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AU Optronics Corporation 08 July 2008

Company News Alert

AU Optronics announces disappointing revenue growth for 2Q 08

Common HOLD AU Optronics Corporation (AU Optronics) today announced its 2Q 08 revenues, which were
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companyat has also announced to defer
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capital spending and to terminate some of its production line, citing inventory build up and lower
than expected demand for Liquid Crystal Display (LCD) panels. We believe the uncertain demand
situation which now prevails in the market will act as deterrence for a positive stock price
movement. Given the company’s lower than expected revenues and unit shipment for 2Q 08, and
uncertain demand scenario combined with the expected pricing pressure; we are likely to revise our
estimates and target price downwards in our next update report. In view of these factors, we now
hold a cautious outlook for the company’s growth, going forward, and downgrade AU Optronics’
Ticker: 2409.TW common stock from a BUY to a HOLD until we revalue the stock in our next update report.

Target price: NT$81.05


Current price: NT$47.65
Price change since (13.0%) We will reassess our common stock rating after the company announces its 2Q 08 results on 24 July
last report: 2008.

ADR HOLD Given that we have revised our fundamental outlook for the common stock, we downgrade our ADR
rating from a BUY to a HOLD, even though we expect a positive currency impact on the ADR over the
long term.
Ticker: AUO
Target price: US$23.16
Current price: US$15.74
Price change since (12.5%) We will reassess our ADR rating after the company announces its 2Q 08 results on 24 July 2008.
last report:

Supervisor: Nirav Shah


Analyst: Aakash N. Singh Investment horizon - short term actionable trading strategies
Editor: Adil Bahar, PhD This report addresses the needs of strategic investors with a long term investment horizon of 6-24 months.
Global Research Director: If this report is provided to you by your broker under the Global Settlement, you may now also access (free of
charge) the short term trading outlook that we publish from time to time for this issuer, looking at the
Satish Betadpur, CFA coming 5-30 days for readers with a shorter trading horizon. These are available on-line only at
Next news due: www.researchoracle.com.
2Q 08 results, 24 July 2008

AU Optronics today announced its revenue and unit shipment figures for 2Q 08. The company
reported revenues of NT$123.5 bn (+16.5% y-o-y and -9.6% q-o-q) for 2Q 08. The company’s large-
sized panel and small and medium-sized panel shipments for 2Q 08 were 21.8 mn and 41.9 mn,
respectively. The company’s 2Q 08 revenues and LCD panel shipments are lower than our estimate
mainly due to reduction in consumer spending and lower demand for LCD panels during the quarter.
We expected revenues of NT$137.7 bn for 2Q 08 and large-sized panel and small and medium-sized
panel shipments of 22.9 mn and 43.4 mn, respectively, for the quarter.

Furthermore, AU Optronics’ Executive Vice President, today, announced the company may defer its
capital expenditure plan and to shut down some of its production lines in view of inventory build up
and lower than previously anticipated demand of LCD panels. The inventory build up in the industry is
also likely to apply significant pricing pressure for companies and may negatively impact their
margins.

The global economic slowdown has impacted the demand for LCD panels and industry observers
expect further reduction in consumer spending in the coming quarters. In view of the company’s
lower-than-anticipated revenues and unit shipment for 2Q 08 and in view of an expected slow down
in consumer spending for such products, we are likely to revise our estimates and thereby our target

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