LG Display Co., Ltd. (LPL) Q3 2026 Earnings Report, Transcript and Summary

[Interpreted] Good morning and good evening. Thank you all for joining the conference call for the LG Display earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we will begin the presentation on LG Display's Third Quarter of Fiscal Year 2026 earnings results.

[Interpreted] Good afternoon. This is Dong Joo Kim, Vice President, in charge of Finance and Risk Management at LG Display. Thank you for joining our third quarter 2026 earnings conference call. Joining us today are CFO, Sung-Hyun Kim; Vice President, Seung-Hyun Cho in charge of Business Control and Management; Vice President, Jong Duck Kim in charge of Large Display Planning and Management; Yu-Shin Ahn, in charge of Medium Display Planning and Management; Vice President, Seung-Ryong Baek in charge of Small Display Planning and Management; Vice President, Ki Hwan Son, Head of Auto Marketing and Product Planning; and Lee Ki-Young, in charge of Business Intelligence. Today's conference call will be conducted in both Korean and English. For more details on the company's performance, please refer to our disclosure or the Investor Relations section in the company's website. Please refer to the disclaimer before we begin the presentation. Please be informed that the financial figures presented in today's earnings release are consolidated figures prepared in accordance with International Financial Reporting Standards. These figures have not yet been audited by an external auditor and are provided for the convenience of our investors. I will now report on the company's business performance in Q3 2026. Revenue in Q3 was KRW 6.277 trillion. In this somewhat unfavorable environment, especially with the strong Korean won, the company was able to grow shipments, thanks to the start of seasonality for major OLED products like large size and mobile. Revenue grew 12% Q-o-Q, fell 10% Y-o-Y, mostly due to the shipment decrease of midsized LCD products as a result of our portfolio realignment centered on profitability. Operating profit was KRW 250.6 billion, slightly improving Q-o-Q and falling 42% Y-o-Y. As I just explained, shipment of large-sized and mobile OLED products grew, but the won to dollar exchange rate fell by 6%, and the chipflation constrained our effort to manage ASP. Prices also rose for some sets, dampening demand for some of our focused high-end products. Operating profit margin was 4% and EBITDA 19%. Net income stood at KRW 755.6 billion, thanks to the vast improvement in FX translation gain following the won's appreciation near the quarter end. Next is area shipment and ASP trends. Third quarter area shipment grew 4% from the previous quarter to 3.7 million square meters as shipment of large-sized OLED products grew despite prolonged uncertainties in the external environment. Price per square meter rose 16% Q-o-Q to $1,250, thanks to growth in shipment of mobile OLED products despite the unfavorable external environment, including the chipflation. Next, I will discuss the revenue breakdown by product category. With the start of seasonality, shipment of mobile products grew, increasing its share out of revenue to 42%, up by 10 percentage points Q-o-Q, which was also the biggest change among all product categories. In contrast, shipment of IT fell with its share declining to 29%, down by 7 percentage points. TV and auto's share remain largely unchanged. Even as external uncertainties and volatility continue, the company is carrying on our work to upgrade our business structure centered around OLED, which is gradually increasing OLED share out of total revenue. As of Q3, OLED share stood at the highest quarterly level of 67%, up 10 percentage points Q-o-Q and 2 percentage points Y-o-Y. Next is financial position and key metrics. Cash and cash equivalents in Q3 was KRW 1.597 trillion (sic) [ KRW 1.511 trillion ] slightly up Q-o-Q. The debt-to-equity ratio stood at 254% and the net debt-to-equity ratio at 141%, both improved from the previous quarter. Next is guidance for Q4. Area shipment is expected to grow around 10% in Q4. Continuing from the previous quarter, seasonality will keep driving shipment, but there is still some impact from the advanced purchase that was made in the first half as well as uncertainties in set demand due to the chipflation, which merits continued close monitoring over the market. As for the ASP, with softer consumer demand and external uncertainties such as inflation and rising prices of raw materials, any increment is not likely to be significant. Price per square meter in Q4 is expected to rise by low single percentage compared to the previous quarter. I will now turn the call over to our CFO, Sung-Hyun Kim.

