(LEAD) Samsung SDI's suspension of plasma production a plus for earnings: analysts
SEOUL, July 2 (Yonhap) -- The latest move by Samsung SDI Co. to suspend production of plasma display panels (PDP) will help improve its earnings, analysts said Wednesday.
"The PDP industry itself has been a waning sector in the global market," said Eo Kyu-jin, an analyst at IBK Investment & Securities Co., adding the PDP accounts for only about 5 percent in the global display market. "Samsung SDI also has been suffering net losses from the division.
"Although the PDP accounted for around 30 percent of its sales, the losses will be recouped by its recent acquisition of Cheil Industries Co.," Eo said. "Clearly, its performance and shares will gain ground in the future."
Chung Won-suk, an analyst at Hi Investment & Securities Co., agreed that Samsung SDI's operating profit will improve by offloading the loss-making division.
"Also, the decision will help Samsung focus on the battery businesses," Chung said. "The workforce, which was previously allocated to the PDP line, is anticipated to be added to the battery division."
Chung painted a rosy picture for Samsung SDI's battery business, as the company's cash holdings improved following the merger with Cheil, which gives the company more leeway in making new investments.
On Tuesday, Samsung SDI completed its merger with Cheil Industries Co., another Samsung affiliate, which produces electronic and chemical materials.
The joined entity has two divisions -- energy solution and materials, with each having their respective representatives. The former will focus on battery and system businesses, whereas the latter will engage in chemical and electronics material-related projects.
"Samsung SDI's decision will lend support to earnings of liquid crystal display (LCD) makers, such as Samsung Display Co. and LG Display Inc., as the demand for the PDP products will switch to LCD TVs," said Soh Hyun-chul at Shinhan Investment Corp.
Samsung SDI shares closed at 168,500 won (US$166.78) Wednesday, up 0.3 percent from the previous trading session, while the benchmark KOSPI edged up 0.81 percent. Samsung SDI's announcement was made during Tuesday's trading session.