LG Display, the world's No.2 flat-screen maker, is starting to see signs of recovery in depressed TV panel prices as it forecast a return to profitability in the current quarter after reporting its second consecutive quarterly loss.

Panel makers, led by Sharp Corp, are reducing production, after the powerful earthquake and tsunami in Japan last month, but demand from television and computer makers is too weak to absorb even lowered supplies, sending prices of large-sized LCD panels down more than one third over the past year.

But the pace of decline has been easing in recent months, raising hopes that demand from TV makers has finally improved. So far, booming demand from smartphones and tablets has been a rare bright spot in the LCD market, which has been in a glut since the summer of 2010.

A meaningful recovery in the sector is not in sight yet. But panel restocking is expected to begin in late May because of seasonal demand in the third quarter, Ji Mok-hyun, an analyst at Meritz Securities, said on Monday.

The positive outlook by LG Display, which kicked off earnings for major Asian LCD makers ahead of results due from Samsung Electronics and AU Optronics, bodes well for the sector as most panel makers including Samsung are widely expected to report heavy losses for January-March.

There are several signs that indicate overall price trend has now turned upside and we expect even depressed TV panel prices to rebound from the mid second quarter as TV makers are preparing to build up inventory ahead of new model launches, LG Display Chief Financial Officer Jung Ho-young told analysts.

LG Display, a key panel supplier for Apple's iPhone and iPad, expects TV panel prices to stop sliding and rebound from the mid second quarter, while overall shipment volume of flat screens was likely to rise by late-teen percentage from the previous quarter.

DEMAND IMPROVES

We are seeing real demand pick up and also very encouraged by strong sales data from China, although it may not be felt by the same degree across the overall panel makers...But the overall condition is improving and our positive growth guidance for both volume shipment and price is a conservative one taking into account potential disruptions in supply from Japan, said LG Display's Jung.

Highlighting soft demand from TV makers, Philips Electronics said on Monday it would transfer its TV business into a joint venture with TPV Technology after reporting weaker-than-expected quarterly net profit.

The Dutch consumer electronics company is one of the main clients of LG Display along with LG Electronics and Toshiba Corp.

Japan's earthquake will have a positive impact on panel supply-demand balance by curtailing production. But it is not good in terms of LCD parts supply, leading to a parts shortage. The impact is neutral, said Ji.

LG Display, which competes with Samsung, Sharp and Taiwan's Chimei Innolux, said January-March operating loss was 239 billion Korean won ($220 million), worse than the consensus forecast of a loss of 123 billion won polled by Thomson Reuters I/B/E/S.

But the result was broadly in line with StarMine's SmartEstimates, which places more weight on recent forecasts by top-rated analysts and expected a downside surprise of 92 percent to 235 billion won in the first-quarter operating loss.

Last week, HSBC lowered its growth forecast for the global LCD TV market to below 10 percent for this year, as most households in advanced countries have already traded their bulky tube TV sets to flat-screens.

In Japan, Sharp, which is estimated to produce around 8 percent of global LCD supply, suspended production at two TV panel plants last week until early may due to slumping domestic demand for TVs and shortages of a gas used in panel production.

LG Display shares have fallen about 9 percent so far this year, lagging a 4 percent gain in the wider market, which hit a record high this month. Ahead of the results, LG shares closed down 0.6 percent in a flat broader market.

($1 = 1088.000 Korean Won)

(Additional reporting by Hyunjoo Jin and Ju-min Park; Editing by Dhara Ranasinghe and Anshuman Daga)

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