Download the licensee repro here - https://github.com/lobneroO/MatFuncLighting
The opening editor scene should look like this:
Open M_Base (not MF_Edit) and switch the "GetMaterialAttributes", which is attached to the if node, directly to output node:
The lighting smooths out on the texture.
There's no existing public thread on this issue, so head over to AnswerHub just mention UE-117367 in the post.