Executive Summary / Key Takeaways

• The LCD Exit is Complete, OLED Dominance is Here: LG Display's sale of its Guangzhou LCD plant in Q2 2025 marked the final chapter in its strategic withdrawal from commoditized LCD manufacturing. OLED products now represent 65% of revenue as of Q3 2025, up from 60% in 2024, driving ASP per square meter to an all-time high of $1,365—a 29% sequential increase that validates the premium pricing power of OLED.

• Profitability Turnaround is Materializing, Not Just Promised: After four years of losses, the company is on track for a full-year operating profit in 2025. Q3 operating profit of KRW 431 billion represents a KRW 500+ billion improvement both quarter-over-quarter and year-over-year, while cumulative operating profit for the first three quarters reached KRW 345 billion. This isn't a one-time event; it's the result of a structural shift toward higher-margin OLED products and relentless cost innovation.

• Balance Sheet Repair Creates Strategic Flexibility: Total debt has been reduced to KRW 13.5 trillion, achieving the company's KRW 13 trillion target ahead of schedule. With CapEx guidance slashed to the high KRW 1 trillion range for 2025—down from KRW 2.2 trillion in 2024—LG Display is generating positive free cash flow and has the financial firepower to invest in next-generation OLED technology without diluting shareholders.

• Customer Concentration Remains the Critical Risk: While the OLED transition is working, LG Display's reliance on a handful of strategic customers (particularly in mobile and TV) creates vulnerability. The mobile OLED segment, which reached 39% of revenue in Q3 2025, depends heavily on smartphone OEMs whose demand can be volatile. Any shift in supplier status or production strategies among these key customers could quickly reverse the profitability gains.

• Valuation Reflects Turnaround Hope, Not Perfection: Trading at $4.48 with a price-to-sales ratio of 0.25 and enterprise value-to-revenue of 0.70, LG Display is priced as a distressed manufacturer despite demonstrating clear evidence of a successful transformation. The market has yet to fully credit the durability of its OLED moat, particularly in automotive displays where the company expects to triple revenue in three years.

Setting the Scene: The Display Industry's Brutal Evolution

LG Display Co., Ltd., incorporated in 1985 in Seoul, South Korea, spent decades building a global empire around liquid crystal display (LCD) technology. For years, this strategy worked—until it didn't. The LCD market became a race to the bottom, with Chinese manufacturers like BOE (000725.SZ) leveraging massive scale and government support to drive prices below sustainable levels. By 2023, LG Display faced a stark choice: continue bleeding cash in a commoditized business or execute a radical transformation.

The company chose the latter. What makes this strategic pivot particularly compelling is its completeness and speed. In March 2008, LG Display formally changed its name from LG.Philips LCD, but the real transformation began in recent years as management committed to an OLED-centric future. The sale of the Guangzhou LCD TV plant stake in Q2 2025 wasn't just an asset disposal—it was a symbolic and financial severing of ties with a business model that had become a value destroyer. Management's willingness to sacrifice near-term revenue from LCD TV sales for long-term profitability underscores the superiority of OLED margins.

The display industry structure has fundamentally shifted. OLED technology, once a premium niche, is now the growth engine across all display categories. The market is driven by three forces: mobile devices demanding thinner, more power-efficient screens; IT devices requiring higher resolution and brightness for AI-driven workloads; and automotive displays exploding in size and sophistication as vehicles become "computers on wheels." LG Display's positioning across all three segments—with technological leadership in large OLED for TVs, tandem OLED for IT, and plastic OLED for automotive—creates multiple avenues for growth that are largely independent of each other.

Technology, Products, and Strategic Differentiation: The OLED Moat

LG Display's competitive advantage isn't just that it makes OLED panels; it's that it makes them better and at scale where it matters most. The company's proprietary WOLED (White OLED) technology for large panels enables significantly higher brightness and efficiency than traditional RGB OLED, translating into 20-30% premium pricing power. This isn't a theoretical advantage—it's reflected in the ASP per square meter hitting an all-time high of $1,365 in Q3 2025, driven by a higher mix of small and medium OLED products.

The tandem OLED technology for IT applications represents another layer of differentiation. By stacking multiple organic layers, LG Display achieves low power consumption, longer lifespan, and high luminance—critical attributes for laptops and monitors that compete directly with LCD. The IT segment, at 37% of Q3 2025 revenue, is where LG Display can capture the highest margins while the global IT market remains sluggish. When replacement demand eventually materializes and AI PCs drive upgrade cycles, LG Display's technological lead will translate into disproportionate profit capture.

In automotive displays, LG Display has built the most diversified technology portfolio in the industry: plastic OLED, ATO (Advanced Thin OLED) , advanced OLED, and high-end LTPS LCD. This isn't just product breadth—it's strategic depth. The company can serve every segment from premium EVs to mass-market internal combustion vehicles, and its recent CES 2026 Innovation Awards for Dual View OLED and Under Display Camera-infrared (UDC-IR) OLED demonstrate continued innovation leadership. The automotive segment currently represents only 8% of revenue, but with a projected tripling of OLED revenue in three years and the total auto display market expected to surpass 200 million units in 2025, this could become a material profit driver.

