LG Display's seasonal recovery is insufficient to offset structural pressures; HSBC maintains Hold and cuts the target price

Overview

This report reviews LG Display's 2Q26 results, the outlook for a seasonal recovery in 3Q26, and structural growth constraints around 2027. HSBC expects the company to return to profitability from 3Q26 and benefit from an upgraded OLED product mix, but believes that higher end-product prices, panel pricing pressure, intensifying competition, and insufficient economies of scale leave sustained improvement uncertain. It therefore maintains its Hold rating and cuts the target price.

Core views

2Q26 results were weaker than HSBC expected. LG Display posted revenue of KRW5.6trn, up 1% q-o-q and flat y-o-y, but recorded a KRW108bn operating loss and an operating margin of -2%, below HSBC's previous forecast of 1%. The seasonal downturn in mobile panels caused blended average selling prices to fall 13% q-o-q. Demand associated with global sporting events drove a 12% q-o-q increase in large- and medium-sized panel shipments, but this was insufficient to offset pricing and cost pressures. One-off restructuring expenses of KRW240bn directly weighed on earnings, while price-reduction pressure from smartphone customers also contributed to the earnings miss. HSBC expects a clear seasonal recovery in 3Q26. Operating profit is forecast to reach KRW482bn, up 12% y-o-y, while revenue is expected to be KRW6.1trn, up 8% q-o-q but down 13% y-o-y. This forecast does not rely on shipment growth: HSBC expects shipments to decline 3% q-o-q, but blended average selling prices to rise 19% q-o-q due to Apple's new products and the company's increased share in conventional smartphones, which should be sufficient to improve revenue and profit. Competitors are more focused on foldable smartphones, while Chinese manufacturers are unlikely to become major suppliers in the near term. However, customer price pressure and rising costs for other computer-related components will continue to limit the extent of margin recovery. An upgraded product mix is the primary support for medium-term earnings improvement. As LG Display expands its deployment of OLED display technology in notebook computers and PCs, HSBC expects OLED's share of total sales to rise from 55% in 2024 to 71% in 2027. Driven by an improved product mix, 2026 operating profit is expected to reach KRW1.073trn, or approximately KRW1.1trn, up about 108% y-o-y, despite revenue being forecast to fall to KRW24.149trn, down 6.4% y-o-y. The report also introduces 2028 forecasts for the first time: revenue is expected to rise from KRW24.149trn in 2026 to KRW27.182trn in 2027 and KRW28.269trn in 2028, with operating profit of KRW1.073trn, KRW1.139trn, and KRW1.202trn, respectively. Corresponding HSBC diluted EPS forecasts are KRW555.48, KRW639.90, and KRW719.32. However, HSBC believes this recovery is insufficient to demonstrate structural improvement. Rising component prices will increase end-product prices, further reducing consumer electronics shipments. Higher memory prices will intensify pricing pressure on smartphone OLEDs, while higher computer prices will also weigh on PC sales and panel demand. The LCD segment is likewise under pressure: the increasing popularity of LCD-based Micro RGB televisions is intensifying competition with OLED televisions. LCD panel prices for IT applications remain weak, with prices for 13-inch LCD notebook panels down 5% y-o-y in August, although prices for 27-inch LCD monitors rose 1% y-o-y. HSBC expects declining end-product shipments by customers to prolong panel oversupply through 2026, while LG Display's exit from LCD panel production is also progressing more slowly than expected. Based on weak 2Q26 results and mounting smartphone OLED margin pressure, HSBC cut its 2026 and 2027 operating profit forecasts by 11% and 21%, respectively. The new forecasts are KRW1.073trn and KRW1.139trn, compared with previous forecasts of KRW1.200trn and KRW1.439trn. The 2026 revenue forecast was cut by 8% from KRW26.178trn to KRW24.149trn, while the 2027 revenue forecast was raised by 7% from KRW25.390trn to KRW27.182trn. The report expects operating margins of approximately 4% in each year from 2026 to 2028, compared with previous forecasts of 5% and 6% for 2026 and 2027, respectively. On valuation, HSBC cut its target price from KRW13,000 to KRW11,500. The new target price uses average 2026/27 book value per share of KRW14,383, compared with the previously used 2026 book value per share of KRW15,904. The target P/B multiple remains unchanged at 0.8x, corresponding to the company's 10-year average valuation during periods of positive ROE. Relative to the current share price of KRW9,590, the new target price still implies 19.9% upside, but HSBC maintains Hold: OLED revenue growth is limited and economies of scale remain weak, leaving structural improvement uncertain; the stock's current valuation of 0.71x forward 12-month P/B is considered elevated; the LCD exit is progressing more slowly than expected; and the entry of mainland Chinese manufacturers into smartphone and other IT OLED markets could further intensify competition.

Analysis framework

HSBC first analyzes the 2Q26 earnings variance by breaking down revenue, average selling prices, shipments, margins, and one-off restructuring expenses. It then forecasts the seasonal recovery in 3Q26 based on new product cycles, customer share, and volume and pricing changes. Its medium-term analysis compares the rising OLED sales mix and product-mix improvement against higher end-product prices, panel supply and demand, LCD prices, and the competitive landscape. It uses this analysis to revise its 2026–2028 earnings forecasts before deriving the target price and rating conclusion from average book value per share and the target P/B multiple.

Methodology notes

• Valuation MethodPB valuation

  Target price-to-book valuation

  The report multiplies average 2026/27 book value per share of KRW14,383 by an unchanged target P/B multiple of 0.8x to derive a target price of KRW11,500. The 0.8x multiple is based on the company's 10-year average valuation during periods of positive ROE.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Decomposition of panel shipments and blended average selling prices

  The report expects 3Q26 shipments to decline 3% q-o-q but blended average selling prices to rise 19% q-o-q, explaining the forecast 8% q-o-q revenue growth and recovery in operating profit.

