OLED, AR/VR And IoT Expansion Will Boost Immersive Digital Demand

Key Takeaways

• OLED-centric strategy, operational improvements, and strong customer relationships position LG Display for higher margins, resilient earnings, and share gains in new premium markets.
  
• Balance sheet strengthening and disciplined capital allocation enable ongoing R&D investment, driving sustained growth and reduced earnings cyclicality.
  
• Rising costs, intense competition, technology shifts, changing consumer habits, and stricter regulations threaten LG Display's profitability, technological relevance, and long-term revenue stability.

Catalysts

Engages in the manufacture and sale of thin-film transistor liquid crystal display (TFT-LCD) and organic light-emitting diode (OLED) technology-based display panels in Korea, China, rest of Asia, the Americas, Poland, and rest of Europe.

• Analyst consensus expects the shift to an OLED-centric business model to incrementally improve margins and revenue, but given LG Display's accelerating gains in ASP per square meter and robust panel shipment growth in both large and small/medium OLED, the magnitude and speed of earnings and gross margin expansion may be materially underestimated.
  
• While analysts broadly agree the Guangzhou LCD plant sale strengthens the balance sheet, they understate the substantial structural improvement in working capital and financial flexibility, which enables outsized investment in next-gen OLED R&D and should drive both sustained topline growth and long-term net margin expansion.
  
• The rapid adoption of OLED and low-power display technologies across an expanding range of immersive digital experiences-including AR/VR, gaming monitors, and streaming-centric devices-positions LG Display to capture greater-than-expected market share and revenue growth from new and premium product categories.
  
• Amid the proliferation of connected devices, IoT, and digital automotive interiors, LG Display's deepening relationships with top-tier global customers and leadership in differentiated display technology provide the foundation for longer-term, high-visibility revenue streams and reduced earnings cyclicality.
  
• The company's disciplined CapEx approach and operational improvements-including reduced debt, higher utilization rates, and ongoing cost innovation-are setting the stage for significant operating leverage, enabling both rapid EBITDA growth and improved resilience through multiple industry cycles.

LG Display Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on LG Display compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming LG Display's revenue will grow by 4.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -2.5% today to 6.9% in 3 years time.
• The bullish analysts expect earnings to reach ₩2064.6 billion (and earnings per share of ₩4140.7) by about August 2028, up from ₩-669.8 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 5.9x on those 2028 earnings, up from -8.9x today. This future PE is lower than the current PE for the US Electronic industry at 15.1x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.76%, as per the Simply Wall St company report.

LG Display Future Earnings Per Share Growth

Risks

• Long-term margin pressure is likely to persist due to rising labor and manufacturing costs in Asia and South Korea, which could erode LG Display's cost advantage, resulting in narrowed profitability and weaker net margins over time.
  
• Intensifying competition from Chinese display manufacturers, supported by scale and state backing, may accelerate price competition and lead to downward pressure on selling prices, undermining LG Display's revenue growth and overall earnings stability.
  
• Despite the strategic shift to OLED, LG Display's heavy capex in legacy assets and high fixed-cost structure may hinder its flexibility to fully capitalize on disruptive trends like mini-LED and micro-LED, which could leave it lagging technologically and suppressing future free cash flow.
  
• Secular consumer shifts towards mobile-centric content at the expense of large-format displays, coupled with macroeconomic uncertainties and a sluggish global IT demand, could dampen long-term demand for LG Display's core products, resulting in volatile and potentially declining revenues.
  
• Increasing environmental regulations and sustainability requirements will likely raise compliance and investment costs, further squeezing profitability and potentially requiring ongoing capital expenditures that limit improvements to net income.

Valuation

• The assumed bullish price target for LG Display is ₩17066.32, which represents two standard deviations above the consensus price target of ₩11910.0. This valuation is based on what can be assumed as the expectations of LG Display's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₩18000.0, and the most bearish reporting a price target of just ₩6500.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be ₩30005.1 billion, earnings will come to ₩2064.6 billion, and it would be trading on a PE ratio of 5.9x, assuming you use a discount rate of 12.8%.
• Given the current share price of ₩11880.0, the bullish analyst price target of ₩17066.32 is 30.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.