Event: the company released its 2021 semi-annual performance report, which is expected to achieve a net profit of 2.7 billion yuan to 2.9 billion yuan in 2021, and 2.65 billion yuan to 2.85 billion yuan after deducting non-return net profit, which is a substantial turnround compared with the same period last year.
2021H1 performance greatly increased compared with the same period last year, glass substrate business to achieve profits: the company's 2021H1 return net profit of 2.7 billion yuan to 2.9 billion yuan, deducting non-return net profit of 2.65 billion yuan to 2.85 billion yuan, a substantial turnround from the same period last year. Benefiting from the rising prices of liquid crystal panel products, panel revenue has increased significantly, the production efficiency of liquid crystal panel and substrate glass production line has continued to improve, product sales have continued to grow, and profitability has improved significantly; the glass substrate business has made a profit in the first half of the year, and the overall business performance has increased significantly. In addition, the company's performance loss in the same period last year was mainly due to the low price of LCD panels and the large provision for asset impairment related to the holding subsidiary.
The room for domestic replacement of glass substrate is huge, and 8.5 + generation independent products break the foreign monopoly: glass substrate is one of the highest components in LCD panels. With the gradual release of the production capacity of domestic advanced generation LCD panel production lines, the domestic market will further increase the share of demand in the global LCD glass substrate market, which is expected to increase from 58% in 2020 to 73% in 2025. From the supply side, the glass substrate is a technology-intensive industry, there are high barriers to entry, production equipment needs independent research and development of glass substrate manufacturers, at present, most of the LCD glass substrate is monopolized by overseas giants such as Corning, NEG, Asahi nitrate, the proportion of domestic manufacturers is very low, and the vast majority are concentrated in the 8.5G products. The company is in a leading position in the field of glass substrate in China, and the independently developed overflow G8.5 + glass substrate products are progressing smoothly, and it is the only manufacturer in China that can supply 8.5 generation glass substrate in batch. the first and second production lines have been fully produced and sold. Next, the company will gradually complete the construction of six production lines in Hefei, all of which are expected to achieve a monthly production capacity of 300,000 pieces after delivery, which will gradually narrow the gap between the company and overseas leaders on the glass substrate.
Panel prices tend to stabilize, and the cycle properties of large-size panels are expected to be weakened: in late July 2021, 65-inch, 55-inch, 43-inch, and 32-inch prices are $288, $227, $137, and $87, respectively, up 75.0%, 120.4%, 106.0% and 175.0% from their lows in early June 2020. The reasons for the sharp rise in panel prices include the reduction of production capacity of South Korean factories, the reduction of TV production capacity of panel factories, and the strong recovery of downstream demand. In addition, the upstream glass substrate is in short supply, Corning raised the price again after raising the price of the glass substrate in the second quarter, which is expected to play a supporting role in the price of Q3 panel. Industry supply side, 2021 panel factory without a large number of new capacity into production, long-term supply is stable, Korean factory LCD production capacity gradually withdraw, industry concentration will continue to improve, while the upstream IC and glass substrate and other materials supply is still tight. On the demand side, under the catalysis of the large size of TV, the upward movement of IT demand center under the stimulation of housing economy, and the emergence of new applications such as Shang Xian, the demand side of the industry has expanded steadily. Overall, the LCD industry will gradually enter a mature period from the rapid development driven by investment, from a large cyclical dominated by the supply cycle to a narrow fluctuation affected by the off-peak season of demand, the concentration of the industry will be greatly increased, and the structure of supply and demand will continue to improve.
Maintain the "overweight" rating: we are optimistic about the continuation of the LCD panel business cycle, panel prices are expected to remain high, driving the company's profitability center to enhance. In addition, the company is in a leading position in the field of glass substrate in China, the first G8.5 + generation glass substrate production line has achieved full production and sales, the future will gradually expand production capacity, and further narrow the gap with overseas manufacturers, the company is expected to return home net profit of 4.868 billion yuan, 5.238 billion yuan, 5.624 billion yuan respectively in 2021-2023, EPS is 1.36,1.46,1.57yuan respectively, corresponding to PE is 7X, 6X, 6X respectively.
Risk tips: panel prices are lower than expected, the impact of the epidemic is higher than expected, capacity release is less than expected, and downstream demand is lower than expected.
