Event: the company announced on September 16 that it intends to use its own funds and other self-raised funds to invest in the construction of a G8.5 + substrate glass production line project with a total amount of 9.101 billion yuan (including working capital) in Shaanxi Xianyang High-tech Industrial Development Zone.
Invest in Xianyang G8.5 + glass substrate project to continuously increase glass substrate production capacity: the company plans to inject RMB 100 million into Xianyang High-tech Zone to set up a wholly-owned subsidiary as the main body of the project, and invest 9.101 billion yuan to build 8 hot-end furnaces and 4 cold-end production lines, the construction period is expected to be 36 months, upon completion, it can produce about 5.8 million pieces of G8.5 + substrate glass per year. At present, the company has built two overflow G8.5 + liquid crystal substrate glass production lines in Hefei, and have successfully realized mass production and batch supply. the mass production of the first two production lines will provide reliable technical guarantee for the construction of the project. The expansion of glass substrate production capacity of this project will further increase the revenue volume of glass substrate and reduce the unit cost of products, the scale effect is expected to reflect, after completion, the market share will be further expanded, and the process of domestic substitution is expected to be accelerated.
The room for domestic replacement of glass substrate is huge, and 8.5 + generation independent products break the foreign monopoly: glass substrate is one of the highest components in LCD panels. With the gradual release of the production capacity of the domestic advanced generation LCD panel production line, the domestic market will further increase the share of demand in the global LCD glass substrate market, which is expected to increase from 58% in 2020 to 73% in 2025. From the supply side, the glass substrate is a technology-intensive industry, there are high barriers to entry, production equipment needs independent research and development of glass substrate manufacturers, at present, most of the LCD glass substrate is monopolized by overseas giants such as Corning, NEG, Asahi nitrate, the proportion of domestic manufacturers is very low, and the vast majority are concentrated in the 8.5G products. The company is in a leading position in the field of glass substrate in China, and the independently developed overflow G8.5 + glass substrate products are progressing smoothly, and it is the only manufacturer in China that can supply 8.5 generation glass substrate in batch. the first and second production lines have been fully produced and sold. Next, the company will gradually complete the construction of six production lines in Hefei, all of which are expected to achieve a monthly production capacity of 300,000 pieces after delivery, which will gradually narrow the gap between the company and overseas leaders on the glass substrate.
The relationship between supply and demand of panels has eased, and the cyclical properties of large-size panels are expected to be weakened: panel prices have continued to rise since June 2020, mainly due to the reduction of production capacity by Korean factories, the reduction of TV capacity by panel factories, and the strong recovery of downstream demand. After July, the price of large-size panels fell somewhat, mainly due to the marginal slowdown in demand for panels such as TV and IT and the relative easing of the shortage of raw materials such as IC. Industry supply side, 2021 panel factory without a large number of new production capacity into production, long-term supply is stable, Korean factory LCD production capacity gradually withdrew, industry concentration will continue to improve, while upstream drive IC and glass substrate and other materials supply is still tight. On the demand side, under the catalysis of the large size of TV and the emergence of new applications such as Shangxian, the demand side of the industry has expanded steadily. Overall, the LCD industry will gradually enter a mature period from the rapid development driven by investment, from a large cyclical dominated by the supply cycle to a narrow fluctuation affected by the off-peak season of demand, the concentration of the industry will be greatly increased, and the structure of supply and demand will continue to improve.
Maintain the "overweight" rating: we are optimistic about the cyclical weakening of LCD panels, and the LCD industry is expected to gradually move from cyclical fluctuations to stable growth, leading to the improvement of the company's profitability center. In addition, the company is in a leading position in the field of glass substrate in China. Two G8.5 + generation glass substrate production lines have achieved full production and full sale. In the future, the production capacity will be gradually expanded and the gap with overseas manufacturers will be further narrowed. It is estimated that the company's 2021-2023 net profit will be 5.237 billion yuan, 5.484 billion yuan and 5.753 billion yuan respectively, and the EPS will be 1.46,1.53,1.60 yuan respectively. The corresponding PE were 5.82X, 5.56X and 5.30X, respectively.
Risk tips: panel prices are lower than expected, the impact of the epidemic is higher than expected, capacity release is less than expected, and downstream demand is lower than expected.
