BOE A (000725): The turning point has arrived
The Korean factory ‘s LCD production capacity is gradually withdrawing, and the market supply and demand usher in a long-term turning point. From the history of industrial development history, LCD has been driven by investment in the past. The transformation has driven excess production capacity. The production capacity of high-generation lines is used to compete with low-generation production linesPressure, so the economy cuts the size and moves up, and promotes demand through the cost of advantages, and forced the gradual withdrawal of backward production capacity.
The industry’s low economic performance in 2016 forced the Korean factory to begin the first scale production capacity withdrawal. Among them, Samsung closed the 160K 7-generation line in 16H1 to improve market supply and demand. Then the prices of LCD TV panel products of various sizes began to rise.Interest rates and operating results have started to improve significantly.
The 17H2-19H2 industry experienced another two downward price periods, mainly due to the rapid growth of domestic production capacity and the withdrawal of large-scale production capacity on the supply side. The demand side from 18H2 was affected by trade frictions to a certain extent.
In 19Q3, the number of leading manufacturers decreased again, and the industry’s bottom-up signal was generally corrected.
With the adjustment of overseas production capacity, prices began to stabilize in November 1919, and are expected to start rising in January 2020.
The dominant products of the Korean factory in the past are mainly 55 “TV panels and the downstream terminals are mainly exported to North America and other markets.
18Q1 and 19Q1 followed BOE 10.
The 5th generation line and the Huaxing Optoelectronics 11th generation line began mass production, which has now caused the price of 65 ”products to fall by a 17-year high of 60%.
Since the Korean factory has no 10.
5th generation line, 8.
The production of products over 65 ”on the 5th generation line has caused persistent serious defects.
And the Korean factory has shifted its TV panel business focus to OLED display, Samsung focuses on QD-OLED, LG focuses on WOLED, and Korean factory will gradually withdraw from large-scale LCD production capacity, which will be a deterministic trend.
We consider the Samsung L8-1 LCD 8 based on a self-built model.
The 5th generation line was converted to 120K, and Foxconn Sharp Guangzhou 10.
After the production capacity of the 5th generation line temporarily eased the impact, in the absence of other additional capacity exits, the global large-size display panel throughput growth in 19-21 was 9% and 8% respectively.
Based on the 19-year global production capacity, Samsung and LG currently have an LCD display panel production capacity of 10% of the global large-size display production capacity.
6%, Taiwan’s 5/6 generation line capacity accounted for 15%.
According to Qunzhi Consulting’s forecast data, LGD’s production capacity area is expected to decrease by 35% in 2020, and Samsung will reduce it by 28%. Affected by this, the global LCD TV panel production capacity growth rate will increase by about 1 in 2020.
7%, the lowest in the past five years.
According to our self-built model, after considering the corresponding reduction in output of the Korean plant in 2020, our revised capacity growth rate in 2020 will be reduced to -0.
12%, 2020 and 2019 global production capacity growth is expected to be flat.
On the demand side, according to Qunzhi Consulting data, the area of LCD TV panel panels is expected to increase by 5% in 2020. Among them, the penetration rate of 65-inch and other products will increase significantly, and it is expected to exceed 15%.
Considering that overseas manufacturers have set up factories earlier and production efficiency needs to be improved, there are still a lot of Korean and 杭州桑拿 Taiwanese factories that can withdraw from production capacity, and we believe that the long-term inflection point of supply and demand in the LCD market has already appeared.
Judging from the increase in the supply side, the main uncertainty in the future lies in the addition of other domestic manufacturers10.
5th generation line capacity.
At present, except for BOE and Huaxing Optoelectronics, two have been planned separately.
Outside the 5th and 11th generation lines, other domestic manufacturers10.
The production capacity of the 5th generation line is facing uncertainty, mainly due to factors such as funds (bank loans), supply chain supporting (glass substrates) and other factors.
Considering the uncertainties of supply-side supplementary production capacity and the withdrawal of production capacity of overseas manufacturers such as South Korea and Taiwan, the supply and demand of the LCD market will improve overall after 2021.
65 / 75-inch products do not increase the room for further price declines, and the supply and demand changes caused by the suspension of investment are attenuated. We believe that the industry is gradually changing from the past price cycle attribute to the cash flow attribute. The stability and sustainability of the industry ‘s earnings will be significantly improved, andDriven by the estimated premium of the sector companies, the long-term investment value has already appeared.
Flexible OLED drives companies to turn to growth attributes, and high profit margins bring high performance. Flexible flexible OLEDs are the core business that drives panel manufacturers to change from the periodic nature of LCDs to the growth attributes.
This growth is manifested by the continuous upgrade of its own display technology, the expansion of downstream application markets, and the substantial growth shared by domestic manufacturers.
The industry’s high barriers also bring benefits to the industry’s bargaining power, which is the core business that can drive the panel “Davies Double Click”.
The industry’s high barriers are mainly reflected in the two dimensions of mass production yield and mass production capacity conversion of flexible OLEDs.A large part of the cost of display panel manufacturing is depreciation of production line equipment. Yield and capacity utilization are sensitive factors affecting profitability.
In fact, the early applications of flexible OLEDs are still dominated by the traditional mobile phone market. The flagship model of mainstream brands has certain requirements for the scale supply capacity of upstream panel manufacturers. In the long term, flexible OLEDs will still be mainly positioned in mid-to-high-end mobile phones.Market, which determines the leading advantages of leading manufacturers on the right.
Considering the barriers in these two dimensions of the industry, we believe that flexible OLEDs must reach the LCD era in terms of supply structure and profitability.
Taking BOE’s Chengdu B7 production line as an example, we made elastic forecasts of performance through self-built models.
Based on the current unit price of US $ 60, a single production line uses 2/3 of the capacity utilization rate and a 60% yield corresponding to the break-even point. It is estimated that the unit cost is currently around US $ 30 (the equipment depreciation cost is calculated separately).
Scenario 1: 60% yield, full production operation, annual revenue is about 258.
3 ‰, gross margin is about 28%, net margin is about 10%; Scenario 2: 75% yield, full production operation, annual revenue is about 322.
8 ppm, gross profit margin is about 42%, and net profit margin is about 22%.
The revenue and profit elasticity of flexible OLEDs are much higher than LCDs.
Considering that the price and cost of flexible OLED products still have room to continue to decline, we believe that the revenue scale of a single production line will be affected in the future, but its profit margin will continue to remain at a high level.
From 2020, with the further increase in the volume of BOE flexible OLEDs, the emergence of profit inflection points, the introduction of more international customers and product models, domestic OLEDs will drive the company’s long-term growth.
Investment Ratings and Estimates We forecast the company’s revenue to be 1128 in 2019-2021.
3 billion yuan, net profit attributable to mother is 20.
68 ppm, EPS is 0.
23 yuan, corresponding to PE is 82X, 41X, 20X, the existing company PB is 1.
91X, we think the reasonable interval of PB is 2.
0X, giving the company a “strong recommendation” rating.
Risks indicate changes in market supply and demand, and the industry’s prosperity is increasing. The production capacity distribution and yield climbing progress are gradually expected.