This action might not be possible to undo. Are you sure you want to continue?
16 June 2012
In-Cell & Touch Panel
A major breakthrough in display: Opportunity in smartphone and Tablet PC
Given uncertainty surrounding In-cell touch panel technology (“In-cell”), we illustrate (1) where In-cell is in terms of technology spectrum; (2) Incell cost structure analysis; (3) quantify impact of In-cell for supply chains; and (4) implications for major LCD panel and touch panel makers. What’s In-cell technology? In-cell touch panel is a display panel integrated with touch sensor which is a thinner, lighter and more flexible touch solution. This is economically viable for single models with big volume (i.e. iPhone). Since it requires only one lamination layer, this provides set makers one-stop solutions and can match with any kind of cover lens such as 3D or curved lens design. In-cell will save up to 20% over add-on type: We estimate In-cell to reduce panel costs by around 20% which will help to alleviate set makers' burden in touch devices' BOM. Also, LCD makers could enjoy attractive margins leveraging their vertical integration once yield rate is on the right track. As the screen size is getting bigger, the additional value to LCD panel makers would be much bigger than the current revenue opportunity and also bring new value in touch functions. Meaningful revenue opportunity in Apple’s products: Assuming iPhone 5 is using In-cell panels, we forecast three panel makers, LGD, Sharp, and Japan Display combined will generate In-cell revenue of US$3.6 billion in 2012 and US$8.0 billion in 2013, respectively. If Incell panels (Oxide backplane) are used in iPad which theoretically reduces 7% of total BOM, then total In-cell revenue opportunity in iPad would be almost US$6.0 billion. Hence, a combined In-cell revenue opportunity would be US$14 billion in 2013, by our estimation. LCD panel makers vs. Touch panels: We forecast LCD makers’ revenue to increase while Touch panel players witness a shrinking trend with multiple contraction. Hence, LCD panel makers (LGD and Sharp) with strong position in In-cell technology will deserve higher multiple, in our view. Among touch panel players, a leading touch panel maker like TPK could still enjoy its industry leadership in the next couple of years.
Display and Touch Panel player valuation
Company LGD Sharp TPK Wintek Ticker 034220 KS 6753 JT 3673 TT 2384 TT Rating OW OW OW N TP (LC) 36,000 650 500 23 Price (LC) 22,300 412 455 16 Upside Downside 61% 58% 10% 46% Market cap (US$ B) 6.9 5.8 3.6 0.9 P/B(x) 12E 0.8 0.7 3.0 0.7 13E 0.7 0.6 2.2 0.7
Asia-Pacific Tech Research
Technology - Semiconductors JJ Park
(822) 758-5717 firstname.lastname@example.org J.P. Morgan Securities (Far East) Ltd, Seoul Branch
(886-2) 2725-9899 email@example.com J.P. Morgan Securities (Taiwan) Limited.
(81-3) 6736-8637 firstname.lastname@example.org JPMorgan Securities Japan Co., Ltd.
(82-2) 758- 5712 email@example.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch
(91-22) 6157-3261 firstname.lastname@example.org J.P. Morgan India Private Limited
Panel & Touch YTD performance
40% 20% 0% -20% -40% -60% LGD
-11% -39% Sharp TPK -27% Wintek
P/E(x) 12E 14.3 na 8.9 31.6 13E 5.8 4.9 8.4 19.8
ROE (%) 12E 13E 5.4 12.4 2.2 36.6 2.2 13.7 30.5 3.4
Source: Bloomberg, J.P. Morgan estimates
See page 19 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.morganmarkets.com
JJ Park (822) 758-5717 email@example.com
Asia Pacific Equity Research 16 June 2012
Table of Contents
What is In-cell technology? .....................................................3
In-cell technology in touch panel trend ....................................................................3 In-cell vs. OGS (One Glass Solution) ......................................................................4 In-cell touch panel cost structure .............................................................................5
How big is In-cell? ....................................................................6
Methodology...........................................................................................................6 In-cell supply/demand .............................................................................................6 In-cell ASP and revenue trend .................................................................................9 In-cell technology beyond iPhone..........................................................................10
Market Cap comparison: TFT-LCD vs. Touch Panel..............................................12 Implications to LGD..............................................................................................13 Implications to Sharp ............................................................................................14 Implication to Japan Display .................................................................................15 Implications to Touch Panel players ......................................................................15
Appendix I: In-cell supply/demand model............................17
and others.5D/3D Add-On 2D SOC. as is the controller IC. (3) quantify potential impact of in-cell to supply chains. J. Being not flexible. (4) comparison b/w TFT-LCD and Touch Panel. Morgan Cover Lens Type Touch Module Maker 2D/2.5D / 3D In/On-cell Sensor Patterning G/G or G/F/F By Separate ITO Patterning by Piece or Sheet In/On-cell Built-in Sensor Lamination & Layer # Cover Lens & Controller Panel Touch Module Maker Controller Panel Cover Lens Market view on In-cell In-cell may be more economically viable for single models with big volume. and (3) Capacitive electrodes (charge-sensing). we have witnessed issues with durability under high-temperature photolithography. lighter. Touch sensor can be: (1) Lightsensing elements (light-sensing). the sensor is integrated into one display panel.park@jpmorgan. yield rate losses related to lamination.JJ Park (822) 758-5717 jj.com Asia Pacific Equity Research 16 June 2012 Given uncertainty around in-cell technology. and (5) implications for key stocks. with in-cell/on-cell touch. Please refer to our last touch panel sector report for details:"Touch Panel Sector: In-cell vs. Where are we in terms of the trend? Conventional add-on projected capacitive touch includes a sensor substrate with ITO pattern that senses the users’ touch. and more flexible touch solution In-cell touch panel is a display panel integrated with touch sensor that is physically underneath either TFT or the color filter. the ITO pattern is on the cover lens (bottom side). we made an attempt to: (1) see where in-cell is in terms of technology spectrum. Figure 1: Touch Panel type by category Sensor Substrate w/ Sensor substrate Touch Module Structure w/o Sensor substrate Panel Maker Source: Display Search. 3 . With sensor-on-cover. However. What is In-cell technology? In-cell technology in touch panel trend Thinner.P. (2) Micro-switches (voltage-sensing). 2012. Two options for eliminating the sensor substrate are sensoron-cover and in-cell/on-cell touch. customization for touch panels seems to be a bottleneck for in-cell to see wider adoption. (2) in-cell cost structure analysis. one-glass solution: Implications from Korean panel makers" by Narci Chang published on 26 March. placed between the TFT array substrate and the color filter substrate. One Glass 2D / 2.