[Interpreted] Good morning and afternoon. This is the CFO, Sung-Hyun Kim. Thank you for joining us at this conference call. Allow me to briefly walk you through our Q3 highlights. Even while external uncertainties continued such as the exchange rate, component price fluctuations and slowing demand for IT products, including high end, the company was able to improve our performance over the previous quarter, thanks to improved business competitiveness based on OLED and higher operational efficiency. The chipflation is driving up the price of sets across industry, and demand is particularly slowing for high-end products, which are the company's strengths. In this environment, what we see as a way to ensure profitability is to keep innovating cost to offset the chipflation and seamlessly develop and upgrade technologies that set us apart and that can help us maintain our competitive edge. As part of this strategy, we keep upgrading the productivity and efficiency of our existing infrastructure while developing leading-edge technologies that will keep a distance from the pack and become our future growth engines. As was reported by the media recently, the company remains focused on technological innovation, evidenced by the successful development of the next-generation OLED patterning technology or FLiPP. FLiPP is the combination of the evolution of our OLED technology and mass production experience. We see it as the next-gen technology that will broaden OLED's applicability and technological leadership. The company remains committed to heightening our technological competitiveness based on our proprietary technology and accumulated know-how to translate them into real business performance. We will keep working to equip ourselves with differentiated technological competitiveness and innovate the cost structure to enhance our readiness against external changes and ensure stable profit generation. Let me now briefly outline our strategy for each business area. In large panel, the company continues to lead the premium market based on our proprietary OLED technology and product competitiveness. We will keep strengthening our premium TV OLED products while broadening the lineup of price-competitive new products to accommodate diverse customers' needs. Meanwhile, in monitor OLED, we will boost our gaming OLED product lineup with our unique technology and widen our presence in the market. In small and medium displays, we will -- we plan to keep up our competitiveness in high-end products leveraging our differentiated technological leadership and reliable development and production capability. In mobile, we will solidify our market position with our tech competitiveness and reliable supply execution. And in IT, we will focus on high value-add products while improving cost competitiveness to achieve higher profitability. In Auto, the environment is challenging with broadly slowing growth in the auto market, moderating transition to EV and tougher competition among panel suppliers. But we will further elevate our business competitiveness by solidifying our position in the premium market with the strategy of improving profitability based on cost innovation. Last is on the company's investment strategy. The company maintains the strategy of cautiously investing in future technology based on visibility into market demand and close consultation with customers. At the same time, we're also methodically building up our plans for future growth, future growth engines and mass production competitiveness by developing new technologies like FLiPP that maximizes the strength of OLED. We will keep improving our financial structure while upgrading our leading technology that can help innovate customer value and the display industry. Meanwhile, we will make investment decisions at the right time upon careful review of the market and investment environment to lose no time in responding to customers and consumers' needs and speedily expand our business performance. CapEx spend this year is expected at around low KRW 2 trIllion. Investment in new OLED technology that we already communicated with the market, will move ahead as planned with matched production to begin at the right time. Thank you very much.

[Interpreted] This concludes our presentation of business highlights for Q3 2026. We will now take your questions. Operator, please commence the Q&A session.

[Interpreted] [Operator Instructions] The first question will be provided by Kwon Min-kyu from Kiwoom Securities.

[Interpreted] I have a couple of them with regards to the company's new technology. There have been quite a lot of media reports about LG Display's FLiPP technology, which the company also seems to be emphasizing in terms of the technological advantages. So my question is with regards to the overview of the FLiPP technology. What would be the investment timing and scale as well as the mass production schedule utilizing FLiPP as well as the product applicability and potential customers? And also given the fact that some of the peers have already gone into mass production based on the 8.6 Gen technology, then what would be FLiPP's advantages over the 8.6 Gen technology? And also, what would be the company's competition strategy to counter the 8.6 Gen? And also, if FLiPP investment were to move fully ahead, then what changes can we expect in terms of the company's medium-term business strategy? And in particular, what direction does the company plan to take with the IT LCD?

