Morgan Stanley Securities (Morgan Stanley) pointed out in its latest report on the "LCD Panel Industry" that after several months of price correction, the panel industry is finally approaching good news. In the Greater China market, Morgan Stanley likes INNOLUX, LG Display, and BOE, all of which give a "better than market" rating, while AUO maintains a "neutral" rating.
Morgan Stanley pointed out that as the industrial fundamentals hit the bottom, TV sales in Chinese Mainland were strong during the October holiday promotion period, and the sales momentum in the first week of the Double 11 promotion season was good, some panel manufacturers considered raising TV panel prices at the end of the fourth quarter. In addition, the momentum of stocking up during the Lunar New Year may also become stronger.
In terms of TV panels, the current price trend is in line with Morgan Stanley's previous expectation, which is that mainstream product prices will remain at the September level and will continue until the end of the year. Morgan Stanley estimates that prices will slightly decline in the fourth quarter of this year compared to the previous quarter, with a quarterly decrease of low single digits, similar to the 3% quarterly decline in the third quarter.
As for IT (monitor and laptop) panels, prices remained roughly unchanged in the first half of November, with laptops experiencing a slight drop of 0.2% and monitors experiencing a slight drop of 0.1%, reflecting suppliers maintaining discipline to cope with the off-season. Morgan Stanley maintains its original expectation that prices will remain at current levels in the coming quarters. Morgan Stanley believes that IT panel prices will remain flat in the fourth quarter, slightly lower than the slight quarterly increase in the third quarter.
Among the two major players in the Taiwan stock market, Morgan Stanley is more optimistic about INNOLUX, focusing on its cheaper evaluation and better benefiting from the growth momentum of commodities. Based on INNOLUX's estimated profit for 2025, Morgan Stanley has set a target price of NT $19.5, with a stock to equity ratio of 0.7 times, which is 0.5 times higher than the mid cycle average.
As for AUO, although it can also benefit from the improvement of industry prospects, its stock price is already high, and the proportion of TV panel revenue in the first half of the year is only 20-25%, lower than INNOLUX's 35-40%. Therefore, Morgan Stanley gives a "neutral" rating with a target price of NT $17, based on the 2025 profit forecast, giving a stock to net asset ratio of 0.8 times.
In addition, Morgan Stanley also has a positive outlook on panel driver chip (DDIC) manufacturer Novatek, giving it a "better than market" rating. It is estimated that Novatek will benefit from cost cutting to stabilize gross profit margins, new potential markets brought by Samsung Display, and growth momentum in foldable smartphones. Moreover, the stabilization of panel prices is also conducive to the stability of DDIC prices.
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