Universal Display: Slightly muted earnings but high margin profile on track; trim PO; reiterate Buy

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Universal Display

Slightly muted earnings but high margin

profile on track; trim PO; reiterate Buy

Reiterate Rating: BUY | PO: 130.00 USD | Price: 78.05 USD

Resilient 2Q results and share repurchases well-executed

31 July 2026

Universal Display Corp (UDC; OLED US) reported mixed 2Q results: sales US$152mn

(down 11% YoY) came in slightly below consensus/our estimate, but margins (GM 76%,

OPM 35%) exceeded the Street expectations (GM 75-76%, OPM 33%). Below-trend

material sales (US$66mn; down 25% YoY) and GM (only 50% vs normally 60%+ range)

were mostly due to lower volume instead of ASP pressure, coupled with changes in

customer mix and a US$6.9mn catch-up adjustment. In contrast, royalty and license

revenue (US$81mn; up 7% YoY) remained strong, which offset weaker material business.

Equity

Slightly toned down 2026 sales guidance

Management updated its 2026 revenue outlook (US$630mn vs US$650mn previously at

mid-point), which implies low-single% YoY decline. Key factors should be lower

smartphone shipment forecast on the back of skyrocketing memory chip costs, weighing

down overall end-demand. Our lower 2027-28E EPS revisions (down 1-3%) are primarily

based on weaker sales (down 2-4%), reflecting management’s softer guidance. We also

assume minimal progress of blue materials commercialization even in 2027. That said,

we believe UDC is well-positioned to defend its high margin profile (GM 76%+, OPM

36%+), thanks to its well-established IP track record. Also, we highlight management’s

strong commitment on shareholder-return activities – repurchase of 1.16mn shares

(worth US$114mn) in 1H26 and steady cash dividend (US$0.5/share for 3Q) - as well as

UDC’s clean balance sheet, with net cash of US$0.9bn (23% of market cap).

Cut PO to US$130, based on 27x 2027E P/E; 50%+ upside

We lower our PO to US$130, derived from 27x 2027E P/E (old PO US$140, based on 31x

2026-27E P/E), which is close to the 2025-26 average but much lower than the 2016-25

average of mid-40x. Our new PO suggests >50% upside potential. We reiterate Buy.

Estimates (Dec) (US$)

Net Income (Adjusted - mn)

EPS

EPS Change (YoY)

Consensus EPS (Visible Alpha)

Dividend / Share

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