• Industry/Sector Analysis FrameworkSupply-demand framework

  Analysis of panel oversupply and pricing pressure

  The report links declining customer end-product shipments, the pace of LCD exits, and changes in competitor capacity to panel supply and demand, concluding that oversupply will persist through 2026 and constrain panel prices and margins.

• Industry/Sector Analysis FrameworkUpstream-Midstream-Downstream Industry Chain Transmission

  Transmission of component costs to end-product prices, end demand, and panel orders

  The report believes that higher prices for memory and other computer components will raise end-product prices, thereby reducing smartphone and computer sales and affecting LG Display's revenue and margins through customer price pressure and lower panel demand.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• LG Display (034220.KS)

  The South Korean display panel company covered by the report is expected to benefit from 3Q26 seasonality, new product launches, increased share in conventional smartphones, and an upgraded OLED product mix, but medium-term growth is constrained by pricing, demand, and competitive pressures.

  Strengths

  OLED's share of sales is expected to rise from 55% in 2024 to 71% in 2027; Apple's new products and increased share in conventional smartphones support 3Q26 average selling prices; 2026 operating profit is expected to grow approximately 108% y-o-y.

  Weaknesses

  OLED revenue growth and economies of scale remain limited, LCD panel prices are weak and the exit is progressing slowly, smartphone OLED faces customer price pressure, and end demand for consumer electronics could decline due to higher component and end-product prices.

  Comparison

  Some competitors are more focused on foldable smartphones. Chinese manufacturers are unlikely to become major suppliers in the near term, but their future entry into smartphone and other IT OLED markets remains a competitive threat, while LCD-based Micro RGB televisions will also intensify substitution competition.

  Risks

  Aggressive capacity expansion by mainland Chinese competitors, delays in exiting LCD capacity, and the entry of additional competitors into the OLED market could all weaken the sustainability of medium-term earnings.

Key data

• 2Q26 RevenueKRW5.6trnUp 1% q-o-q and flat y-o-y
• 2Q26 Operating Profit-KRW108bnOperating loss with an operating margin of -2%, below HSBC's 1% forecast
• 2Q26 One-Off Restructuring ExpensesKRW240bnIdentified by the report as a key reason for pressure on quarterly earnings
• 2Q26 Blended Average Selling Price-13% q-o-qAffected by seasonal weakness in mobile panels
• 2Q26 Large- and Medium-Sized Panel Shipments+12% q-o-qSupported by demand associated with global sporting events
• 3Q26 Operating Profit ForecastKRW482bnUp 12% y-o-y, with the company expected to return to profitability
• 3Q26 Revenue ForecastKRW6.1trnUp 8% q-o-q and down 13% y-o-y
• 3Q26 Volume and Pricing AssumptionsBlended ASP +19% q-o-q; shipments -3% q-o-qThe impact of higher selling prices is expected to outweigh the decline in shipments
• OLED Sales Contribution55% in 2024; 71% in 2027Reflects the company's shift toward an OLED-focused product mix
• 2026 Revenue and Operating Profit ForecastRevenue KRW24.149trn; operating profit KRW1.073trnRevenue down 6.4% y-o-y and operating profit up approximately 108% y-o-y
• 2026/27 Operating Profit Forecast Revisions-11% / -21%New forecasts are KRW1.073trn and KRW1.139trn
• HSBC 2026–2028 EPSKRW555.48 / KRW639.90 / KRW719.32The report adds a 2028 forecast for the first time
• August LCD Price Trends27-inch monitors +1% y-o-y; 13-inch notebook panels -5% y-o-yPrice performance diverged across IT panels, with notebook panel prices continuing to decline
• Target P/B and Valuation Base0.8x; average BVPS KRW14,383The target multiple is unchanged, while the valuation base was changed to average 2026/27 BVPS
• Target Price and Implied UpsideKRW11,500; +19.9%Target price cut from KRW13,000, based on the current share price of KRW9,590

Impact & implications

The report believes LG Display's near-term earnings trajectory will be characterized by a “seasonal rebound with structural constraints still in place”: new products and a higher OLED mix could drive a return to profitability in 3Q26 and operating profit growth in 2026, but pricing pressure, declining end demand, LCD oversupply, and insufficient economies of scale weaken the sustainability of margin improvement. The earnings forecast cuts lower the valuation base, so even though the target price remains 19.9% above the current share price, HSBC has not changed its Hold stance.

Risks

• Upside risk: Production cuts by panel manufacturers could result in stronger-than-expected LCD television panel prices.
• Upside risk: More aggressive promotions could accelerate the ramp-up of plastic OLED.
• Upside risk: Demand for television applications could recover unexpectedly, particularly demand for OLED televisions.
• Downside risk: Aggressive capacity expansion by mainland Chinese competitors could intensify supply and pricing pressure.
• Downside risk: Delays in LG Display's exit from LCD panel production could weaken the sustainability of medium-term earnings.
• Downside risk: The entry of new competitors into smartphone and other IT OLED markets could compress market share and margins.

What to watch

• Whether 3Q26 operating profit can reach KRW482bn and whether a 19% q-o-q increase in blended average selling prices can offset a 3% q-o-q decline in shipments.
• Smartphone OLED customer pricing pressure and the impact of higher memory prices on margins.
• Whether shipments of smartphones, computers, and other consumer electronics end products decline further following increases in component and end-product prices.
• LCD television, monitor, and notebook panel prices, and the extent to which panel oversupply persists through 2026.
• Progress toward raising OLED's share of sales to 71% by 2027, improvement in economies of scale, and the pace of entry by mainland Chinese OLED competitors.
• The actual pace of LG Display's exit from LCD panel production.