(Adds details, company comment, updates shares)

SEOUL, May 16 (Reuters) - Shares in South Korea's LG Display (034220.KS: Quote, Profile, Research) plunged as much as 6.7 percent after Lehman Brothers downgraded its rating on the company and the whole LCD sector, citing worries of oversupply and weaker profitability.

Lehman in a note dated Thursday cut its ratings on the Asian display industry to neutral from positive, noting profitability had likely peaked in the first quarter, with margins seen weakening in the subsequent two quarters.

Lehman also cut ratings on LG Display and Taiwanese rivals AU Optronics (2409.TW: Quote, Profile, Research) and Chi Mei Optoelectronics (3009.TW: Quote, Profile, Research) to equal-weight from overweight.

It set a new target price of 54,000 won ($51.87) per share from 65,000 won for LG Display.

LG Display was down 5.34 percent to 47,900 won as of 0139 GMT, against the wider market's 0.4 percent gain. It was the second-most actively traded stock on the market.

Bigger rival Samsung Electronics (005930.KS: Quote, Profile, Research), the world's biggest maker of liquid crystal display (LCD) panels, was down 1.31 percent.

Shares in AU and Chi Mei showed no significant change in early trading in Taipei.

"We are more convinced that there will be a severe fall in panel prices from October 2008 through 1H 09," Lehman's James Kim said in its research report on the display industry.