1H24 results are in line with market expectations

The company announced 1H24 results: revenue of 93.386 billion yuan, up 16.5% year on year; net profit to mother was 2.284 billion yuan, up 210% year on year. Among them, 2Q24's revenue for the single quarter was 47.499 billion yuan, up 12.5% year on year, up 3.51% month on month, and net profit for the single quarter was 1.3 billion yuan, up 166% year on year and up 32.2% month on month. The performance was in line with market expectations. The increase in performance was mainly due to a significant year-on-year recovery in the price of large panels.

Development trends

TV panel prices are expected to stabilize in 4Q24. Looking back at 2Q24, due to poor TV sales, etc., the price of large panels changed from a slight increase in April/May to a slight drop in June, and entered 3Q24, and the decline widened slightly. According to Qunzhi Consulting, 7M24 32"/50"/55"/65"/75" panel prices are -2.7%/-1.9%/-2.2%/-1.2%/-1.2% month-on-month, respectively. The decline of 50"/55" is expected to increase to -3.8%/-3% in August, and the remaining dimensions are comparable. Considering that the second half of the year is usually the peak season for consumer electronics, and panel manufacturers plan to regulate production in October, we are optimistic that 4Q24 TV panel prices will stabilize, while the restart and rise in panel prices requires watching the rise on the demand side. We see that IT panel prices are relatively stable, and the price of small-sized LCD panels has declined slightly since 3M24. BOE's leading position is stable. According to the company announcement, 1H24 ranks first in the world in the shipment volume of five mainstream applications and oversized (≥85") flagship products in the LCD field. In the flexible OLED field, the company's product shipments increased by more than 25% year on year. In the field of automotive displays, the company maintains the leading position in the industry in terms of shipment volume.

The profitability of display devices has increased, and the product structure continues to be optimized. According to the company announcement, the gross margin of 1H24's display device business reached 13.91%, an increase of 7.9 ppts over the previous year, mainly because panel prices improved sharply year on year, and the company placed more emphasis on profitability. The company announced that it has launched a variety of flexible AMOLED high-end folding products for exclusive use by customers, providing highly reliable LED backlight products and Mini/Micro LED display products. In addition to the display business, based on the “1+4+N+ Ecological Chain” development strategy, the company continues to iterate new products in the fields of IoT innovation, sensing, MLED, smart medical engineering, etc., to enhance brand competitiveness. We are optimistic that the company's product structure will continue to be optimized, R&D investment will consolidate technical barriers, make steady breakthroughs in flagship products with high added value, and expand market share and enhance profitability.

Profit forecasting and valuation

As TV panel prices stopped rising and falling in the second half of the year, we cut our 24/25 revenue 6.7% and 4.9% to 190.695 billion yuan and 219.731 billion yuan, and our 24/25 net profit 20.7% and 14.6% to 5315 billion yuan and 9.101 billion yuan. Considering the long-term trend of improving supply and demand, we kept our outperforming industry rating and target price of 5.25 yuan unchanged. The target price corresponds to 1.5/1.4 times P/B for 24/25. The current stock price corresponds to 1.1/1.0 times P/B in 24/25, with 35.3% room for growth.

risks

Demand is weak, panel prices are falling, raw material prices are rising, and competition is intensifying.