Original title: BOE has reduced the output of the 10.5 generation LCD production line from 25% in July: touch screen and OLED network.
LCD panel prices continued to decline, BOE, Huaxing optoelectronics, and huaxo cut production. According to BusinessKorea reports, as the price of LCD panels (LCD) continues to fall, Chinese LCD producers begin to cut production to ease the recession.
China's BOE is ranked first in the world in terms of LCD shipments this year, with a market share of 18.2%, and has decided to cut production. The company has begun to reduce the output of the 10.5 generation LCD production line from 25% in July, and the output of other LCD production lines is reduced by 10%. Huaxing optoelectronics and huaxo also reduced the start-up rate of the 8.5 generation LCD products by 10% and 20% respectively.
In addition to price declines, the Chinese government has reduced support for panel makers. China's display company has been increasing the production of LCD monitors through subsidies from local governments. Recently, however, the Chinese government has decided to change its support measures, because the share of Chinese companies in the LCD market will exceed 50%, and the expansion of Chinese companies will become fiercer.
Therefore, Korean market experts say that Chinese display manufacturers are most likely to abandon excessive competition in factory expansion and further alleviate oversupply. China's share in the global LCD market is expected to increase from 29% in 2016 to 54% in 2020.
Global market research firm IHS Markit data show that as of August, the price of 32 inch and 55 inch LCD TV panels were 33 US dollars (39300 won) and US $106 (126340 won), respectively, down 20% and 26% from the beginning of the year.
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Low demand for capacity release, BOE half year net profit fell 44%, brokerages still bullish
It is disclosed that in the first half of 2019, BOE showed a "no increase in profits" in its revenue. Specifically, in the first half of the year, BOE achieved operating income of 55 billion 39 million yuan, an increase of 26.6% over the previous year, and net profit attributable to shareholders of listed companies was 1 billion 668 million yuan, down 43.92% compared with the same period last year. Net profit after deducting the net income was 651 million yuan, a decrease of 56.65% over the same period last year.
For the reasons for the decline in performance, BOE outlined in its business overview that the global political and economic situation in the first half of 2019 is complex and changeable, the global economic growth is slowing down, the downward pressure is increasing, the production capacity of the high generation line of the semiconductor display industry is concentrated and rapidly released, the market demand is sluggish, and the situation of oversupply is becoming more and more serious.
It is worth mentioning that there is still a need for further dehydration in the net profit of BOE. As a company that has been enjoying huge subsidies from the government, BOE's dependence on government subsidies has always been criticized by the market. Its latest semi annual report shows that in the first half of the year, BOE received a total of 1 billion 152 million yuan from the government's subsidy and included in the current profits and losses. Therefore, if the subsidy is deducted, the actual net profit level of BOE will shrink substantially in the first half of the year.
Stock prices reflect stability.
although BOE A(4.040, -0.01, -0.25%) The performance of the interim report is not good, but the two level market's response to the reported data is quite stable.
In August 27th, the share price of BOE A showed a trend of turbulence, closing down 0.75% at the end of the year and closing at 3.85 yuan / share. On the whole, BOE's share price is not affected by the negative news of the newspaper.
A private Guangzhou official said, "although the net profit of BOE is declining significantly, its performance is expected in the market, and its pre market share price has already been reflected in the issue of performance, so there will be no case of final collapse due to final performance."
However, on the same day, the Shanghai stock index, Shenzhen Shenzhen Composite Index and GEM board rose by 1.35%, 1.86% and 1.71% respectively.
Subsidies burn hard
Although the share price of the two tier market is stable, the BOE's semi annual report reveals the unavoidable problem at the present stage: the subsidy is hard to burn.
Semi annual report showed that many BOE production lines were successfully put into operation in the first half of this year. Among them, the number of shipments in the sixth generation of flexible AMOLED production line in Chengdu increased by over 300% over the past year, and the yield level was high. Hefei's 10.5 generation TFT-LCD production line achieved full production and the yield was over 90%; the 10.5 generation TFT-LCD production line in Wuhan completed the equipment move in; the sixth generation flexible AMOLED production line in Chongqing was planned to advance according to plan.
However, when the capacity is released at large, the demand for the downstream end is sluggish, and the "price increase" will inevitably result in the weakening of BOE's gross profit. In view of the gross profit margin of the panel business (port devices) in the first half of this year, BOE is only 15.56%, down 2.36% from the same period last year.
If we look at the gross margin of sales in BOE as a whole, the gross profit margin of BOE in the first half of 2019 is also in the position of the last three years.
For BOE, as a heavy asset display industry, it will be understandable to invest a large amount of funds in the new generation line every year.