sensor. the sensors and controller IC are built into the panel. Table 1: Comparison of In-cell vs. but not flexible for customization Inner Mechanics Additional FPC and controller IC still occupy inner mechanical room Good for integration on IC and signal cable In-cell Source: Display Search.P. Piece type has more difficulty with patterning on 3D form No need to match any kind of cover lens except tuning controller/IC Panel Source Brands have multiple sources of panel makers to match touch modules Brands have more limited selection of panel makers IC & Spec. where to procure IC solutions. 3D is limited to premium models. Unlike touch module makers. covered by Mark Moskowitz) can fully enjoy incell technology's benefit. making the device lighter. Table 2: Who is working on what? LightSensing In-Cell In-Cell In-Cell In-Cell In-Cell In-Cell In-Cell In-Cell In-Cell On-Cell VoltageSensing In-Cell In-Cell Charge-Sensing In-Cell In-Cell In-Cell On-Cell On-Cell On-Cell On-Cell Resistive On-Cell On-Cell Developing Phase MP in 2H12 MP (Galaxy) MP in 2H12 R&D R&D MP in 2H12 MP in 2H12 MP in 1H12 MP in 4Q12 R&D R&D Sharp Samsung Mobile AUO Hitachi CPT Sony TMD LGD CMI HannStar Wintek On-Cell In-Cell In-Cell On-Cell On-Cell Source: Display Search. it requires additional processes to mature. intensive integration could drive up the cost of customization if panel makers want to serve multiple customers. and touch module makers. hence it leads to lower yield rate at an initial stage. In addition. J. panel sources. Customization dilemma is not serious for OGS type as brands have flexibility choosing options. This provides set-makers onestop solutions. Apple. hence it requires only one lamination layer as OGS. change. OGS (One Glass Solution) Key advantages: easier integration and one-shop solution As for in-cell/on-cell touch. Possible scenarios: collaboration b/w panel and touch panel players In-cell and OGS/SOC involve cover lens and lamination processes and both approaches avoid the sensor substrate. Customization Easier to select. in-cell can match with any kind of cover lens while OGS cannot easily support 3D or curved lens design.e. Who will use In-cell? The feasibility of customization ultimately depends on the scale of business. J. Beside. panel makers have to decide how to invest in cover lens finishing 4 . Additionally. or tune performance from controller IC. It could create noises which interfere with TFT-LCD ICs. Morgan. Morgan. OGS (One-Glass-Solution) Sensor-on-cover OGS/SOC 3D Cover Lens Sheet type has difficulty forming 3D when ITO sensor is already on. and panel Good for integration. This could lead to a decline in sensitivity.JJ Park (822) 758-5717 jj.P.com Asia Pacific Equity Research 16 June 2012 In-cell vs.park@jpmorgan. Brands with large volume seller (i. *SOC = Sensor on Cover Key disadvantage: bottleneck lies in customization While easier integration or 3D cover lens provide benefits.
JJ Park (822) 758-5717 jj. 2011. % 11% 8% 16% Cover glass FPCB & Chip Touch sensor Cost down ~20% Cover glass FPCB & Chip TFT LCD + Touch control +15% +10% 62% TFT LCD +70% Panel Price $37 Panel Price $?? Source: J. In this case.e.5" TFT-LCD capacitive panel. We believe TFT-LCD panel makers will enjoy attractive margins leveraging their vertical integration and gather increasing touch-embedded panel orders once yield rate is on right curve.P. touch panel firstname.lastname@example.org Asia Pacific Equity Research 16 June 2012 capacity. If set-makers allocated some or entire cover lens and lamination process. but will gain less revenue since only lamination is needed instead of the whole touch module. touch panel players (i. this will help alleviate set makers' burden in touch device’s BOM. Actual price may vary 5 . Morgan estimates. As Narci Chang. one key advantage of in-cell touch panel is integration of TFTLCD panel with touch sensor functionality. *Above cost structure is assuming 3. According to our estimates. flagged in touch panel industry note (“Recent concerns about tight key component supply appears to be overblown”) published on 16 February. it will reduce panel cost by approximately 20% (assuming same panel size). In-cell touch panel cost structure In-cell will save up to 20% compared to add-on type touch panel. TPK) with strengths in cover lens finishing process and lamination can still benefit in our view. Figure 2: Cost structure comparison b/w In-cell and OGS $. assuming yield rate is mature As mentioned above. then touch module makers can still benefit.
it is difficult to gauge the price of In-cell type display module.3 0. (In-cell runs multiple processes on the color filter. Morgan estimates” Gen 4.5 2. Since In-cell has not been manufactured on a mass scale.0 37. Table 3: In-cell touch panel BOM comparison (iPhone 4S vs. Gap is expected to decrease as LGD increases its allocation from 4Q12E. OGS has separate processes for cover glass and color filter).8 23.P. but we believe the manufacturing costs would be higher than that of OGS solution since it does not have to scrap out the color filter even if it fails during photolithography process.5 Glass substrate 730 1500 600 1300 920 1850 720 1500 Monthly glass capacity (K) 3Q12E 4Q13E 65 80 25 25 53 53 35 35 18 18 Yield rate 3Q12E 73% 58% 64% 63% 64% 4Q13E 80% 75% 76% 75% 76% In-cell supply/demand In-cell capacity to hover around 466K/Qtr by 2013E According to our estimates. J.com Asia Pacific Equity Research 16 June 2012 Manufacturing cost comparison Aside from touch panel BOM difference. Major difference b/w adjusted capacity and max capacity comes from LGD's increasing allocation to previous technology line. Morgan estimates How big is In-cell? Methodology Our in-cell supply/demand is based on below key assumptions. OGS's at over 80% on average.8 35.5 Proportion 11% 5% 3% 1% 6% 75% Source: Display Search.2 1. iPhone Next-series) US$. we estimate total in-cell capacity to climb up to +450K/Qtr by end of 2013E on square meter basis. J.0 3.0 1.P. TFT-LCD LTPS for previous iPhone series. Table 4: In-cell supply key assumptions Line LGD AP2 LTPS Sharp Kameyama line Japan Display Ex-Sony Ex-TMD D2 Source: Company data.0 0.7 1.2 6. % iPhone 4S (3. Current in-cell's yield rate is expected to hover around 60-70% vs.0 Proportion 11% 16% 5% 3% 1% 2% 62% 100% Total 47.6 100% Next iPhone series (assuming 4") Component Cover glass Chip FPCB OCA Others TFT-LCD + Touch control Price $ 5.JJ Park (822) 758-5717 jj.5 5. 6 . the manufacturing costs are theoretically lower in OGS than In-cell considering yield rates.3 email@example.com 6.4 2.5") Component Cover glass Glass sensor Chip FPCB OCA Others TFT-LCD Total Price $ 4.
