCDs and high-end LTPs LCDs based on tandem OLED technology, ATO, and high-end LTPs LCDs. In particular, in the case of car OLEDs, after the first production in 2019, Next is auto. We continue to improve business performance driven by differentiated products and technological competitiveness.

including P-OLED and ATO using tandem OLED technology and high-end LTPS LCD. In particular, our expansion is accelerating in automotive OLED, having secured 10 global premium OEM brands as customers in just four years since the first mass production in 2019. We will solidify our position as the world's number one by building up our customer base as well as orders and sales.

Last is on our investment activities.

CAPEX last year was $3.6 trillion, reduced by $1.6 trillion from 2022. This year, under the principle of strengthening financial soundness, CAPEX is planned at $2 trillion level on a cash-out basis, focusing on essential recurring investments and projects agreed upon with customers.

The economic situation in the city is getting worse. Thank you.

While market volatility is expected to linger due to the prolonged macroeconomic instability, we are going all out to create customer value and achieve profitability by strengthening our OLED business competitiveness and growth foundation. We will also keep driving company-wide cost innovation and operational efficiency to secure financial soundness and enhance business stability to improve our performance over the past year. Thank you very much for your attention.

That brings us to the end of earnings presentation for Q4 2023. We will now take your questions. Operator, please commence with the Q&A session.

Now, Q&A session will begin. Please press star 1, that is star and 1, if you have any questions. Questions will be taken according to the order you have pressed the number star 1. For cancellation, please press star two, that is star and two on your phone. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only two questions per each participant. The first question will be provided by Dongwon Kim from KB Securities. Please go ahead with your question.

Thank you very much for taking my question. I have one question about the market outlook.

What is the company's expectations of the demand and the ASP per square meter for each of the products?

Yes, this is Ki-young Lee, B.I. In terms of the overall display demand, we expect that the demand, which has been variable over the past three years due to COVID-19, will stabilize overall in the next 24 years.

This is Ki-young Lee in charge of business intelligence responding to your question. Let me explain about the overall expected trend in display demand. During the COVID-19 pandemic, demand had been quite volatile, but then we expected demand to be more stable in 2024. In the case of TV,

The demand for ultra-large TV is on the rise, which also bodes well for the demand for set panel area.

In terms of TV, the demand for ultra-large TV is on the rise, which also bodes well for the demand for set panel area.

we are trying to reduce the price change and stabilize the market price by adjusting the price based on demand.

And in terms of supply as well, we see that the panel makers are trying to stabilize prices by adjusting the production capacity based on the real demand and adjusting the supply as well.

Also, due to the recent earthquake in Japan, some parts are expected to be charged,

And due to the recent earthquake in Japan, there might be some disruptions in the supply of the necessary parts and components, which is also expected to drive up the prices slightly in the first half of the year.

The growth is expected, but the width is expected to be reduced.

And in terms of IT, the macroeconomic environment is expected to remain uncertain, meaning that the negative growth in IT demand is expected to continue, but then it is also expected to narrow.

Also, due to the replacement of PCs that were expanded during the COVID-19 period since the end of 2024, We are expecting gradual recovery in demand, especially in the second half of the year, because during the COVID pandemic period, demand for PCs had increased,

and now such a PC is coming upon the replacement cycle starting in the second half of the year. In addition to that, there are preparations for replacement with the upcoming expiration of the support for Windows 10, and also there is a growth in the AI PC market as well.

As a result, for the IT panels as well, just like TV, we believe that the prices are also going to remain flattish based on the real demand. In addition, the high-end smartphone market and auto display market targeted by the company

In addition, the company's targets, the high-end smartphone market as well as the auto display, are expected to remain on the rise.

Thank you. We will take the next question.

The following question will be presented by Sunwoo Kim from Meritz Securities. Please go ahead with your question.

Yes, hello. I am Sunwoo Kim from Meritz. I would like to ask you a question about the financial structure. In 2023, our cash flow has increased a lot to 13 trillion won. As you have explained well, we have successfully processed the cash flow, Thank you. I have some questions about the company's financial structure. Now, in 2023, the company's net borrowings have topped 13 trillion won.

And of course, the company is now successfully going through the capital increase. But then afterwards, I'm wondering about the company's plan on managing the financial structure and also managing the financial soundness overall. So if you could also explain a bit more about some of the details of the financial structure. So for example, some of the borrowings or the debts that are coming to maturity within the year, as well as the expected interest rate burden.

This is the CFO responding to your question. Now, in terms of the question on the debt management, I would take it that it is more focused on the borrowing side, and so I will also focus my response on borrowings. Currently, if I were to talk about the overall situation, in various situations, we were able to implement the ideal growth. You may have some complaints about the stock market, but in the overall picture, it was clear that it was an act of restoring trust in the market.

Now, in looking at the overall picture, of course, the company went into capital increase under various circumstances. And we do also realize that this was not pleasing to everyone, especially in the stock market. But then also looking at the overall market, we do believe that this was an important step in recovering the trust from the market.

It was like that before, but even now, In the financial market, it is not difficult for us to reach the required funds. However, it is clear that we need to reduce the burden of financial costs in order for our company to become a better company.

Now, it has always been true, and it is still today, that the company never suffered difficulties in raising funds from the financial market. But then, for the company to become an even better company, we also believe that it is vital that we improve our financial soundness and reduce our financial cost burden.

