BOE A (000725): Falling panel prices weigh on short-term performance Flexible OLED drives future growth

Event: The company released the semi-annual report for 2019, and the company achieved operating income of 550 in 19H1.

390,000 yuan, an increase of 26 in ten years.

60%; net profit attributable to mother 16.

68 ppm, a decrease of 43 per year.

92%.

Comments: The decline in panel prices has dragged short-term performance, and the issue of renewable bonds will increase the company’s 19H1 revenue growth in the future.

60%, mainly due to the end of the company’s new production line capacity climbing, contributing to increase in new sales; the company’s gross profit margin in 19H1 was 16.

76%, with a ten-year average of 2.

40pct, mainly due to lower profitability due to falling 重庆耍耍网 prices.

In terms of expense ratio, the company’s 19H1 management and R & D total expenses9.

31%, a year up 0.

70pct, mainly due to the short-term expansion of resources required for the construction of multiple new production lines; financial cost restructuring2

12%, a decline of 0 per year.

64pct, mainly due to reduced exchange losses; sales expenses decreased by 2.

48%, a decrease of 0 every year.

50pct, better control.

The company also announced that it will issue renewable bonds of no more than $ 30 billion to meet the company’s future business development and optimize its financial structure.

The company currently has multiple production lines under construction and requires investment. The bond issuance will form the basis for the company’s future development potential.

The flexible OLED production 四川耍耍网 line holds the initiative and is expected to drive long-term growth in the future. The company has announced that it will invest in the construction of a sixth-generation flexible OLED production line project in Fuqing, Fujian Province, with a planned production capacity of 48K / month. It will become the company’s fourth flexibility after completionOLED production line.

OLED has the characteristics of wide color gamut, high brightness, low power consumption, bendability, and self-luminous. Under the trend of Samsung and Apple mobile phones equipped with OLED panels, major mobile phone manufacturers around the world are targeting OLED applications.Scale follows the pace of OLED applications in mobile phones.

In the field of flexible OLEDs, the company has been a leader from the beginning.

In terms of production capacity, the company’s Chengdu G6 flexible OLED production line has been mass-produced, and it is now climbing smoothly. Mianyang G6 flexible OLED production line is expected to achieve mass production in 2019. Chongqing G6 flexible OLED production line has begun.Fuqing G6 flexible OLED production line, the company is expected to be comparable to Samsung in terms of production capacity.

Currently, the production capacity of Flexible OLED is mainly in the hands of Samsung. Based on the consideration of supply security, mobile phone manufacturers have a strong incentive to find new suppliers.

The company’s flexible OLED products have achieved large-scale expansion, and are used in flagship phones such as Huawei Mate 20 Pro, showing the higher quality of the company’s products.

With the gradual commissioning of several subsequent production lines, the company will be the first to meet the needs of many mobile phone manufacturers, and the market share is expected to usher in a rapid increase and seize the opportunity of industry development.

Profit forecast, estimation and rating We believe that the company has not been weaker than Korean manufacturers in terms of production capacity and technology after undergoing a lot of counter-cyclical investment in the LCD field, and it does have a certain leading edge in large-size panels.

In the field of flexible OLED panels, the company is one of the leaders in the industry. It has first-mover advantages in technology, patents and equipment, and will deeply benefit from the rapid development of the flexible OLED industry.

We maintain the company’s EPS for 2019-2021 to be 0.

12/0.

14/0.

16 yuan, maintain “Buy” rating.

Risk warning: The new production capacity of LCD panels exceeds expectations; the capacity and yield climb of the new production line are less than expected; the downstream application scenarios of OLED products are less than expected.