com Asia Pacific Equity Research 16 June 2012 Figure 3: Quarterly in-cell capacity by panel makers Unit in 000sqm 250 200 150 100 50 0 3Q12E 4Q12E LGD AP2 LTPS 1Q13E 2Q13E 3Q13E Japan Display 4Q13E Sharp Kameyama line Figure 4: Quarterly in-cell adjusted-capacity by panel makers Unit in 000sqm 200 150 100 50 0 3Q12E 4Q12E LGD AP2 LTPS 1Q13E 2Q13E 3Q13E Japan Display 4Q13E Sharp Kameyama line Source: Company data. J.P.park@jpmorgan. J. According to our industry check.P. Morgan estimates Source: Company data. Morgan estimates. J. we forecast all panel makers to run the line at full-capacity. Once mass production takes off. Despite lower yield rate compared to LGD. 7 . we believe Sharp and Japan Display will catch up with LGD in terms of yield rate and start fullscale production in 3Q12E. we estimate industry average yield rate is around 60-70%. Morgan estimates Source: Company data. LGD seems to be on right track and should soon be ready for commercial production.P. J.P. *Adjusted-capacity = capacity x allocation (%) Figure 5: Yield rate assumptions by panel makers % 85% 80% 75% 70% 65% 60% 3Q12E 4Q12E LGD AP2 LTPS 1Q13E 2Q13E 3Q13E Japan Display 4Q13E Sharp Kameyama line Figure 6: UTR assumptions by panel makers % 100% 95% 90% 85% 80% 3Q12E 4Q12E LGD AP2 LTPS 1Q13E 2Q13E 3Q13E Japan Display 4Q13E Sharp Kameyama line Source: Company data.JJ Park (822) 758-5717 jj. Morgan estimates Average yield rate to be 68% in 2012E and 76% in 2013E As of 1H12.
207-250M in 2013E Above supply/demand analysis is based on our base case assumption of panel size (4.com Asia Pacific Equity Research 16 June 2012 Figure 7: Quarterly in-cell supply by panel makers Unit shipments in millions 25 20 15 10 5 0 3Q12E 4Q12E LGD 1Q13E Sharp 2Q13E Japan Display 3Q13E 4Q13E Figure 8: Quarterly in-cell supply M/S by panel makers % 100% 80% 60% 40% 20% 0% 3Q12E 4Q12E LGD 1Q13E Sharp 2Q13E Japan Display 3Q13E 4Q13E 32% 29% 36% 29% 37% 29% 36% 29% 37% 29% 37% 37% 31% 35% 34% 35% 34% 34% Source: Company data.park@jpmorgan.P. we estimate they will account for roughly 20% of total shipments in 2012E. Morgan estimates Source: Company data. J. accounting +80% of 2013E iPhone shipments. we estimate incell panel demand to climb above 60M once yield rate curve moves up.JJ Park (822) 758-5717 jj. Going into 2013E.P. Figure 9: Quarterly in-cell demand Unit shipments in millions 45 40 35 30 25 20 15 10 5 0 40 29 27 14 3Q12E 4Q12E 1Q13E 2Q13E 3Q13E 4Q13E 28 28 30 Figure 10: Quarterly in-cell supply/demand Unit shipments in millions 70 60 50 40 30 46 27 52 58 60 61 40 28 28 30 61 40 10 7 6 6 20 10 0 3Q12E 4Q12E 1Q13E 2Q13E 3Q13E 4Q13E iPhone w in-cell (new iPhone) Source: Company data. Depending upon panel size and yield rate variances. Within panel makers. Morgan estimates Quarterly supply to reach 60M after full-scale production We expect panel makers to kick-in full-scale production in late 2Q12E and its quarterly supply to reach +50M by end of 4Q12E.P.0" and average yield rate 68%/76%). For 2013E. Sharp is expected to be the major supplier followed by Japan Display and LGD.P. in-cell panel supply may vary as large as 11% to our view. we do not expect in-cell panel demand to cause supply shortage risks. 27M/126M in 2012E/2013E Assuming next iPhone series adopt in-cell panels. Given plenty of supply over demand. J. 1Q13E onwards. 8 . J. we expect LGD to increase its M/S similar to Japan Display. we forecast in-cell demand to reach 126M units. Morgan estimates iPhone w/o in-cell In-cell Supply In-cell Demand to panel makers (different from end-demand) Source: Company data. In-cell demand to pick-up in 2013E. Morgan estimates Sensitivity reveals supply to range from 85-101M in 2012E. J.
100 2. we believe iPhone 4S G/G structure (including TFT array) is around $37 (3.JJ Park (822) 758-5717 jj. J. In-cell quarterly total revenue to be around $2 billions On a quarterly basis.5”) and in-cell initial price point should not be lower than that. increasing manufacturing cost.000 1. 9 .0" Panel Size = 4. per our assessment. As yield rate climbs up on the curve. which accounts 9% of iPhone COGS in 2012E.firstname.lastname@example.org Asia Pacific Equity Research 16 June 2012 Table 5: Unit outputs sensitivity analysis by panel size and yield rate Panel size in inches.P. we expect in-cell panel price to show moderate decline of 10% Y/Y in 2013E. Figure 11: Quarterly in-cell revenue by panel makers Unit in US$ millions 900 800 700 600 500 400 300 200 100 0 3Q12E 4Q12E LGD 1Q13E Sharp 2Q13E Japan Display 3Q13E 4Q13E Figure 12: Quarterly in-cell total revenue and panel price trend Unit in US$ millions. Panel price is derived from cost saving of glass sensor. US$ 2. Yield rate in %. we estimate total in-cell revenue to be around $2 billion. we foresee Sharp to generate the largest in-cell revenue followed by LGD and Japan Display. In table 4. J. Unit output in millions 2012 Unit Output Panel Size = 4. we forecast its proportion to total iPhone COGS to increase to 19% once panel makers begin full-year production. panel makers are projected to generate over $4 billion revenue.P.800 1.500 3Q12E 4Q12E 1Q13E 2Q13E 3Q13E 4Q13E In-cell revenue Source: Company data. Morgan estimates In-cell total revenue accounts for ~19% of total iPhone COGS On annual basis. Provided panel is the most expensive single component in smartphone. we forecast quarterly revenue to reach $2.3" 2013 Unit Output Panel Size = 4.700 1.1 billion in 2Q13E. Given limited suppliers and better yield rate.900 1.P. According to unit output base assumptions. and linear increase in other components.200 2.0" Panel Size = 4.600 1. J. Morgan estimates Avg Yield Rate = 68% (base) 98 85 Avg Yield Rate = 76% (base) 239 207 Avg Yield Rate = 71% (bull) 101 88 Avg Yield Rate = 79% (bull) 250 216 In-cell ASP and revenue trend Initial In-cell panel ASP to be $48 and decrease 10% Y/Y next year Currently. we assess the potential in-cell display panel cost structure and estimate initial ASP to be $48.3" Source: Company data. Morgan estimates 48 50 46 45 43 42 40 48 46 44 42 40 38 36 Panel Price assumptions Source: Company data. assuming mature yield rate on par with TFT-LCD LTPS.