As I mentioned earlier, We are now trying to be a symbol in terms of trying things as a condition. The next step we need to take is to create revenue quickly and to make the cash flow a perfect positive cash flow. That's the obvious task.

And one of the conditions of becoming a better company, as I have mentioned earlier, is to go into the capital increase, which we have decided to do so. And another step would be to quickly become profitable and also to have a completely positive cash flow.

And other efforts, other steps would be ongoing. For example, the activities to improve and upgrade our business structure and to reduce costs.

So these activities, I assure you, will continue throughout 2024 so that in the end, we will be able to have a healthier structure.

Of course, asset management is something that can be done by the financial side, but it is my principle that management, maintenance, and management are done based on business performance.

Now, in terms of the debt management, obviously fundraising or financing, that can be done from the financial department or the financial organization. But then in terms of repayment or maintaining or managing the debt, I believe that that can be borne by business results.

Yes, that's a long story. The lifetime of our difference is a little less than 4 years. If you divide the total difference in 3.8 years to that level, you can calculate the amount of difference that comes back every year. And the content is basically our goal is not to increase the difference this year. How far does it go exactly?

So that was a bit of a long-winded introduction leading to the response to your question. Now in terms of the response, now our borrowings, it's quite simple. The lifetime of our borrowings are less than four years. So usually it's about 3.8 years. So all you have to do is divide the outstanding borrowings by 3.8 years, and you will get the borrowings that come into maturity every year. And we plan to abstain from increasing our borrowings as much as possible this year, which also means that we will try to reduce our borrowings as much as possible within the year.

Yes, we will take the next question.

The next question is from Gyuhwa Lee of NH Investment & Securities. The following question will be presented by Gyuhwa Lee from NH Investment & Securities. Please go ahead with your question.

Hello, I am Gyuhwa Lee of NH Investment & Securities. Thank you for the opportunity to ask a question. There are many reports about IT OLED. I would appreciate it if you could share your perspective on the IT OLED business, which is an important axis of performance improvement in 2024.

Thank you very much for taking my question. Now, I see there are a lot of news reports about the IT OLED, and we believe that IT OLED is also going to be an important pillar for the company in improving your overall business results in 2024. So, can the company share with us the outlook on the IT OLED market this year?

Hello, I'm Yong-Hoon Kim. The IT OLED production preparation is going smoothly as planned. The Tandem technology based on two-stack applied to IT OLEDs has the advantage of low power and long life, so we have been accumulating advanced technology and 양산 경쟁력 in the company. If we start 양산 in the middle of this year, it will run well and expand stably, so we expect that the business quality will be further strengthened in terms of the entire business structure. That's all.

This is Yongwon Kim in charge of small display marketing responding to the question. Now for the IT OLED, the preparation for mass production is underway on schedule. And the double stack based tandem technology to be applied to IT OLED boasts the advantages of low power consumption and long life. And the company has been accumulating leading technologies as well as mass production competitiveness. So if we are to go into mass production within the year, and we will have, of course, stable operations and expansion afterwards, then this is going to be very helpful in strengthening our business fundamentals, especially in terms of upgrading our business structure.

We will take one last question.

The last question will be presented by Won Seok Jeong from High Investment and Securities. Please go ahead with your question.

There have been a lot of news reports about the large OLED showing negative growth. So news reports coming last year about large OLED showing negative growth.

So, what is the company's target in terms of the large OLED shipment in 2024? And also, are there any changes to the existing customers or the new customers? So, if there can be an update on the overall customer base. Thank you.

I'm Lee Tae-jong, the marketing manager of Daewong. First of all, I'd like to answer about the market. As our BI mentioned earlier, This is

in charge of large display marketing, responding to your question. Now, in terms of the overall market, as was explained by the BI department, yes, there had been negative growth last year, and it is likely to continue. But then, because of the easing of the overstocking that started in the latter part of last year, we believe that the negative growth is going to narrow down considerably. And also, the macroeconomic uncertainties and the external environment volatility are also likely to continue into 2024. But then we do believe that overall, the TV market is also going to see improvement in demand.

Also, the high-end market that JASA is always targeting is expected to improve gradually. So, including the second meta-true technology of JASA, And of course, we are targeting the high-end market, and the company's expectation is that the high-end market would also gradually improve this year.

And also what we have showcased at the CES, the Meta 2 technology as well. So we see that the OLED adoption is increasing overall in the high-end products. So together with the Meta 2 technology as well, we believe that overall there is going to be an improvement in the market. Then also in terms of the gaming market, which we have entered last year, we are also showing quite a lot of good results. So overall, we believe that for this year, the OLED shipment is going to increase.

Lastly, we would like to apologize for not being able to talk about specific customer-related issues in detail. However, we continue to build a good strategic relationship with global TV set customers, so we will continue to work on new technologies and new market growth. As to the latter part of your question, please understand that we cannot mention specifics about our customers, but then we are maintaining strategic relations with many of the global TV set customers.

And so we are in a good position to continue to adopt new technologies and to see the market grow. So based on this, we believe that our projection for OLED shipment is to see increase by 20%.

Yes, that's all for LG Display's 4th quarter of 2023. Thank you for attending.

We will now close the Q4 2023 earnings conference call. Thank you once again for joining us today. Please do contact us at the IR team for any additional questions. Thank you.