[Interpreted] This is Yu-Shin Ahn, in charge of Medium Display Planning and Management. Now first about the new technology FLiPP. FLiPP is on RGB OLED patterning method, that allows us to use the full sheet Gen 8 mother glass without having to use FMM. It is the next-gen OLED technology, which is the combination of the evolution in our OLED technology and know-how so far. And it also has far stronger advantages over existing approach in terms of product specifications, production process and cost. And in terms of product specifications and performance first, it improves the aperture ratio, which improves brightness, lifespan and power consumption. It allows individual patterning of RGB, optimizing pixels for each device, maximizing OLED device efficiency and improving color representation and viewing angle. And in terms of production, it does not require repeated iteration of alignment and attachment between the mother glass and the FMM. And since it does not use FMM, it goes through the process continuously for each step, which reduces the process time and improve efficiency. In terms of cost, we can use the full-sheet Gen 8 mother glass, which gives us higher cutting efficiency and productivity, with higher deposition efficiency as well, it offers better material costs. In terms of our plans for investment and production of FLiPP, for example, the size or the timing of such investment in production, have not been finalized yet. We are preparing for our future OLED business with FLiPP, solidifying our OLED technology leadership and opening up new markets with differentiated customer value. And a few words about the latter part of your question, which was on the IT LCD. Now IT LCD business is an area where cost is crucial due to slowing demand and growing competition. We plan to upgrade our product portfolio by focusing on the high-end product needs of our major customers. Not only that, we will recover our business competitiveness here by maximizing our opportunities while keeping an eye on profitability. We will accelerate the work to improve cost and business structure and improve fab efficiency in step with the market.

[Interpreted] The following question will be presented by Kangho Park from Daishin Securities.

[Interpreted] I also have a couple of questions with regards to the company's important business, which is OLED. Now my first question is the shipment of large OLED panels seems to be growing fast led by OLED monitors. And I would like to ask for the company's comments on the company's projection for your shipment for this year and next as well as profitability. And the second question is, what is the company's mid- to long-term business and fab operation strategy for large OLED, including the timing of reutilization of part of the capacity in Paju?

This is Vice President, Jong Duck Kim, in charge of Large Display Planning and Management, responding to the questions. Now first, about the Large OLED business. The panel shipment for large OLED this year is projected at the high [ 7 million ] range, higher by around 20% Y-o-Y. Of them, OLED monitor will be about 20%. We plan to maintain meaningful growth into next year as well based on the increase in shipment for OLED monitors. And as for profitability, there will be some volatility with downturn in the TV downstream market, chipflation and rising cost in logistics, among others. But we will try to secure a stable revenue structure by increasing panel shipment and continuing our cost-cutting initiatives. And about your second question, our utilization of existing capacity continues to go up following the growth in demand for large OLED panel. We will restart part of the capacity flexibly in proportion to the incremental demand, while considering the demand intensity in the TV and monitor downstream market and the optimum production ratio. For a large business, we plan to go beyond the TV market where we are currently strong. We will broaden our monitor market with the WOLED technology and keep growing our business by maximizing our use of existing infrastructure and resources. We will secure stable volume based on win-win partnership with our customers and further elevate our leadership in Large OLED by improving cost and tech competitiveness.

[Interpreted] The following question will be presented by [ Jong-hyeon Yun ] from UBS.

[Interpreted] I have two questions on the mobile OLED and IT OLED. Now the first question is about the mobile, the customers' unveiling of the foldable smartphone has escalated expectations in the market and consumers. But for the bar-type phone where the form factor hasn't changed, initial market reaction appears to be subdued. What is the trend in the panel shipment and actual sales that the company is currently seeing? And the second question is, now the launch of foldable also triggered concerns for potential erosion of demand for tablet products. Does the company see foldable smartphones affecting demand for tablets as well?