596 2012E In-cell revenue 2013E In-cell % to iPhone COGS Source: Company data. Touch panel players may lose +60% revenue opportunity (assuming no touchpanel supply at all in in-cell panel).3bn compared to $3.000 0 19% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 9% 7.5bn in 2012E/2013E Given uncertainty of our panel price and unit output assumptions. Morgan estimates Source: Company data.000 1. and their 2013E revenue from iPad could decline to $1.JJ Park (822) 758-5717 jj.3 in non in-cell case. US$ million Panel Price ($36) .135 4.733 2.056 3.772 9.596 4.8~10. 10 .6~4.144 Unit (bull case): +15% 3.P.park@jpmorgan. J. Table 6: Revenue sensitivity analysis by panel price and unit output Panel Price in US$.515 4.000 4.515 Unit (bear case): -15% 5.8bn in 2012E and $5.759 7. J.5 billion vs. $7.500 2.500 1.598 3. Morgan estimates Total in-cell revenue may go as high as $4.base Panel Price ($54) .745 6.500 3. we illustrated sensitivity analysis to give color on total revenue range.P.000 6.000 500 0 2012E LGD Sharp Japan Display 2013E 1. Depending upon panel price and unit output variances.188 1.bear Panel Price ($42) . Apple has kept singular model policy across different mobile applications and we believe there is a chance that Apple may consider choosing in-cell for other applications if it works well with iPhone.base Panel Price ($49) .951 9. US$ million Panel Price ($40) .000 7. Unit output in millions. In this case.bull Source: Company data.144 10.298 Figure 14: Annual in-cell total revenue and % out of iPhone COGS Unit in US$ millions.000 8. iPad with in-cell can generate +22% more revenue to TFT-LCD Assuming new iPad (to be launched in 2013E) was manufactured with in-cell display.8bn / $10.000 3.772 Unit (base case) 3.000 5.com Asia Pacific Equity Research 16 June 2012 Figure 13: Annual in-cell revenue by panel makers Unit in US$ millions 3. J.755 Unit (bull case): +15% 7.921 2.000 1.516 In-cell technology beyond iPhone Works under high-volume single model brand As we have illustrated in the technology comparison section. we forecast TFT-LCD players to generate $8.5bn in 2013E. we estimate total in-cell revenue to range from $2. Morgan estimates Unit (bear case): -15% 2.000 2.759 7.bull 2013 Revenue.311 1.056 3.P.097 2.0 billion in non in-cell case. +50M new iPad series may be candidates for in-cell technology.135 Unit (base case) 6. % 9.000 2.bear Panel Price ($47) . Apple seems to be most suitable brand to adopt the in-cell in near-term.951 3. Revenue in US$ millions 2012 Revenue.
000 800 600 400 200 0 2011 In-cell demand 2012E 2013E 2014E 2015E In-cell demand % Total smartphone touch panel demand Figure 18: (Touch Panel + LCD array) % to total BOM comparison % 21% 17% 13% 3% 0% 25% 20% 15% 10% 5% 0% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 63% 82% 18% Smartphone 37% Tablet PC Source: Company data. Morgan Stock implications LGD and Sharp stand out to us as the winners Given limited supply and strong position with in-cell.400 1. we pick LGD and Sharp to be key beneficiary names in the panel space. hence we expect panel makers to jump into tablet PC developing in-cell in long-term after firstly touching base on smartphone touch panel.467 2.P.P. % 160 140 120 100 80 60 40 20 0 58% 61% 59% 70% 60% 50% 40% 30% 20% 10% 0% 2011 iPad shipments 2012E Total Tablet PC shipments 2013E iPad % (RHS) Figure 16: LCD & Touch Panel Revenue opportunity from iPad US$ millions 12. As total BOM must be reduced to enable more attractive price points.282 6.552 8. J.000 0 1. J.com Asia Pacific Equity Research 16 June 2012 Figure 15: Apple and market tablet PC shipment Unit in millions. Morgan estimates Touch panel BOM needs to be reduced Comparing module (TFT-LCD + Touch Panel) costs' burden in touch device's BOM.431 2011 2012E Panel Source: Company data.477 4. Figure 17: Smartphone Touch Panel market demand Unit in millions.JJ Park (822) 758-5717 jj. J.P. % 1. we see increasing need of cost reduction efforts. 11 . it represents over 37% of the tablet PC BOM and 18% of the smartphone BOM according to our estimates. Morgan estimates Source: iSuppli.000 10. w/o in-cell Source: Company data. J.934 2013E (w/o in-cell) Panel Sales +22% vs.290 2. which could be positive catalysts for the share price.200 1.000 4. LGD and Sharp seem pretty confident about in-cell adoption and we believe in-cell will create strong top-line and bottomline opportunity.park@jpmorgan.P. In-cell on Tablet PC panel can theoretically reduce +7% of total BOM.926 2013E (w in-cell) Touch 3.000 8.000 2. Morgan estimates 1.000 6.
touch panel market cap began to move up on back of strong Apple supply chain story while TFT-LCD players suffer from deteriorating supply/demand dynamics. touch panel players reverted into showing stiff correction and we witnessed similar market cap trend between two names.000 15.000 6. Laibo (The need for ITO sensor is eliminated. Moving into 2010. both TFT-LCD and Touch panel have witnessed similar market cap to revenue multiple trend and nicely rebounded after financial crisis.000 - TFT-LCD Touch Panel (RHS) Source: Bloomberg.JJ Park (822) 758-5717 jj. Since TPK's IPO.000 25. Morgan. TPK could remain in the supply chain given its superior lamination yield rate.P.com Asia Pacific Equity Research 16 June 2012 Table 7: Potential beneficiary for in-cell touch panel technology Technology In-cell Winners LGD. Touch Panel includes TPK/Wintek/Melfas/Iljin Display/J Touch/ELK TFT-LCD clearly trading on discount to revenue generation Until mid-2009. Figure 19: Market Cap trend of TFT-LCD and Touch panel players US$ millions 45. Beginning from mid-2011.000 30.000 5. Sharp. both TFT-LCD and Touch panel players' market cap moved inline direction until mid-2010.000 0 Jan-08 12. Touch panel began trading at higher multiple compared to TFT-LCD on Apple supply chain story and it recorded robust multiple expansion from mid-10 to mid-11.000 10. TFT-LCD includes LGD/Sharp/AUO/CMI. Sintek. However.000 35.000 10. Lamination is TPK's best strength. however. TMD Losers TPK & Wintek. Touch Panel Touch Panel on boom until mid-2011 since TPK IPO After financial crisis.000 TPK IPO Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 email@example.com 4.000 8. all ITO sputtering is made by TPK/Wintek on cover glass) OGS/Touch-on-lens Source: J.000 20. 12 .000 40. TPK Market Cap comparison: TFT-LCD vs.
