BOEVx delivered flattish revenue in 2023 while net profit dropped 18% YoY due to EBITDA margin pressure on lower ASP and higher depreciation. For 2H23, we are encouraged by its NPM recovery to 4.9% (vs 3.9% in 1H23), given improving yield and operation efficiency at the Chengdu plant. For 2024, mgmt. is positive on high- end product growth, rising UTR and expansion of overseas customers. We lowered our FY24-25E EPS by 28-32% to reflect on-going auto OEM price war but steady NPM. Trading at 6.5x/5.7x FY24/25E (1-sd below 4-year avg.), we think risk-reward is attractive. Maintain BUY with a new TP of HK$10.94 based on lowered 15x FY24E P/E (vs 20x prior) for near-term industry headwinds.
FY23 earnings below market expectation due to ASP/margin pressure despite improving yield and efficiency. BOEVx revenue was up 0.4% YoY in 2023 driven by stable growth in TFT products, touch panel display modules and automotive system products, offset by RMB depreciation of 8.5% and passive products' sales decline. EBITDA margin dropped 0.6ppt due to ASP adjustment and higher costs such as staff cost, PP&E depreciation and the Chengdu plant's marginal cost. 2H23 net margin of 4.9% showed positive signs of improvement (vs 3.9% in 1H23) given better yield and operation efficiency at the Chengdu plant.
2024 outlook: rapid growth in LTPS/Oxide/OLED products, rising UTR at Chengdu plant, and overseas expansion on track. For 2024, mgmt. is positive on sales growth to outperform industry average (Omdia: 5% YoY). By product, mgmt. expected 1) Oxide: double-digit growth, 2) LTPS: higher shipments, 3) OLED: 200%+ YoY on high-end customers' demand, 4) a-Si: high shipment growth with stable share, and 5) mid-to-large-sized products: double-digit shipment growth. In addition, system business is expected to achieve 100% YoY in FY24E. As for the Chengdu plant, mgmt. guided a solid backlog in 1H24E and rising UTR on production optimization. For overseas market, mgmt. expected customer expansion to be on track and guided double-digit YoY growth on new order wins.
NPM recovery on track despite overhang from price war; maintain BUY. We expect near-term ASP/GPM will still be under pressure given the on- going price war among China auto OEM. However, we remain positive on margin recovery in FY24-25E given less domestic capacity investment and better operation efficiency at the Chengdu plant. We lower our FY24-25E EPS by 28-32% to factor in more conservative ASP on auto price war. Maintain BUY and cut TP to HK$10.94 based on lowered 15x FY24E P/E.
