SK Securities projected on October 8 that LG Display's earnings for the third quarter of this year will fall short of market expectations. However, the firm maintained a 'buy' rating, citing potential long-term growth as capital expenditures (CAPEX) are expected to resume in 2027. The target price was adjusted downward to 12,500 won.
Park Hyung-woo, a researcher at SK Securities, estimated LG Display's third-quarter revenue at 6.9285 trillion won and operating profit at 233.6 billion won. While revenue is expected to be similar to the same period last year, operating profit is anticipated to decline by 46%, falling below market consensus.
The target price reduction is a result of adjustments to earnings estimates. SK Securities calculated the target price of 12,500 won by applying a typical price-to-earnings ratio (PER) of 10 times to the average expected earnings per share (EPS) for 2027-2028 in the IT hardware sector. This represents a potential upside of 51.5% compared to the current stock price of 8,250 won.
Factors contributing to the disappointing performance include exchange rates, price reduction pressures, and weak demand. The decline in the won-dollar exchange rate was identified as the most significant factor. LG Display has shown sensitivity, with monthly operating profit fluctuating by approximately 5 to 8 billion won for every 10 won change in the exchange rate.
Due to rising component prices, small panel customers are also demanding price reductions. The tablet and PC markets are experiencing a slowdown in demand as the burden of component costs is passed on to end consumers.
The outlook for the fourth quarter has also been lowered. Park conservatively estimated LG Display's fourth-quarter operating profit at 201.8 billion won, citing uncertainties in global set demand and smartphone component orders from North American clients.
Nevertheless, SK Securities emphasized the importance of focusing on investment directions post-2027 rather than short-term performance. LG Display has aimed to normalize profitability by minimizing CAPEX and managing depreciation costs while concentrating on cost efficiency measures such as voluntary retirement programs until this year.
Starting next year, the company is expected to shift its focus back to growth strategies. Investment plans are being reviewed across small, medium, and large panels, including new applications, enhanced price competitiveness, and expanded production capacity.
Park stated, "It is crucial to maintain a profit trend even during the off-season in the first half of next year. If performance improves compared to the previous year, valuation pressures will significantly decrease, potentially changing market perceptions." He added, "The key to the long-term stock story is the resumption of capacity expansion in 2027, and visibility on whether new investments will lead to actual profitability improvements will be a condition for valuation re-rating."
* This article has been translated by AI.
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