[Interpreted] This is Vice President, Seung-Ryong Baek, in charge of Small Display Planning and Management. And yes, the foldable is expected to grow to see growing demand, because it provides differentiated value to consumers with a new form factor and addresses the need for larger screens with increasing use of AI. Now they started the event early -- early reservation for the product on October 16, and it seems as if the expectations continue to grow. So, at this time, it appears as if the foldable market or the foldable segment is likely to go -- likely to grow faster than expected. Again, it seems as if the foldable market is set to grow. But also at the same time, the bar-type is likely to remain the mainstream product as it continues to innovate itself with new technologies. So for the company, we will be making the investment according to our plan. And we will also keep up with the trends and the demands from the market as well as the consumers and also keep in line with the next-generation evolution so that we can maintain our leadership in the market. And now with the launch of the foldable products, yes, perhaps there may be some concerns about the -- its impact on the demand for the tablet at the same time. But then we do believe that the demand for these different types of products is different. Also, the target customers are different. So the projection is that given the fact that the target customers and the purpose of each product segment are different, the impact is going to be limited.

[Interpreted] The following question will be presented by Jung Hoon Chang from Samsung Securities.

[Interpreted] I also have two questions. The first is that it's been said that the chipflation has intensified customers' pressure on the panel price. So the question is then how much, if any, has it been affecting the company's profitability? And the second question is, despite the fact that the share of revenue by the mobile products has gone up, at the same time, the mobile business appears to have more downside risk than upside due to stronger competition despite the concentration in the strategic customers. So my question is what is the company's business strategy or the response strategy against this?

[Interpreted] Now this is Seung-Ryong Baek again for the -- in charge of the Small Display Planning and Management. Now in terms of the pressure in the downstream industry as well as the volatility, this is something that is occurring generally across the market. And yes, it is also affecting the company as well. Now our goal is for the medium to longer term to continue to increase volume. But also at the same time, given these various constraints, it is also likely that our profitability improvement is going to be limited compared to the increase in the volume. Now based on the technology that we have continued to build up in the smartphone panel business, we will continue to strengthen our position in the market as well as the technological leadership. And also based on the -- based on our cost innovation and also upgrade in the product and operation, we will continue to maintain stable performance while at the same time, driving growth in both the revenue and volume so that we can continue to achieve sustainable performance. Now in order to respond to the changes in the market and the market demand, we will continue to maximize the use of existing production infrastructure and also carefully consider preemptive investment in new technologies. And by doing so, we will focus on timely development of new technologies to help competitiveness of new models launched by our customers and heighten the entry barrier to the smartphone panel business. Thank you. We will take the last question.

[Interpreted] The last question will be presented by Won Suk Chung from iM Securities.

[Interpreted] Now my question is on the auto business. Now the auto business for the company continues to maintain at around 10% share out of the total revenue. But then also, we see that for the OEMs, then the demand is really slow to recover and also competition in the display business continues to get tougher. Now we understand that the auto business is relatively stable compared to others because it is based on the orders. Then the question is, what is the company's current status in terms of the auto business and the profitability? And there was also an update once about the order backlog. So can the company provide the update again in terms of the order backlog today? And what is the expectations of the revenue growth in the future?

[Interpreted] Thank you. This is Vice President, Ki Hwan Son, Head of Auto Marketing and the Product Planning responding to the question. Now it is true that the market environment around auto continues to be challenging, with demand and competition, both remaining challenging, and the global auto market has also been showing gradual recovery since COVID, but auto sales growth is expected to be negative this year due to the Middle East war and inflation. Not only that, but combined with other factors like tariff uncertainties in the trading environment, semiconductor supply issues and slower consumer sentiment, real recovery in the auto market is likely to be postponed until next year. Despite such constraints, the company is maintaining its stable business operations with focus on our customers. The LTPS LCD business has kept up its consistent performance based on solid sales by major strategic partners in North America, Korea, Japan and others. And OLED has struggled a little due to the slower sales of European OEMs' EV and delay in mass production of some new models. But we do expect stability to settle as the existing projects move into mass production. For the medium to longer term, we see high growth potential in the auto display market, thanks to wider adoption of vehicle display and larger panel size. It is true that strong growth potential is inviting more competition, but the company will achieve competitive advantage in the market and solidify our business base with our differentiated vehicle tandem OLED, LTPS LCD technology and improvement in cost competitiveness. And about the order backlog that you asked about, please understand that we are not at liberty to disclose the exact size given the competing market environment and confidentiality with our customers.

[Interpreted] This concludes LG Display's Q3 2026 Earnings Conference Call. We thank everyone for joining us today. Should you have any additional questions, please contact the IR team. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]