Research and development investment is focused and purposeful. The KRW 1.260 trillion commitment to new OLED technology through H1 2027 isn't about chasing every trend—it's about maintaining the technological gap with competitors. Management explicitly stated this investment is to "maintain this technological gap with our competitors," acknowledging that in display technology, leadership is perishable. Investors benefit from LG Display spending just enough to stay ahead without squandering cash flow on speculative projects, a discipline that contrasts sharply with the capital destruction of its LCD era.

Financial Performance & Segment Dynamics: Evidence of Structural Change

The numbers tell a story of accelerating transformation. Q3 2025 revenue of KRW 6.957 trillion represented 25% sequential growth, but the composition matters more than the top line. OLED products accounted for 65% of revenue, up 9 percentage points quarter-over-quarter and 7 percentage points year-over-year. This mix shift is the engine of profitability—OLED panels command premium prices and generate higher gross margins than the LCD products they're replacing.

Segment performance reveals the strategy in action. The mobile OLED business, at 39% of Q3 revenue, grew 11 percentage points quarter-over-quarter driven by seasonality and new product preparation. Management expects around 20% year-over-year shipment growth for 2025, with the wearable devices market providing additional upside as health monitoring drives demand for premium displays. LG Display has secured a stable, growing position in the most profitable segment of the display market, reducing its historical dependence on cyclical TV demand.

The IT segment's 37% revenue share in Q3 2025 reflects a deliberate focus on high-end, differentiated products. While the global IT market remains sluggish, LG Display's tandem OLED technology and high-end LCD offerings (including IPS Black ) allow it to capture premium pricing. The company expects profitability in this segment to improve gradually, with 2024 marking the bottom. LG Display can generate profits even in a weak end-market by focusing on technology leadership rather than volume.

The TV segment's decline to 16% of Q3 revenue is a feature, not a bug. The exit from LCD TV production is complete, and the focus is now on premium large OLED panels. Shipments are projected at mid-6 million units for 2025, growing to 7 million in 2026, with gaming OLED monitors representing a low- to mid-teen percentage of this volume. LG Display is no longer competing in the brutal, low-margin LCD TV market—it's now a premium OLED supplier with pricing power and structural demand growth.

Balance sheet repair provides strategic optionality. Total debt of KRW 13.5 trillion represents a KRW 1.1 trillion reduction from year-end 2024, achieving the KRW 13 trillion target ahead of schedule. The debt-to-equity ratio of 263% and net debt-to-equity of 151% remain elevated but are trending downward. More importantly, CapEx guidance for 2025 has been reduced to the high KRW 1 trillion range, down from KRW 2.2 trillion in 2024, while depreciation is projected to decline to KRW 4.3 trillion in 2025 from KRW 5.1-5.2 trillion in 2024. This combination of lower investment and declining depreciation means free cash flow generation is set to accelerate, giving management flexibility to invest in growth, reduce debt further, or return capital to shareholders.

Outlook, Management Guidance, and Execution Risk

Management's guidance for 2025 is clear: achieve a full-year turnaround in operating and net profit after four years of losses. As of Q3, this commitment appears not just achievable but potentially conservative. Cumulative operating profit of KRW 345 billion through three quarters already exceeds the full-year guidance implied by management's projection of another KRW 1 trillion improvement over 2024. LG Display is executing ahead of plan, suggesting either stronger-than-expected OLED demand or better-than-expected cost control—both bullish for the stock.

Q4 2025 guidance calls for low single-digit percentage growth in total area shipment, with ASP per square meter expected to decline in the low single-digit percentage range due to product mix changes. However, management emphasizes that ASP will remain at a higher level compared to average quarters, and the annual OLED revenue share is projected at a low 60% level. The company is managing for profitability, not volume, prioritizing high-margin OLED shipments over low-margin LCD volume.

The 2026 outlook suggests continued momentum. Large OLED panel shipments are expected to grow to 7 million units, up from mid-6 million in 2025, while the auto business is positioned for sustained growth. Management's commentary that "we will continue to work to further improve our business performance next year as well Y-o-Y" indicates confidence in the durability of the turnaround. This isn't a one-year recovery story—it's a multi-year expansion driven by structural OLED adoption across multiple end-markets.

Execution risks center on three factors. First, the mobile OLED business depends on a handful of strategic customers, and any loss of supplier status could quickly reverse gains. Second, competition in IT OLED is intensifying, with Samsung Display and Chinese manufacturers investing heavily. Third, macroeconomic uncertainty and trade volatility could disrupt demand, particularly in the automotive segment where LG Display is counting on strong growth.

Risks and Asymmetries: What Could Break the Thesis

Customer concentration remains the most material risk. The mobile OLED segment's 39% revenue share is concentrated among a few smartphone OEMs, and management acknowledged that "recent changes in supplier status" have driven growth in the wearable panel business. While this has been positive so far, it cuts both ways—if a key customer shifts strategy or develops in-house capabilities, LG Display could face sudden revenue loss. Despite the OLED transformation, the company remains vulnerable to decisions made by a small number of large customers, creating earnings volatility that the market will likely continue to discount.

