BOE A (000725): Falling panel prices dragged down profits and waited for industry turning point to appear
A brief review of BOE’s revenue in the third quarter of 2019 was approximately 30.7 billion. Once it increased by 18%, its net profit attributable to its mother was only 1.
8.4 billion, about 54% in the previous decade.
In the first three quarters, the camp received 85.7 billion yuan, an increase of 23.
4%, but the profit side is affected by the decline in panel prices, the profit is about 1.9 billion, a decrease of 45% every year.
Operating analysis The decline in TV panel prices in the third quarter dragged down the company’s gross profit margin: The company’s gross profit margin fell by approximately 4% in the third quarter of 2019, meaning that the proportion of TV panel prices that accounted for more than 40% of the company’s revenue fell by nearly 5%.
The growth rate of gross profit margin further dragged the company’s operating profit margin into negative for the first time in the past three years, changing to -1.
For display panel manufacturers, which are mainly large-sized TV panels, have experienced a difficult quarter. The industry leader LGD has fallen by 5% in Q3 this year.
2%, operating margin is temporarily -7.
5%, Taiwan panel leader AU Optronics made even more serious profits, with gross margins and operating profit margins reaching -0.
4% and -7.
The company’s continuous production of flexible OLEDs has helped Huawei’s foldable mobile phone Mate X go public successfully. As the first domestic manufacturer to integrate flexible OLED screen production capacity, BOE has become the exclusive supplier of Huawei’s foldable mobile phones that have been listed at the end of October.
The company’s flexible OLED production line in Chengdu has been successfully mass-produced, and the Mianyang production line is still ramping up production capacity. There are two more in the planning. The company’s flexible OLED production growth rate (CAGR) will reach 50% in 2018-2025. It is expected that the company will reach 2025.In the global mobile phone OLED panel market share is expected to reach 22%, second only to Samsung’s 38%.
Korean factory 8.
The 5th generation LCD 杭州桑拿 production line is determined to be withdrawn. The 2Q Tokyo Olympics preparation period next year is expected to stimulate the industry’s gradual recovery.At the end of the quarter, it is expected that the P7 and P8 production lines will begin to convert to OLED production lines early next year. After this round of industrial capacity reshuffle, BOE will exceed LGD this year to become the world’s largest display panel manufacturer.
In addition to the supply contraction, TV manufacturers will enter the two consecutive peak seasons of stocking in 1Q and 2Q in 2020 after completing inventory clearance in the fourth quarter of this year. The turning point of panel prices is expected to appear in Q1 or Q2 next year.
Earnings adjustment and investment recommendations We have reduced the revenue ranges for 2019-2021 by 10%, 11% and 9%, respectively. The net profit attributable to mothers has been adjusted downwards to 3.4 billion, 6.2 billion, and 11.3 billion, respectively, with adjustments of 29%, 39% and 28%.
We believe that this round of industry capacity reshuffle will gradually come to an end. As a global panel leader, BOE will further enhance the concentration of the industry and maintain the company’s “Buy” rating.
Risks remind that delays in the closure of Korean factories LGD and Samsung; the demand for Q1 and Q2 next year is less than expected.