The company has been deeply involved in small and medium size displays for 40 years. The company was founded in 1983 and is one of the most representative small to medium panel manufacturers in China. The company has a mainstream display technology layout in all fields from black and white passive, a-Si TFT-LCD, LTPS TFT-LCD to AMOLED, and has forward-looking investment to build a full-process micro-LED production line, with an operating system in the field of small and medium size displays with fast response, flexible delivery, vertical starting capacity, and leading quality The company is a global leader in various market segments such as LTPS mobile phones, automotive front-mounted displays, and exclusive displays. Compared to peers, a rich and diverse product and customer structure helped the company improve its resilience to risks and help the company grow steadily. Since the second half of '23, panel price repairs, product structure optimization, and continuous cost reduction have driven the company's profitability to improve dramatically, and 24Q3 has turned losses into profits in a single quarter.

Using the rejuvenation and professionalization of the leadership as the foundation, the “2+1+N” strategy led the development in 2021. The two post-80s leaders: the new chairman Peng Xuhui and the general manager took control of Shenzhen Tianma. These two are also young cadres who have been at the helm of Tianma, and Tianma itself has cultivated. This represents the future reform ideas for the rejuvenation and professionalization of Tianma's leadership. At present, the company has formed a “2+1+N” business layout with a rich product matrix, balanced structure and continuous optimization.

Mobile phones: Flexible OLEDs have entered a period of full strength, and profitability has improved markedly in terms of flexible OLEDs. In the past, against the backdrop of the concentrated release of production capacity from local panel manufacturers in China and the continuous decline in global mobile phone shipments for many years, the operating rate of local panel manufacturers was lower than that of Korean manufacturers, and in the demand for high-end panels, the penetration of domestic brand high-end demand to shift to localization is also gradually increasing. This is a mismatch with the supply growth pace of China's panel manufacturers, and the demand for flexible OLEDs was weak due to the decline in the external environment. Prices continue to fall. However, since the second half of '23, the mobile phone market has continued to recover, the penetration rate of flexible OLEDs has continued to rise, and demand for high-end domestic folding machines and LTPO straight-board machines has increased, driving the continuous healthy growth of flexible OLED demand; from the supply side, the domestic flexible OLED sixth generation production capacity layout has basically been formed, and new supply in the market is limited, so we believe that the tight production capacity structure of flexible OLED phones will continue. After the price is repaired in the first half of the year, it is expected to remain stable in the future.

Tianma is currently entering a period of full strength in the flexible OLED field: both the TM17 and TM18 production lines maintain a good operating rate and actively support the launch and mass production of flagship models for multi-brand customers. In particular, TM18 is the latest sixth-generation production line in China. It is built using the latest technical specifications in the industry, and has strong technology and cost competitiveness. The release of TM18 production capacity is right at the pace of growing demand for folding screens and LTPO phones. This will drive the overall value increase. Therefore, as one of the few manufacturers in the domestic market that is rapidly releasing production capacity Excellent growth elasticity. Furthermore, with the company's continued cost reduction efforts and product structure optimization, the profitability of the flexible OLED business has also been greatly improved, and TM17 24Q3 has achieved positive gross profit in a single quarter.

Vehicle: High barrier racetrack, the company has a deep moat, steady and far-reaching vehicle display market innovation continues, and the trend of multiple screens and large screens is obvious. In particular, the penetration rate of LTPS LCD technology is rapidly increasing. In this context, in addition to requiring reliable and excellent product quality and stable delivery capabilities, new energy vehicle manufacturers also require suppliers to have a complete product portfolio, rich reserves of new technology, and rapid iterative response capabilities, etc., which further raises the competitive threshold for in-vehicle displays. Automotive displays are the company's flagship business. With nearly 30 years of professional in-vehicle system capabilities, world-leading quality, comprehensive mass production technology, and extensive customer cooperation, the company occupies the first place in the global market share in front equipment and instruments with high barriers, and has fully won the trust and reputation of customers. The company's differentiated competition in the LTPS LCD field and the smooth development of the automotive electronics business will help the automotive display business achieve better growth, and the sharp increase in automotive LTPS product shipments has also significantly improved the profit margin level of the LTPS LCD production line.

IT display: LTPS differentiates competition. The company insists on the mid-to-high-end IT business market space, and product specifications are continuously upgraded. As consumer requirements for resolution, refresh rate, brightness, and lightness of display products gradually increase, a-Si technology has gradually failed to meet consumers' requirements for display performance, and higher-level display technologies such as LTPS have ushered in development opportunities. In the IT market, the company uses LTPS technology to compete for differentiation, adhere to the middle and high-end positioning, and rapidly increase its market share. Among them, the market share of LTPS tablet display products has increased to nearly 40% in more than 2 years.

Exclusive display: Deeply involved in the long-tail market, remaining number one in the world for many years and different from the consumer electronics market. The exclusive display market covers many segments, diverse product specifications, and a high degree of customization. Facing a demanding and sophisticated specialty market, the company insists on “being realistic, in-depth, stable, and detailed”, and continues to maintain a global lead in various professional market segments such as medical care, smart home, industrial handheld, and human-computer interaction. In recent years, judging from the data disclosed by the company, the operating income of the company's exclusive display business has remained around 5 billion yuan. The revenue scale is stable and profit margins are good, which is an important cash flow business for the company.

The launch of the TM19 and TM20 production lines will help the company upgrade its mid-size production capacity and specifications. Considering that a-Si technology still dominates in the mid-size field, and the higher-generation line has better cutting efficiency and cost advantages, the company will supplement a-Si and IGZO production capacity by building an 8.6 generation production line TM19 (holding 15%, not consolidated). The company's newly built 8.6-generation line uses mature mass-produced production equipment and process technology in the industry, and is directly targeted at small to medium size applications such as IT and automotive at the beginning of the design, compared with other 8.5/ 8.6 generation line, TM19 has latecomer advantages and cost advantages. With mass production of G8.6 and the new display module production line, the company will open up more room for growth in the automotive and IT fields.

Profit forecasting and valuation

The company's revenue for 2024-2026 is estimated to be 32.5 billion yuan, 36 billion yuan, and 401 billion yuan, respectively, and net profit to mother will be -0.85 billion yuan, 0.21 billion yuan, and 0.66 billion yuan, respectively, covered for the first time, and given a purchase rating.

Risk Alerts

Flexible OLED panel prices fell; competition in the automotive/IT display market intensified; new production lines fell short of expectations.