On Friday, Nomura/Instinet shifted its stance on LG Display (NYSE:LPL) Co Ltd (034220:KS) (NYSE: LPL), upgrading the stock from Neutral to Buy and lifting its price target to KRW15,000 from KRW11,000.
The firm's revised price target is based on an anticipated book value per share (BVPS) for the year 2025, which has been adjusted to KRW16,553 from the previously forecasted 12-month forward BVPS of KRW14,805. This adjustment corresponds to a target price-to-book (P/B) ratio of 0.89x, an increase from the earlier 0.72x.
The analyst justifies this premium by projecting that LG Display's return on equity (ROE) for 2025 will reach 10.5%, surpassing the average upcycle ROE of 8.4% by 25.6%. Looking further ahead, the analyst anticipates that the company's ROE will continue to improve, potentially hitting 18.9% in 2026. Currently, LG Display's stock is trading at 0.8x the forecasted 2024 P/B ratio.
Despite the positive outlook, the analyst notes potential downside risks for LG Display. These include the possible reflection of restructuring costs in the company's financials and the overall weakness in financial performance.
The analyst estimates that LG Display may require a capital injection of KRW1.5 to KRW2.0 trillion to invest in its 7.5k 8.6G IT OLED operations. Moreover, if the sale of the Guangzhou LCD TV fabrication plant faces delays, the company might consider raising additional capital to fund its investments.
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