Competitive pressure is intensifying across all segments. Samsung Display maintains technological leadership in flexible OLED for foldable smartphones, an area where LG Display is "closely monitoring market trends" but hasn't established a strong position. In IT OLED, the level of competition is "becoming more fierce," with Samsung and BOE both targeting the high-end monitor and notebook markets. In large OLED, competition between different products is intensifying as LCD manufacturers launch premium mini-LED products that compete directly with OLED. LG Display's technological lead is not insurmountable, and competitors with deeper pockets like Samsung or lower cost structures like BOE could erode margins over time.

Macroeconomic and trade uncertainties create demand volatility. Management explicitly cited "macro-related real demand, intensifying competition among suppliers and supply chain stability" as key variables in Q4 2025. The U.S. tariff issue is "a hotly debated topic," and the company is "closely monitoring how set makers determine their production base and strategies." While management claims "there are no critical issues that at this point, we believe will exist" regarding pricing pressure, the risk of trade disruptions affecting customer production decisions remains real. Even a successful internal transformation can be derailed by external forces beyond management's control.

The auto business, while promising, faces its own risks. The market outlook is positive, driven by "expanding in-vehicle display adoption and accelerating enlargement of displays," but competition is intensifying and the shift toward EVs has created uncertainty as "countries scale down on subsidies." LG Display's expectation to triple OLED revenue in three years assumes continued rapid adoption of premium displays in vehicles, which may not materialize if automakers face cost pressures or if LTPS LCD remains the dominant technology in mass-market vehicles.

Valuation Context: Turnaround Priced as Distressed Equity

Trading at $4.48 per share, LG Display carries a market capitalization of $4.48 billion and an enterprise value of $12.60 billion. The price-to-sales ratio of 0.25 and enterprise value-to-revenue of 0.70 place it firmly in distressed manufacturing territory, despite clear evidence of a successful strategic transformation. This valuation gap reflects market skepticism about the durability of the OLED turnaround and lingering memories of the LCD-era losses.

Cash flow metrics tell a more nuanced story. The price-to-operating cash flow ratio of 2.96 suggests the market is beginning to recognize the company's cash generation potential, while the price-to-free cash flow ratio of 49.27 reflects the still-early stage of consistent FCF generation. With annual operating cash flow of $1.78 billion and quarterly free cash flow of $157.86 million, LG Display is generating substantial cash that can be deployed for debt reduction, technology investment, or eventual shareholder returns.

Balance sheet metrics remain a concern but are improving. The debt-to-equity ratio of 1.71 is elevated but trending down from prior levels, and the company has already achieved its debt reduction target ahead of schedule. The current ratio of 0.70 and quick ratio of 0.42 indicate tight liquidity, but this is offset by the company's improving cash generation and reduced capital intensity. While the balance sheet isn't pristine, it's stable enough to support the OLED transition without requiring dilutive equity issuance.

Peer comparisons highlight the valuation disconnect. Samsung Display (through Samsung Electronics (005930.KS)) trades at enterprise value-to-revenue multiples that reflect its premium market position and profitability. BOE Technology, despite its lower-margin LCD focus, trades at 5.70x EV/revenue. AU Optronics (2409.TW) and Innolux (3481.TW), both struggling with LCD overcapacity, trade at 9.85x and 15.42x EV/revenue respectively—though these multiples reflect their own unique capital structures and market positions. LG Display's 0.70x EV/revenue multiple suggests the market hasn't yet accepted that its business model has fundamentally changed.

Conclusion: OLED Leadership Meets Manufacturing Discipline

LG Display has executed one of the most complete transformations in the display industry, exiting a commoditized LCD business and establishing itself as a premium OLED leader. The evidence is compelling: OLED represents 65% of revenue, operating profit has improved by over KRW 500 billion quarter-over-quarter, debt reduction targets have been achieved ahead of schedule, and CapEx discipline is generating positive free cash flow. This isn't a turnaround story—it's a turnaround reality.

The investment thesis hinges on whether the market will pay a premium multiple for a company that has successfully reinvented itself. At current valuations, investors are getting the OLED business for less than one times sales while receiving essentially no credit for the automotive display opportunity or the company's technological leadership in tandem OLED. The risks are real: customer concentration, intensifying competition, and macro volatility could all derail progress. But the asymmetry is favorable—downside is limited by the already-depressed valuation, while upside could be substantial if LG Display continues to execute on its OLED roadmap and expands its presence in high-growth automotive applications.

The next 12-18 months will be critical. If the company delivers on its full-year 2025 profit turnaround, continues to grow automotive OLED revenue, and maintains its technological edge in mobile and IT OLED, the market will be forced to re-rate the stock from a distressed manufacturer to a premium technology supplier. For investors willing to look past the historical baggage of the LCD era, LG Display offers a rare combination: a proven transformation, improving financials, and a valuation that doesn't yet reflect the new reality.