The company has a wide business layout, and the vehicle display screen accounts for 8% of the global vehicle TFT-LCD shipments, making it the leader in this field; the mobile phone LCD module sales share is 19%, ranking first in China; and the camera module global shipping share is about 4.5%, ranking fourth in China. Tamping solid vehicle and industrial control display screen market has stabilized the performance, while the layout of OLED, dual photography, 3D and other innovative directions to bring potential performance growth.
Focus on LCD subdivision of vehicle, industrial control and other areas, stabilize the company's performance foundation company technology, scale, although there is a certain gap compared with the leading panel manufacturers, but by focusing on vehicle, industrial control and other subdivision areas with high order visibility and stable profit margins, the overall performance foundation of the company is relatively stable.
The vehicle LCD market is expanding rapidly (CAGR is expected to be 20% between 2016 and 2020), and the share of TFT-LCD shipments is expected to increase (from 8% in 2016 to 9% in 2018). The company's vehicle business revenue is expected to grow by about 25% in 2018 compared with the same period last year. Benefiting from the overall growth opportunities of IOT (the number of IOT terminals is expected to grow by 36 per cent a year between 2016 and 2020) and the expansion of the company's layout, industrial control revenue is expected to grow by 30 per cent year-on-year in 2018.
High-end flexible AMOLED is about to be mass produced, enjoy the industry growth dividend OLED with its high contrast, lightweight and other excellent performance in smart phones, wearable and other small and medium-sized applications take the lead in rapid penetration, the market demand is strong, the market size of CAGR in 2016-2020 is about 28%, but the production capacity is scarce. The mainland's continuous investment in the field of OLED has achieved initial results, and is gradually breaking the absolute monopoly situation in South Korea. The company is one of the few companies in the world to break through the high-end flexible OLED technology. If AMOLED is successfully mass produced in 18Q1, it will boost the company's performance and valuation.
Breaking through dual photography and 3D module technology, ASP is expected to usher in a growth inflection point, which is one of the most important trends in mobile phone upgrades in recent years, with penetration expected to increase from 20 per cent in 2017 to 35 per cent in 2018. The company first mass-produced double photography at the end of 2017, becoming the fourth domestic double photography supplier, and its global shipping share is expected to increase from 0% to about 4%. At the same time, the company's 3D sensing module is actively laid out and may gradually scale up in 2019. If the cooperation with Qualcomm Inc goes smoothly, it is expected to enjoy explosive growth opportunities in the industry. In view of the fact that the price of dual and 3D modules is significantly higher than that of single photography, the company's camera module business is expected to enter a medium-and high-speed growth stage with both volume and price increases.
The target price is HK $3.0, with a "overweight" rating for the first time.
The company's LCD panel growth is solid, breaking through OLED, dual photography and 3D modules to bring potential performance growth, while the associated company is expected to turn a loss into profit in 2018. It is estimated that the EPS for 2018-2019 will be HK $0.45 and HK $0.45, respectively, for 2017-2019. At the same time, considering that the smooth realization of the company's performance still depends on the actual acquisition of subsequent orders, based on the segment valuation method, it is considered that the 2018 12x PE of the display panel business and the 2018 8x PE of the mobile phone module business is a reasonable level, corresponding to the target price of HK $3, and the 2018 PE of about 10.5x is rated as "overweight" for the first time.
Risk hint: OLED mass production process is not as expected; double photography and 3D customer expansion is not as expected