Merrill Lynch optimistic about panels, expects strong demand

The institutional investor based its optimism for the flat panel industry on three factors: First, a reduction in capital expenditure by manufacturers over the past two years has led to an equilibrium in supply and demand. Second, more advanced technologies have emerged. Third, large-size panels have become a trend and are expected to lift sales.

The three factors are expected to boost average sales price and capacity utilization at manufacturing plants, said Merrill Lynch, which also cited strong LCD TV business in North America, especially during the Thanksgiving period.

The market had expected LCD TV sales in North America to experience flat growth this year. Yet as it turned out, sales in September and October increased by 13 percent and 7 percent, respectively, on a year-on-year basis. Overall, sales over the first 10 months have increased by 6 percent year-on-year, beating market expectations.

Making things better, sales were strong during the Thanksgiving period, when retailers offered discounts of 20 to 50 percent on TVs 50 inches and larger on Black Friday, the day after Thanksgiving Thursday when most businesses record profits with black ink.

These developments caused Merrill Lynch to express a favorable view over panel shares in the short-term. It recommended AU Optronics, which closed at NT$12.05, up 1.69 percent, yesterday.

As for rival Chimei Innolux, Merrill Lynch does not recommend it as the firm's fundraising plan has been postponed to January next year, it said.

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