1. The glass substrate industry is the core raw material for LCD panels. It has the characteristics of high technical barriers, high profit margins, and high industry monopoly (currently the vast majority of the market is occupied by US and Japanese companies). It is also a strategic emerging industry that has been supported by the country for a long time. Mainland China is expected to become the world's largest producer of LCD panels by 2018, and independent glass substrate companies represented by Rainbow Co., Ltd. have huge room for import substitution. 2. Since all of its withdrawal from the traditional CRT business, Rainbow Co., Ltd. has continued to follow the path of R&D and production of glass substrates. Currently, the company's main production lines are G5 and G6 generations, but overall profitability is poor. The company is now focusing on developing the G8.5 generation line. The 8.5 generation line of Rainbow Co., Ltd. is the first local company with completely independent technology, and has mastered all technologies from front-end to back-end. The company's glass substrate production line will focus on serving Xianyang 8.6 generation panels and CLP Panda 8.5 generation lines, and will continue to develop new customers in the future. The overall yield of the company's 8.5-generation line has increased steadily compared to previous years. Currently, the yield rate of front-end kilns remains around 85%, which is close to Corning's yield level. It is expected that 6 8.5-generation lines will be completed by 2018, and the annual production capacity is expected to reach 3.4 million pieces. The first 8.5-generation line (including the front and back end) will be put into operation in 2017Q4, and Xianyang's TFT-LCD will be put into operation in February 2018. If progress goes well, the glass substrate production line can fully match the production schedule of the upper panel line. 3. The cover glass business is another strategic focus of Rainbow, and the Group plans to focus on cultivating this business, making it an excellent asset under the Group. Cover glass has extremely high profit margins. Currently, it is basically owned by Corning. After years of technical reserves, Rainbow has obtained a full range of technology to prepare cover glass by liquid flow pressurization, etc., and the yield is currently close to 90%; due to the use of the same technology as Corning, the product performance is superior to Japan's Asahi Glass and Electric Glass, and can make products that are on par with Corning. Rainbow Group's strategy in the field of glass covers is to be able to enter the main producer field of cover glass in the next few years and share the market with first-tier manufacturers. Currently, the company has a renovated cover production line in Xianyang, with a planned annual production capacity of 1 million square meters. The company also plans to build 8 cover lines (4 in Xianyang and 4 in Changsha), mainly to support local mobile phone cover glass suppliers. 4. Considering that the glass substrate industry, like the panel industry, is a high-end manufacturing industry supported by the country, Rainbow has leading domestic production capacity for high-generation glass substrates and has very strong expectations of import substitution. We are optimistic about the company's future development prospects. The company's 2016-2018 EPS is expected to be -0.25/0.08/0.12 yuan, giving it a “buy” rating.
彩虹股份(600707)调研报告:行走在玻璃基板产业“新长征”路上
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