Key points of investment
Relying on BOE Group resources, it focuses on in-vehicle displays and system solutions. Focusing on the automotive, industrial display and solutions business, BOE Precision Electronics is a company acquired by BOE Group in 2016 (the group holds 54% of the shares) and is also the only vehicle display and system operation platform within the group. Currently, the company's production resources are domestic (Heyuan/Chengdu/Hefei, etc.) and sold globally. The company is in a leading position in the automotive display market. Since 2020, shipments of medium and large sizes (≥8”) have remained number one in the world, ranked second in the world in terms of shipping area in the first half of 2021, and the domestic automotive market share reached 30%, ranking first.
Benefiting from the recovery in global demand for new energy vehicles, particularly in China, 1H21's performance exceeded expectations and improved dramatically.
In the first half of 2021, the company achieved revenue of 3.2 billion (HKD, same below), +69% year on year; EBITDA 174 million, +93% year on year; net profit of 95 million, +423% year on year, exceeding the company's performance forecast by no less than the 400% year-on-year growth guide. Net profit margin rose to 3% (1.5% in 2020), gradually achieving economies of scale. By product, the revenue of the automotive display business was 2,578 million yuan, +86% year on year; the revenue of the industrial display business was 622 million, +21% year on year. By region, China accounted for 63% of sales, followed by Europe at 20%. The revenue scale in Europe, America and other regions also increased rapidly.
The trend of large touch screens highlights the company's competitive advantage, and orders are expected to continue to grow. With the intelligent development of new energy vehicles, large-size, high-definition in-vehicle touch panels may become standard. The value of large in-vehicle screens may increase tenfold compared to traditional screens, and the company's key layout and leading advantages in 8-inch and above products have been highlighted. The growth momentum is expected to continue through the second half of 2021, mainly from TFT and touch screen module orders for traditional and new energy vehicles in China (21H1's TFT accounts for 81%).
The long-term deployment of smart cockpits will enter a rapid growth channel in the next 5 years. Currently, the global smart cockpit market is about 40 billion US dollars. CAGR is close to 10% in the next 5 years. Among them, the hardware is mainly divided into large central control screens, full LCD meters, AR-HUD and central rearview mirrors for streaming media. The current penetration rate is 80% 30%/10%/7%, and is expected to reach 100%/70%/30%/30% by 2025. The company's smart cockpit business is still in the investment period. The company's related business contributed significantly to revenue in 2022 as soon as possible. Relevant revenue is divided into two categories. One category is screen display system integration business (instrument central control, etc.), and the other category is optical display systems (operating through subsidiary Jangcheng Technology). The overall CAGR is expected to exceed 30% in the future.
Expanding the business to smart cockpits is also expected to open up room for profitable growth (domestic smart cockpit leader Desai Siwei's net interest rate in 2020 was 7.6%).
Investment advice: The company's automotive market position is stable, and strong orders drive high growth in short to medium term performance, and the Group's strategic positioning of the company in smart cockpits will further open up room for long-term growth. We believe that the company's performance will enter a stage of rapid growth, so it is recommended to pay active attention.
Risk warning: Vehicle display competition intensifies, new product development falls short of expectations, and decisions are influenced by the group