we estimate LGD to generate approximately $1.000 Mainly due to shrinking TPK top-line 1. Multiple = Market Cap / Revenue 7.0 0. we believe in-cell panel business to positively contribute to LGD’s operating level.0 1.000 500 - Source: Company data.0 6.park@jpmorgan.P. we believe panel makers with a strong position in in-cell technology deserve higher multiple going forward.Present) X.P. Bloomberg. We illustrated revenue impact of in-cell to each players in the below section. Touch Panel includes TPK/Wintek/Melfas/Iljin Display/J Touch/ELK Source: Company data.500 2. Touch Panel includes TPK/Wintek/Melfas/Iljin Display/J Touch/ELK However. in-cell/on-cell emergence and weak IT demand has dragged down touchpanel’s multiple to similar level of TFT-LCD and they are each trading at 1.0 4. Upon increasing revenue trend.0 3.500 1. TFT-LCD deserves higher multiple on in-cell opportunity JPM Asia tech team forecasts TFT-LCD players' revenue to continuously increase while Touch panel players witness a shrinking trend.0 5.000 10. each accounting for 5% and 10% of total revenue.0 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 TFT-LCD Touch Panel Jul-12 Oct-12 Figure 22: Revenue projection of TFT-LCD and Touch Panel Unit in US$ millions.0 1. Morgan estimates * TFT-LCD includes LGD/Sharp/AUO/CMI.0 4.0 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 TFT-LCD Jul-10 Jan-11 Touch Panel Jul-11 Jan-12 Source: Company data. J.JJ Park (822) 758-5717 jj.000 4.0 3.000 6.0 5.000 0 Jan-11 Jul-11 Jan-12 TFT-LCD Jul-12 Jan-13 Touch Panel (RHS) Jul-13 3.com Asia Pacific Equity Research 16 June 2012 Figure 20: Market Cap to Revenue trend (2008 . Recent multiple contraction seems market has already priced in risks associated with Touch-panel.0 2. 13 . Touch Panel includes TPK/Wintek/Melfas/Iljin Display/J Touch/ELK Implications on LGD Revenue Impact According to our estimates. % 12.2x (TFTLCD) and 2. Morgan estimates * TFT-LCD includes LGD/Sharp.0 0.6 billion in 2012E/2013E.0 6. TFT-LCD includes LGD/Sharp/AUO/CMI.000 8.000 2.3x (Touch panel) as of now.000 2. Along with strong top-line growth. Bloomberg. J.0 2. Figure 21: Market Capitalization to Revenue trend (2008~) Multiple (X) 7.3/2.
Figure 23: In-cell revenue contribution to LGD’s business Unit in US$ millions.000 15.JJ Park (822) 758-5717 jj. 14 .P. the company recently commented that it will base the timing of the introduction on clients’ needs. production volume.000 5. However. the company commented its latest version of IGZO is compatible with in-cell technology and we therefore think panels for tablet PCs could use in-cell technology starting from 2013. scheduled to begin full-scale production this summer. Cost impact As the equipment used in Kameyama plant No. 2. or price. J. However. On the other hand. making margins narrower than those on other lines. is likely to produce smartphone panels using in-cell technology. However.000 25. however. yield. which uses IGZO technology. Morgan estimates 12% 10% 10% 8% 5% 6% 4% 2% 0% 2013E LGD (in-cell) revenue In-cell % out of total revenue Implications to Sharp Recent development from Sharp Sharp announced at end-2011 that it would likely introduce in-cell technology 2013 and not 2012.000 20.000 10.com Asia Pacific Equity Research 16 June 2012 Earnings impact Previously we forecasted smartphone display to account for 26% of total LGD's OP in 2012E.000 0 2012E LGD total revenue Source: Company data. 1 (6G LTPS line). 1 was supplied by a major smartphone maker. we cautiously forecast in-cell to contribute more to total OP than current smartphone display. we think Kameyama plant No. The company has yet to make any comments on production lines. 2 itself. While we think Kameyama plant No. % 30. Detailed margins are not provided. we think yield improvements on this line will more easily translate into broader margins.park@jpmorgan. is not likely to use in-cell technology. because Sharp purchased the equipment used in its Kameyama plant No. based on changes in the tone of management’s comments. we think prices will also be kept low. we think fixed costs are low and risk has therefore been minimized.
touch panel makers (i.000 0 Sharp LCD revenue 19% 12% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2012E Sharp (in-cell) revenue 2013E In-cell % out of total revenue Source: Company data.000 8. but we believe the market could be overly pessimistic about the leading touch panel makers’ revenue opportunities in other areas like tablet market growth and touch on NB or AIOs.000 12. While information on the company is limited because it is not listed. In short. TPK and Wintek) could see negative impact on its revenue and earnings if in-cell gains market acceptance quickly. 1.000 2.5G.000 14. TMD. has been loaned manufacturing equipment (5. TMD). we believe the touch panel market opportunities are expanding significantly.P.firstname.lastname@example.org 6. We summarize the touch panel market condition by market segment: (1) smartphone market become less attractive for touch panel makers: TFTLCD makers are gaining market shares in smartphone area especially given Apple could potentially switch to in-cell. leading touch panel makers could gain market shares through OGS. in our view. especially if measured in square meters and revenues.com Asia Pacific Equity Research 16 June 2012 Figure 24: In-cell revenue contribution to LGD’s business Unit in US$ millions.000 10. Currently. The size migration and the better margin would likely give touch panel makers another boost on earnings in 2H12 and 2013. 15 . Currently.000 4.000 16. J. Morgan estimates Implication to Japan Display Japan Display is an unlisted LCD panel maker formed in 2012 through the integration of the small. Given the technology improvement and the capacity build. but technology-laggards and film-based makers continue to lose ground. the margin for smartphones touch panels has become marginal.e. LTPS) by a major smartphone maker and we thus expect Japan Display to produce smartphone panels using in-cell technology in the TMD plant.JJ Park (822) 758-5717 jj. Hitachi. and Toshiba (Toshiba Mobile Display. like Sharp’s Kameyama plant No. % 18. more than 90% of the design-ins models for touch on NBs are based on OGS given easier conversion costs among different models and ease of manufacturing process. we believe the market has discounted the potential losses of iPhone 5 orders from touch panel makers. Most of the second-tier touch panel makers barely make any profits in this market segment.and medium size LCD panel businesses of Sony. Implications for Touch Panel players On the flip side.
OGS seems to be the most practical solution for this market in terms of weights. but technology and cost hurdles remain to be resolved first. We also believe there is a great potential that Apple could follow suit by integrating touch into its NB/AIO series of products in the future. and this is a downside risk for touch panel maker like TPK and an opportunity for TFT-LCD makers like LGD and Sharp. thickness. hence it could fill up touch panel makers’ capacities quickly. and Apple’s market share to be 61%/59% in 2012/2013. per our estimate. but penetration could be less than 1% in 2012/2013.JJ Park (822) 758-5717 jj. and costs (over 90% touch on NB models are OGS-based). Desktop PC represents another 154/152 million unit market. we believe leading touch panel makers like TPK could still enjoy its industry leadership in the next couple of years. this is Apple’s binary decision. Of note.park@jpmorgan. Hence.com Asia Pacific Equity Research 16 June 2012 (2) tablets market could be a big swing factor: we estimate the market is growing by 54%/ 31% in 2012/2013. one 14” touch panel is nearly twice as large as a 10” tablet in areas. We believe eventually touch panel would become an essential part of PCs along with the touch panel prices decline. Again. We do not rule out the possibility that Apple could adopt in-cell for iPad in the longer term. especially given Intel's agreement with touch panel makers that put touch panel makers at front of the priority in this market segment. per our estimate. it could wipe out TPK/Wintek's operating profits by 30-40% for 2012/2013. We have seen Intel and Microsoft clearly pushing touch panel adoption in the NB market in Computex. This could be a drag on touch panel makers' valuation multiple since if this happens. 16 . (3) NBs and AIOs benefits OGS manufacturers: we estimate the touch on NB would represent 5-7% penetration of total market size of 238 million units in 2013.
