First, an overview of events recently, Huaying Science and Technology issued an announcement: it intends to invest no more than 280.06 million yuan with its own funds (including 122.17 million yuan for the transfer of internal facilities and equipment and 157.89 million yuan for external expenditure) to integrate the module business production line.
II. Analysis and judgment
Optimize and adjust the product structure of the module, focus on laying out the production line of high-margin vehicle products, and improve the efficiency of production and operation.
1. The company intends to streamline its production capacity. After optimizing and replacing the module processing production lines of Huaying Video (Wujiang) Co., Ltd and Huaying Optoelectronics Co., Ltd., part of the production capacity is concentrated to Fujian Huaying display Technology Co., Ltd., after the production line is integrated, cooperate with the company to absorb lucky Fujian Huaying display Technology Co., Ltd.
2. This production line integration is in line with the company's business planning for product restructuring, focusing on strengthening the production line layout of high-margin vehicle products and eliminating some old and backward production lines. After the integration of the module business industry, according to the company's current calculation of the same output, the total labor cost and energy consumption are reduced by about 7.79 million yuan per month, and the expected payback period is about 20 months.
3. We believe that the integration of LCD module production line is in line with the company's strategic planning to optimize capacity allocation, which will further improve the company's operational efficiency, reduce management and labor costs, and enhance product competitiveness. On the basis of the refinement and strengthening of the module business, the company plans to invest more resources into the cover glass business and panel business, which is expected to achieve business transformation and upgrading.
The size of the vehicle display panel becomes larger, the demand continues to grow, and the market space grows further.
1. According to IHS's forecast, the total global shipments of on-board display components will grow to 170.6 million in 2021, with CAGR exceeding 6%. By 2021, each new car will be equipped with at least two TFT-LCD or AMOLED displays, with shipments of 335m displays of 7 inches or more and close to 10 per cent of CAGR.
2. The larger size of the vehicle display panel is mainly due to the strong demand for automobile multi-entertainment system, safety and automobile system functions, and the gradual enrichment of entertainment, ADAS, body operation and other functions requires a larger display screen. IHS research report pointed out that from a global point of view, the LCD dashboard display size is gradually evolving from 3 inches and 4 inches to 5 inches and above, and the display panel size of the vehicle central control system is developing to 7 inches and above. At present, the vehicle central control LCD display between 8 inches and 10 inches is very common in high-end cars, and it will further infiltrate to the middle and low-end models in the future.
3. We believe that the continuous demand for car comfort, safety and entertainment is becoming the driving force of the vehicle display system market, and the vehicle central display LCD panel market will grow rapidly. the company will continue to improve the module business by increasing the proportion of high gross margin vehicle LCD module products and optimizing the module production line.
Third, profit forecast and investment advice estimate that the company's EPS from 2017 to 2019 will be 0.24,0.38,0.52 yuan respectively, which can give the company 4550 times PE in 2017, and a reasonable valuation of 10.8-12.0 yuan in the next 12 months, maintaining the company's "cautious recommendation" rating.