According to the semi annual report of BOE, the balance of construction projects in the company is 71 billion 479 million yuan, of which sixth generation AMOLED projects, 10.5 generation TFT-LCD projects and sixth generation LTPS/AMOLED projects three production lines totaling 62 billion 691 million yuan, accounting for 87.71%.
As the gross profit margin is squeezed, the degree of risk faced by the company is also rising. Under such circumstances, BOE has long relied on government subsidies and market financing to meet the needs of capital, and it will naturally be questioned by the market.
In the case of BOE in terms of financing, according to Wind statistics, since the listing, BOE has raised 203 billion 836 million yuan in total, including 81 billion 876 million yuan in direct financing and 121 billion 950 million yuan in indirect financing. By the end of August 27th, the total market capitalization of BOE A was only 133 billion 974 million yuan.
For the slump problem facing the panel industry, BOE is also looking for new profit growth points to actively promote the development of IOT and smart medical workers, but this is far from enough to supplement the company's revenue.
Therefore, although BOE continued to grow steadily in the first half of the year under the overall shrinkage of the industry market, its problems still exist.
For BOE, at present, perhaps the most urgent thing is to wait for the turning point of the industry.
Securities companies remain optimistic
It is worth mentioning that despite the poor performance of the newspaper, some institutions still maintain a good view of BOE.
After the disclosure of the semi annual report in BOE, State Securities(9.480, -0.01, -0.11%) , Southwest Securities(4.920, 0.02,0.41%) Both issued a report on maintaining the "buy" rating of BOE.
Southwest Securities analysis pointed out that from the Q2 panel price data, the panel industry is still in the bottom of the cycle, demand for consumer electronics terminal demand continues to be weak, supply side mainland manufacturers expansion cycle has not yet ended, South Korea's major manufacturers shift plan postponed. Under the circumstances, BOE still maintains the first volume of 2019H1 display shipments in the world. The shipment area grew by 23% over the same period last year, which has continued to consolidate the leading position of the five mainstream products.
Southwest Securities also pointed out that BOE AMOLED shipments increased significantly, 2019 is expected to achieve profitability, and gradually relay LCD become the main profit growth point. In addition, although the profitability of BOE is short term pressure, the company has achieved remarkable results in cost control.
Taking into account the above situation, Southwest Securities lowered the EPS 2019-2021 yuan to 0.13/0.17/0.23 yuan in the eastern part of the capital, corresponding to the current stock price PE being 29 times, 22 times and 17 times, but considering the LCD trend of expansion and the leading position of flexible OLED, it maintained a "buy" rating for BOE.
Similarly, state gold securities also analyzed the situation of BOE's "increasing profits without increasing profits".
State gold Securities pointed out that the new production line driven production revenue growth continued, the price of the panel dragged down the company's "no increase in profits": since the 10.5 generation line in Hefei put into operation, BOE has been expanding in the past four quarters (3Q18-2Q19) year-on-year growth rate, 5%, 13%, 23% and 30%, respectively, but due to the continued decline in the LCD panel prices, the report is reflected in "increasing profits without increasing profits".
However, BOE is still the world's leading supplier in the five main applications, including smart phone LCD, tablet PC display, laptop display, display screen, TV display and so on. Therefore, by adjusting the product structure, the gross profit margin of the single quarter in the 2 quarter has dropped by only 1.7%. In addition,state gold Securities pointed out that cooperation with HUAWEI will enable BOE to be ready for new products such as folding phones.
State gold securities specifically mentioned that the supply side production reduction has become the main theme, and the 4 quarter panel price is expected to usher in a bottoming rebound. From the middle of 2017, the average price of LCD panels has dropped by more than 50%, and the price of TV panels below 65 and below has fallen below the cost of most of the panel makers' cash. "Closing factory production" has become the main theme of the industry in the second half of the year. Han factory Samsung and LG are turning to OLED. It is expected that the two generation of 8.5 generation lines will be shut down in South Korea. The manufacturers of Taiwan will begin to reduce the rate of production. The mainland plant leader BOE will also reduce the capacity of the 10.5 generation line of the first half of the year by about 25%. The supply side's capacity clearance is expected to drive the price of the panel to rebound in the 4 quarter, and BOE is expected to benefit significantly as a leading LCD panel.
Based on this, Guo Jin securities's forecast of net profit of 19-21 years to the BOE was 4 billion 800 million, 10 billion and 15 billion 500 million respectively, corresponding to EPS's 0.14 yuan, 0.29 yuan and 0.45 yuan respectively, and the target price of 5.78 yuan remained unchanged.
Compared with BOE's closing price of 3.85 yuan in August 27th, the target price rose by 50%.