park@jpmorgan.P.5 6.5 1Q12 NA NA NA NA NA NA 17 .5 5.0 3.0 3.5 5. M/S (%).5 1Q12 70% 55% 61% 60% 61% In-cell panel supply by company Unit output based on 4” panel (mn units).0 3.5 5.5 1Q12 0 0 0 0 0 0 2Q12E 0 0 0 0 0 0 2Q12E 73% 58% 64% 63% 64% 3Q12E 113 177 136 41 95 425 3Q12E 75% 60% 67% 66% 67% 66% 4Q12E 136 177 136 41 95 448 4Q12E 78% 65% 70% 69% 70% 70% 1Q13E 145 177 136 41 95 458 1Q13E 80% 70% 73% 72% 73% 74% 2Q13E 153 177 136 41 95 466 2Q13E 80% 72% 76% 75% 76% 76% 3Q13E 153 177 136 41 95 466 3Q13E 80% 75% 76% 75% 76% 77% 4Q13E 153 177 136 41 95 466 4Q13E 80% 75% 76% 75% 76% 77% 2012E 62 88 68 20 47 218 2012E 77% 63% 68% 68% 69% 68% 2013E 151 177 136 41 95 464 2013E 80% 73% 75% 74% 75% 76% Gen 4.5 6. Morgan estimates Gen 4. J.5 1Q12 0 0 0 0 0 0 2Q12E 0 0 0 0 0 0 2Q12E NA NA NA NA NA NA 3Q12E 14 17 15 4 10 46 3Q12E 31% 37% 32% 9% 22% 100% 4Q12E 18 19 15 5 11 52 4Q12E 35% 36% 29% 9% 21% 100% 1Q13E 20 21 17 5 12 58 1Q13E 34% 37% 29% 9% 20% 100% 2Q13E 21 22 17 5 12 60 2Q13E 35% 36% 29% 9% 20% 100% 3Q13E 21 23 17 5 12 61 3Q13E 34% 37% 29% 9% 20% 100% 4Q13E 21 23 17 5 12 61 4Q13E 34% 37% 29% 9% 20% 100% 2012E 32 36 30 9 21 98 2012E 33% 36% 30% 9% 21% 100% 2013E 82 88 69 21 48 239 2013E 34% 37% 29% 9% 20% 100% Gen 4.5 6. Morgan estimates Gen 4.JJ Park (822) 758-5717 jj. Based on Base case scenario Unit output LGD Sharp Japan Display Ex-Sony Ex-TMD Total supply M/S by unit output (%) LGD Sharp Japan Display Ex-Sony Ex-TMD D2 Total Source: Company data. J.com Asia Pacific Equity Research 16 June 2012 Appendix I: In-cell supply/demand model In-cell capacity and yield rate assumptions by company Quarterly capacity in 000s sqm and yield rate assumption in %.5 6.5 5.0 3. Based on Base case scenario Adjusted Quarterly capacity (K sqm) LGD AP2 LTPS Sharp Kameyama line Japan Display Ex-Sony Ex-TMD D2 Total Yield rate assumptions (%) LGD AP2 LTPS Sharp Kameyama line Japan Display Ex-Sony Ex-TMD D2 Average Source: Company data.P.
188 1.P.903 45 2Q13E 672 699 563 168 395 1. J.921 2.311 1.5 6.745 48 4Q12E 643 662 544 162 382 1.733 2. Based on Base case scenario Revenue LGD Sharp Japan Display Ex-Sony Ex-TMD Total Panel Price assumptions Source: Company data.5 5.5 1Q12 NA NA NA NA NA NA 2Q12E NA NA NA NA NA NA 3Q12E 544 649 553 165 388 1. Morgan estimates Gen 4.094 42 4Q13E 692 749 580 173 407 2.934 43 3Q13E 717 776 601 179 421 2. Panel Price in US$.097 327 770 3.612 7.850 46 1Q13E 653 696 554 165 389 1.0 3.JJ Park (822) 758-5717 jj.020 40 2012E email@example.com 685 1.951 42 18 .com Asia Pacific Equity Research 16 June 2012 In-cell panel revenue by company Unit in $ millions.596 47 2013E 2.
P.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from LG Display. TPK Holding Co. TPK Holding Co. Ltd.P.inquiries@jpmorgan.. Client/Non-Securities-Related: J. with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers. Company-Specific Disclosures: Important disclosures.T/¥412/Overweight). within the past 12 months. Investment Banking (past 12 months): J.460 as of 15-Jun-12.P.P. Morgan currently has. Ltd. calling 1-800-477-0406. and (2) no part of any of the research analyst's compensation was. TPK Holding Co. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for TPK Holding Co.P. TPK Holding Co. Seoul branch is acting as a Market Maker (Liquidity Provider) for the Equity Linked Warrants of LG Display and owns 18. J. Non-Investment Banking Compensation: J. TPK Holding Co. (3673. Ltd. or had within the past 12 months.. Morgan currently has. Investment Banking (next 3 months): J.com with your request. Client/Non-Investment Banking. Ltd.. Client/Investment Banking: J.. Ltd. Morgan expects to receive.com/disclosures/company. or intends to seek.. 19 .. compensation for investment banking services in the next three months from Sharp (6753).P.disclosure. the following company(ies) as clients. Ltd. Sharp (6753). Morgan Securities (Far East) Ltd. Ltd.. and the services provided were non-investment-banking. Morgan currently has.. the research analyst denoted by an “AC” on the cover or within the document individually certifies.KS/W22300/Overweight). TPK Holding Co. Securities-Related: J.. Ltd. Client: J.P.. and the services provided were non-securities-related: Sharp (6753). Sharp (6753). or had within the past 12 months. the following company(ies) as clients. Sharp (6753). or emailing research. the following company(ies) as investment banking clients: Sharp (6753). Morgan currently has. Morgan received in the past 12 months compensation for investment banking Sharp (6753). Morgan– covered companies by visiting https://mm. or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report.jpmorgan.. or had within the past 12 months.. Ltd.P. Important Disclosures Lead or Co-manager: J. are available for compendium reports and all J. including price charts..JJ Park (822) 758-5717 jj. TPK Holding Co. securities-related: LG Display. the following company(ies) as clients: LG Display.firstname.lastname@example.org Asia Pacific Equity Research 16 June 2012 Companies Recommended in This Report (all prices in this report as of market close on 15 June 2012) LG Display (034220. TPK Holding Co.TW/NT$454.. where multiple research analysts are primarily responsible for this report. or had within the past 12 months.P. Sharp (6753) (6753..50/Overweight) Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or.538.. is.
