1H24's revenue increased 16% year over year, while 2Q24 revenue and profit increased year on month. The company released its 2024 semi-annual report, with 1H24 revenue of 93.386 billion yuan (YoY +16.47%) and net profit of 2.284 billion yuan (YoY +210.41%). 2Q24's revenue was 47.499 billion yuan (YoY +12.54%, QoQ +3.51%), and net profit to mother was 1.3 billion yuan (YoY +166.17%, QoQ +32.16%). Under the supply-side production control strategy, LCD TV panel prices fluctuated moderately, industry profitability gradually improved, and 2Q24's gross profit margin was 17.46% (YoY +6.4pct, QoQ +3.0pct). By business, 1H24's display device business revenue was 78.013 billion yuan (YoY +14.87%), IoT innovation business revenue 17.156 billion yuan (YoY +10.57%), MLED business revenue 4.033 billion yuan (YoY +115.95%), smart medical business revenue 0.903 billion yuan (YoY +13.63%), sensing business revenue 0.163 billion yuan (YoY - 10.83%).

The price of 1H24 LCD TV panels increased, and the gross margin of display devices improved year-on-year. The company maintains its leading edge in the semiconductor display field, and has steadily ranked first in the world in the shipment volume of the five major mainstream applications in the LCD field, and the share of core customers continues to rise. LCD product structure optimization, stable breakthroughs in advantageous high-end flagship products, and maintaining the number one global shipment volume for oversized products. LCD TV panel prices have fluctuated moderately in the past two years under the supply-side production control strategy, and the industry is expected to enter a stable profit stage. According to Witsview data, LCD TV panel prices rose from February to May. The profitability of the company's display device business improved year on year in the first half of the year, and the gross margin of the 1H24 display device business increased 7.92 pcts year on year to 13.91% year on year.

OLED continues to penetrate the smartphone panel field, and 1H24's flexible OLED shipments increased year-on-year.

The recovery in the global smartphone market was compounded by the release of OLED production capacity, and OLED panels continued to penetrate the lower end market. 1H24 global AMOLED smartphone panel shipments were 0.42 billion pieces, an increase of 50.1% over the previous year. According to Qunzhi Consulting, 1H24 shipped 64.4 million flexible OLED panels, an increase of 27% over the previous year, ranking second in the world. The company continues to increase shipments of high-end products such as LTPO and folding, increasing the proportion of high-end flagship products shipped. 1H24 offers a variety of flexible AMOLED high-end folding products for exclusive use by customers, creating a variety of brand-first products. According to CINNO Research, 2Q24 China sold 2.62 million units of folding screen phones, up 125% year on year, maintaining a three-digit year-on-year increase for four consecutive quarters. The cumulative sales volume in the first half of the year was 4.98 million units, up 121% year on year, and the penetration rate reached 3.6%.

Investment advice: We maintain the company's profit forecast. The company's revenue for 2024-2026 is expected to increase 18.8%/8.9%/8.3% year on year to 207.4/225.9/244.6 billion yuan, and net profit to mother will increase 85.7%/91.9%/36.7% year on year to 4.73/9.076/12.403 billion yuan, corresponding to 2024-2026 PB of 1.10/1.06/1.01 times, respectively, maintaining the “better than the market” rating.

Risk warning: Panel prices fluctuate, demand falls short of expectations, and the company's OLED business falls short of expectations.