2Q24 Performance continued to improve year on month

BOE A released 1H24 performance forecast: net profit to mother of 2.1-2.3 billion yuan, median value of 2.2 billion yuan (yoy: +199%); 2Q24 is expected to achieve net profit of 1.12-1.32 billion yuan, with a median value of 1.22 billion yuan (yoy: +149%, qoq: +24%), mainly due to the significant increase in the operating rate of the company's large-size LCD production line from April to May, and the average price increase for 2Q24 large-size LCD panels (yoy: +15%, qoq: +6%). Considering our expectations for improving the supply and demand pattern of large-size LCD panels and the company's OLED production line profit recovery expectations are more optimistic than before, we raised the company's 24/25/26 EPS to 0.14/0.24/0.31 yuan (previous value: 0.11/0.21/0.27 yuan) and 24/25/26 BPS to 3.58/3.82/4.13 yuan (previous value: 3.55/3.75/4.03 yuan). At the same time, the target price was raised to 5.73 yuan (previous value: 5.70 yuan), based on 1.60 x 24-year PB, which is higher than the comparable company average (0.90 x 24-year PB, premium based on the company's leading position). Maintain a “buy” rating.

Industry: Benefiting from peak season stocking demand, 2Q24 large-size LCD panel prices rose month-on-month, according to Omdia data: 1) After experiencing a brief slight correction in 4Q23, the average price of 32, 43, 50, 55, and 65-inch LCD TV panels finally stabilized in January '24, and continued to rise in February-May. With the arrival of the 618 peak season and the arrival of the Olympics & European Cup, the average price of 32, 43, 50, 55, and 65-inch LCD TV panels increased by 12%, 7%, 7%, and 6% in 2Q24, respectively; 2) The average price of 6.8-inch OLED panels increased by 1 US dollar to 25 US dollars in May '24 after experiencing price increases in October '23. With the further penetration of OLED panels into mobile phones and medium-sized terminals, and the increase in LTPO and folding screen phone shipments, the supply and demand for OLED panels may enter a tight balance, and prices are expected to rise further in 2H24.

Company: It is expected that the price of large LCD panels will rise in late August, and the profit of the old OLED production line will improve the LCD business. Although the short-term price of large LCD panels has declined due to the weakening momentum of TV terminal customers, we expect the price of large LCD panels to restart and rise in late August with the restart of the peak season in the second half of the year. In the OLED business, with the further penetration of OLED screens in mobile terminals and the increase in the share of high-end folding machines, we expect the company to achieve the goal of a continuous increase in flexible OLED screen shipments in 24 years (0.16 billion pieces for the whole year), and the profit situation of the old OLED production line is also expected to improve further.

The target price was raised to 5.73 yuan; the valuation is at a historically low level. Defensive attributes highlight that the company's net profit for 24/25/26 is estimated to be 5.4/9/11.8 billion yuan, respectively. The company's current stock price corresponds to 1.20 x 24 PB, which is at the lowest level since 2016, and its defensive properties are prominent. The target price was 5.73 yuan, based on 1.60 times 24-year PB. Maintain a “buy” rating.

Risk warning: The Korean factory's capacity withdrawal was slower than expected, downstream demand fell short of expectations, and production capacity climbed slower than expected.