500 N Y750 UW Y770 OW Y900 Y650 OW UW Y690 OW Y700 N Y700 2.KS. price data adjusted for stock splits and dividends.120Y2.000 N Y1. Initiated coverage Oct 11.000 Rating Share Price (W) OW OW OW OW OW OW N N N N N OW OW OW OW OW OW OW OW OW OW OW 30400 32400 39600 42700 45000 49250 37600 32900 29600 20850 31450 31350 34800 30000 41350 41700 45450 37250 38550 34850 29550 30250 19150 28550 Price Target (W) 40000 45000 50000 56000 60000 70000 60000 36000 31000 24000 28000 31000 36000 40000 53000 55000 60000 55000 52000 50000 45000 42000 32000 36000 Price Target (Y) 2120 2550 2400 2000 1850 1500 1250 1050 750 610 550 650 770 900 1050 1250 750 690 700 900 850 700 650 10-Apr-07 03-Jul-07 10-Oct-07 31-Oct-07 03-Jul-08 10-Jul-08 20-Aug-08 17-Apr-09 10-Jun-09 17-Jul-09 12-Nov-09 06-Jan-10 01-Apr-10 23-Apr-10 17-Sep-10 13-Jan-11 28-Mar-11 01-Jul-11 22-Jul-11 13-Sep-11 28-Jan-12 Date 04-Oct-06 22-May-07 OW 02-Dec-08 N Source: Bloomberg and J. price data adjusted for stock splits and dividends.000 N W24.400 OW OW Price(Y) N Y1.474 0 Oct 06 Jul 07 Apr 08 Jan 09 Oct 09 Jul 10 Apr 11 Jan 12 N W31.656 N Y2.000 OW OW W60.992 15-Dec-08 N 03-Feb-09 15-Jul-09 03-Aug-09 14-Oct-09 17-Nov-09 21-Sep-10 06-Jun-11 14-Sep-11 16-Nov-11 12-Jan-12 02-Feb-12 24-Apr-12 1.550Y2.000 OW W45.250 N Y610 UW Y900 OW Y850 3.050 Y550 Y650 N UW UW N Y1.000 OW W45.T. 20 . 034220 KS) Price Chart 94. Morgan.email@example.com 80.000 N W31.000 OW 53.844 OW W50.000N W36.370 OW W40.000 OW W70. 6753 JT) Price Chart 09-Mar-07 26-Jul-07 23-Oct-07 28-Apr-08 22-Jul-08 05-Sep-08 07-Oct-08 04-Nov-08 3.896 Price(W) 40. Rating Share Price (Y) N OW OW N N N N N N UW UW UW UW N UW UW N OW OW OW OW 2025 2185 2175 1850 1797 1577 1290 1003 687 599 662 889 1087 1018 1009 1226 867 738 595 698 643 656 509 Sharp (6753) (6753.422 26.984 N Y1.328 664 0 Sep 06 Jun 07 Mar 08 Dec 08 Sep 09 Jun 10 Mar 11 Dec 11 01-May-10 N Source: Bloomberg and J.000 W36. Morgan.000 OW W55.JJ Park (822) 758-5717 jj.050 Y1.000OW W60.000 N W36.000 OW W32. Initiated coverage Oct 04.000 67.000OW W52.948 13.000 OW OW W50.000 W40.com Asia Pacific Equity Research 16 June 2012 Date 11-Oct-06 LG Display (034220.000 N W28.250 Y750 N UW 1.P.000 OW W55. 2006.850 Y1.000 OW W42.P.320 N Y2.318 OW W56. 2006.000 OW W60.000 W53.
Narci: AU Optronics (2409.TW).com Asia Pacific Equity Research 16 June 2012 TPK Holding Co. E Ink Holdings Inc.00 492 246 0 Oct 10 Jan 11 May 11 Aug 11 Dec 11 Apr 12 Source: Bloomberg and J. Morgan Equity Research Ratings Distribution. Morgan’s research website.T).T) J. price data adjusted for stock splits and dividends.. Sony (6758) (6758.00 Price Target (NT$) 1200. Renesas Electronics (6723) (6723.T).476 1. N= Neutral. Epistar Corporation (2448.P. 2012 J. Toshiba (6502) (6502. Chimei Innolux Corporation (3481. each stock’s expected total return is compared to the expected total return of a benchmark country market index.P.00 719. as of April 3.park@jpmorgan.TW). Yoshiharu: Anritsu (6754) (6754. Ltd. (3474. the certifying analyst’s coverage universe can be found on J.P. The chart(s) show J.] Underweight [Over the next six to twelve months.00 385. Ltd.com..TW) Izumi.230 OW NT$800 OW NT$1.] In our Asia (ex-Australia) and UK small.00 1000. For purposes only of FINRA/NYSE ratings distribution rules. 3673 TT) Price Chart 1.T).T). Everlight Electronics Co.and mid-cap equity research.00 500.TW). If it does not appear in the Important Disclosures section of this report. Omron (6645) (6645. and our Underweight rating falls into a sell rating category. LG Electronics (066570. SK Hynix (000660. Fujitsu (6702) (6702. we expect this stock will underperform the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.TW). Mitsubishi Electric (6503) (6503. Ltd. Inc..T).T). Fuji Electric (6504) (6504.T).] Neutral [Over the next six to twelve months. Panasonic (6752) (6752. our Neutral rating falls into a hold rating category. we expect this stock will perform in line with the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe. 21 . Morgan Global Equity Research Coverage IB clients* JPMS Equity Research Coverage IB clients* Overweight (buy) 45% 51% 43% 70% Neutral (hold) 43% 45% 48% 61% Underweight (sell) 12% 34% 9% 53% *Percentage of investment banking clients in each rating category.P. (2393. Samsung Electronics (005930.000 OW NT$1. we expect this stock will outperform the average total return of the stocks in the analyst's (or the analyst's team's) coverage universe. TPK Holding Co.T).KS). Sharp (6753) (6753. JJ: LG Display (034220. Morgan's continuing coverage of the stocks. 2011.P.OS).200 OW NT$500 OW NT$700 984 Price(NT$) 738 Date 04-Jun-11 11-Aug-11 28-Oct-11 22-Feb-12 26-Apr-12 Rating Share Price (NT$) OW OW OW OW OW 936.TW). (8069. Inotera Memories. Nanya Technology Corporation (2408.00 581.TW.T). UW = Underweight Explanation of Equity Research Ratings and Analyst(s) Coverage Universe: J.TWO). www.KS) Chang. Taiwan Surface Mounting Technology (6278.00 700. Nissin Electric (6641) (6641.TW).TW). not to those analysts’ coverage universe.T).TW). Morgan.00 490. Morgan ratings: OW = Overweight. (3673.P.JJ Park (822) 758-5717 jj.KS). (3673. Oki Electric Industry (6703) (6703.P. J. our Overweight rating falls into a buy rating category. Hitachi (6501) (6501. Coverage Universe: Park.KS).T).T). Morgan uses the following rating system: Overweight [Over the next six to twelve months. Initiated coverage Jun 04.00 800. NEC (6701) (6701.morganmarkets. Wintek Corporation (2384. the current analysts may or may not have covered it over the entire period.
