We hosted BOEVx at 4Q outlook investor call this week. Mgmt. is positive on demand recovery in both domestic and overseas markets as well as rapid growth in system business in 2H24E. As for Chengdu plant, mgmt. guided UTR to improve to 70-80% in the near term (vs. 60-70% now) given larger orders and better sales in 2H24E. As for overseas markets, mgmt. stated Japan/Korea/ Europe project wins are on track in FY25-26E and reiterated 50% overseas sales mix guidance in FY27E. Trading at 9.7x/7.7x FY24/25E P/E (1-sd below hist. avg), the stock is attractive given margin recovery and rapid overseas expansion in 2H24E/2025, in our view. Reiterate BUY.
Domestic/overseas demand recovery on track; system biz fast growth.
Mgmt. stated that while domestic auto market recovery stayed at slow pace, overseas' demand remains encouraging after the US rate cuts. Mgmt. remains positive on overseas project wins and order stability to drive capacity ramp-up and better yield. While market competition may weigh on ASP, mgmt. reiterated that strong partnership with major customers, BOEVx's global No.1 market position, new products' breakthrough (e.g.
OLED, flexible and foldable display) and effective cost controls will allow BOEVx to outperform peers despite intense competition. In addition, mgmt. expected system biz to stay fast growth and sales mix to reach 7-8% in FY24E, which will enable BOEVx to cope with fierce competition in auto display market.
Chengdu capacity ramp-up and better UTR in 2H24E. As global largestand most advanced auto display module plant, BOEVx Chengdu factory's UTR now reached 60-70% and target 70-80% in the near term, thanks to more complex and larger orders from major customers. Mgmt. commented that Chengdu plant showed improving inventory days, reduction in inventory and better sales growth in 2H24E. Overall, mgmt. expected a better 2H24E thanks to Chengdu's plant ramp-up and improving inventory level.
Overseas sales mix to reach 50% in FY27E; limited impact from the USnew tariff plan. For overseas markets, mgmt. reiterated 50% overseas sales mix target in FY27E, backed by project wins in Japan/Korea/Europe in FY25-26E. In addition, mgmt. expected limited impact from the US new tariff plan given that its US orders are manufactured in Vietnam plant, and BOEVx will closely monitor the dynamics and adjust strategy with suppliers.
