* No supply-side risks for rechargeable batteries

- Focus on laptop computer component vendors

Laptop computer component vendors should fare well over the short-term thanks to marginal inventory correction risks. LCD TV panel producers have an inventory burden after the Chinese New Year holiday and face uncertainties over LCD panel makers’ capex plans in China. Accordingly, we expect laptop computer component vendors to deliver better earnings thanks to brisk demand and low inventory correction risks. The 2010F shipments of laptop computers including netbooks should increase by 32% to 222mn units.  

- A slim chance of oversupply

Production capacity always exceeds demand in the rechargeable battery industry but such excess capacity does not lead to a supply glut or product price plunges. The rechargeable battery industry had 22% capacity oversupply in 2009 and it should stay in 2010F. Nonetheless, rechargeable battery makers can adjust the supply volume effectively by lowering the utilization rate, and this owes to an inherently light fixed costs burden. Concerns are great regarding JPY depreciation. The likelihood is small the weak JPY will lead to ASP drops and profitability erosion given that both Sharp and Samsung SDI saw their operating margins improve during 2Q-3Q08 when the JPY was under pressure.

- 1Q10F operating profit to reach W61.7bn

The 1Q10 earnings should be favorable thanks to stronger-than-expected demand for rechargeable battery and PDP modules. The 1Q10 sales should reach W1.1trn and operating profit should increase more than our estimation by 32% QoQ to W61.7bn.