J. Riyadh 11553. Other Disclosures J. Pakistan: J.K. and its subsidiaries. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. Road. Registered in England & Wales No. Morgan Securities Singapore Private Limited (JPMSS) [MICA (P) 088/04/2012 and Co. advising and custody. N. and trading securities held by a research analyst account. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. having its registered office at J. N.P. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.com/publications/risks/riskstoc.INB 010675237/INF 010675237) and is regulated by Securities and Exchange Board of India.park@jpmorgan.S. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB.com. arranging. Dubai.Building 3. Morgan Securities Australia Limited (ABN 61 003 245 234/AFS Licence No: 238066) is a Market Participant with the ASX and regulated by ASIC. contact the primary analyst or your J. Kalina.K. Philippines: J.: JPMS is a member of NYSE. are not registered/qualified as research analysts under NASD/NYSE rules.A. Australia: J. Hong Kong: J. South Africa: J.P.P.A. For the purposes of this paragraph the terms "wholesale client" and "retail client" have the meanings given to them in section 761G of the Corporations Act 2001. P. Morgan Securities (Far East) Ltd. Registration of non-US Analysts: Unless otherwise noted. London EC2Y 5AJ. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent. including the quality and accuracy of research. This report has been issued in the U. Seoul Branch.A. U. Morgan Cazenove is a marketing name for the U. India: J. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options. P.P.inquiries@jpmorgan. is a member of the Philippine Stock Exchange and is regulated by the Securities and Exchange Commission. N.P. Germany: This material is distributed in Germany by J. Kingdom of Saudi Arabia. Off. Morgan India Private Limited.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. Morgan Securities LLC ("JPMS") and its affiliates worldwide.K. Frankfurt Branch and J.T. Frankfurt Branch which are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. is regulated by the Korea Financial Supervisory Service.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. UAE. Morgan Saudi Arabia Ltd. with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor.P..morganmarkets.P.P.optionsclearing. Morgan Pakistan Broking (Pvt. which include revenues from. J.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank.P. Saudi Arabia: J. please contact your J. the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Santacruz East.P. In other EEA countries. such information is available only to persons who have received the proper option risk disclosure documents.: J. JPMorgan Chase Bank.P.V.disclosure. Morgan representative. and European Economic Area (EEA): Unless specified to the contrary. Box 51907. Reg.. Country and Region Specific Disclosures U. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants. Korea: J.P.K.K. is a member of FDIC and is authorized and regulated in the UK by the Financial Services Authority. Indonesia: PT J. the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS. N. or email research.P.Morgan Chase Bank.P.A. (JPMSL) is a member of the London Stock Exchange and is authorized and regulated by the Financial Services Authority. SIPC and the NFA. King Fahad Road.P. and the EEA by JPMSL. (For research published within the first ten days of the month. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong. the disclosure may be based on the month end data from two months prior. may not be associated persons of JPMS. Morgan Casa de Bolsa.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. and overall firm revenues.A. is a member of the National Stock Exchange of India Limited (SEBI Registration Number . investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. Taiwan: J. only to persons of a kind described in Article 19 (5). Mexico: J.P.P. Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission.pdf Legal Entities Disclosures U. Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre . Singapore branch (JPMCB Singapore) which is regulated by the MAS. de C.com . Mumbai . Morgan S. Singapore: This material is issued and distributed in Singapore by J.P. Thailand: JPMorgan Securities (Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Dubai: JPMorgan Chase Bank. C.com Asia Pacific Equity Research 16 June 2012 Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies. Registered Office 125 London Wall. please see the most recent company-specific research report at http://www.INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration Number .JJ Park (822) 758-5717 jj.. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Morgan ("JPM") is the global brand name for J. client feedback. Morgan Securities Ltd. implement and maintain such a policy.P. among other business units.. Morgan Tower. competitive factors. FINRA. Morgan Securities Philippines Inc. callable bull bear 22 .400098. Morgan Securities Ltd. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Al-Faisaliyah Tower.P. issued and approved for distribution in the U. 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons").) J. 2711006. Many European regulators require a firm to establish.P.O.A.P. Investment research issued by JPMSL has been prepared in accordance with JPMSL's policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors. JPMSAL does not issue or distribute this material to "retail clients". Morgan Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188) is regulated by ASIC and J. Brazil: Banco J. Institutional Equities and Investment Banking. Morgan Representative or visit the OCC's website at http://www. S.S.. PO Box 506551. Level 7. This document must not be acted on or relied on by persons who are not relevant persons. and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies. 38. Options related research: If the information contained herein regards options related research. public appearances. No.P.
not for sale. and the customer in advance. Morgan Securities (Far East) Ltd. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.P. Financial Instruments Firms: JPMorgan Securities Japan Co. To the extent that the information contained herein references securities of an issuer incorporated. Canada: The information contained herein is not. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report. not for sale. or solicitation of an offer to buy securities described herein. Kanto Local Finance Bureau (kinsho) No. Ltd.com. will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. Past performance is not indicative of future results.hkex. research published by non-U.P. objectives. An updated list can be found on HKEx website: http://www. Ltd. Seoul Branch.. an offer to sell securities described herein. All pricing is as of the close of market for the securities discussed.P. an advertisement. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials. This report or any portion hereof may not be reprinted. market conditions or any other publicly available information. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules. in the course of and for the purposes of their business. any trades in such securities must be conducted through a dealer registered in Canada. The Financial Futures Association of Japan. unless otherwise stated.. in Canada or any province or territory thereof. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. All rights reserved. sold or redistributed without the written consent of J. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. formed or created under the laws of Canada or a province or territory of Canada. Clients should contact analysts and execute transactions through a J. The opinions and recommendations herein do not take into account individual client circumstances. or its affiliates and/or subsidiaries (collectively J. habitually invest money. and any representation to the contrary is an offence. Type II Financial Instruments Firms Association and Japan Securities Investment Advisers Association. Ltd. #$J&098$#*P 23 . Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading.. Korea: This report may have been edited or contributed to from time to time by affiliates of J. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. "Other Disclosures" last revised April 18. and under no circumstances is to be construed as. a public offering. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. Periodic updates may be provided on companies/industries based on company specific developments or announcements. Copyright 2012 JPMorgan Chase & Co. financial instruments or strategies to particular clients. the information contained herein or the merits of the securities described herein. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient.JJ Park (822) 758-5717 jj. a prospectus. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978.P. for securities where the holding is 1% or greater. or needs and are not intended as recommendations of particular securities..com Asia Pacific Equity Research 16 June 2012 contracts and stock options listed on the Stock Exchange of Hong Kong Limited.park@jpmorgan. Pakistan: For private circulation only. affiliates and accepts responsibility for its contents. and that a loss may occur due to the exchange rate in the case of foreign share trading. General: Additional information is available upon request. 2012. India: For private circulation only.S. alternatively. Morgan.S. 82 Participating Association / Japan Securities Dealers Association.. the specific holding is disclosed in the Important Disclosures section above. In the case of share trading. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMorgan Securities Japan Co.hk. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or. JPMS distributes in the U..