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[买入评级]BOE TECHNOLOGY GROUP(000725/200725):CHINA’S LEADING PA

作者:ihpa.net 发布时间:2018-02-13

 


Recommendation
BOE is China’s leading panel manufacturer. It has greatlystrengthened its position and influence in the LCD panel marketthanks to 1) tariff protection and government subsidies; 2) costadvantage; and 3) the potentially lucrative market in China. Its flexibleAMOLED panel production line is only the world’s second that hasstarted mass production (following Samsung),copper powder, giving it a first-moveradvantage.
BOE to end monopoly of South Korean companies in AMOLEDpanel market and gain long-term growth. We expect BOE’sAMOLED panel business revenue to begin increasingsubstantially in 2018 and account for 8%/20.2% of its totalrevenue in 2018/19. 1) AMOLED panels are a seller’s market inthe short term. Due to the short supply, AMOLED panels arelikely to maintain a large price premium over LCD panels until2020. 2) BOE’s AMOLED panel production capacity and yield areramping up faster than the market was expecting. We think thatthe AMOLED panel business will be a considerable source ofprofit for the company in the long term.
BOE’s LCD panel business has obvious competitive edges andwill support earnings. 1) The supply and demand of the LCDpanel industry will be relatively balanced through end-2018,limiting the downside in prices. Although LCD panel prices fell in2H17, the decline in large-size panel prices has narrowed sinceNovember. 2) We expect BOE’s LCD panel production capacity(in area terms) to expand 22.9% in 2018, as its generation-8.5production line in Fuzhou will be operating at designed capacity.
Earnings forecast and valuation
We expect BOE’s revenue in 2018/19 to grow 25.5%/29.9% YoY andnet profit to rise 34.3%/30.9% YoY. We maintain BUY with a targetprice of Rmb8.40 based on 24x 2018e P/E.
Risks
Slower-than-expected progress in construction of AMOLED panelproduction lines due to: 1) tight supply of core equipment such asevaporators; or 2) failure to make breakthroughs in core technologies.

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