Fund-raising project to realize the linkage layout of "panel + substrate" business
Rainbow shares listed on the Shanghai Stock Exchange in 1996, the early CRT picture tube products as the main business, in 2010 through a non-public offering of 3.5 billion, into the panel glass substrate business, has formed less than six generations of domestic supply capacity. In 2017, 19.22 billion yuan was raised through non-public offering, of which 14 billion yuan was used for Xianyang Optoelectronics to build the 8.6th generation TFT-LCD panel production line, and 5.22 billion yuan for Hefei liquid crystal construction 8.5G glass substrate production line project. At present, it is the only FPD enterprise to realize the linkage of panel and substrate business in China.
The design capacity of the Xianyang 8.6th generation LCD production line is 120K, with a total investment of 28 billion yuan. The production line was lit up in December 2017 and achieved a cumulative full production capacity of two phases of 120K in July 2019. The panel is mainly composed of 50 "/ 70" products, which has the ability of mixed cutting process of production line, and the overall use efficiency of production line is high. Panel products to achieve downstream terminal mainstream customer supply.
The total investment of the company's Hefei 8.5G glass substrate project is 6.003 billion yuan, which mainly includes 6 hot end lines and 3 post-processing production lines, of which 4 hot end lines are compatible with 8.6 generation glass substrate sizes. The total design capacity of the project is 3.49 million pieces of 8.5G glass substrate per year.
LCD panels continue to benefit from the upward trend in prices
From 2018 to the first half of 2019, because the TV panel price is in the downward cycle and the production line of the company is still in the stage of production capacity climbing, the scale effect is weak and the overall profitability is poor.
At the end of 2019, as the industry gradually ushered in the price upward cycle, and the company achieved full production operation from 19Q3, the business situation gradually improved.
With the continuous withdrawal of the production capacity of overseas manufacturers represented by Korean factories, the TV panel industry has ushered in a long-term inflection point of supply and demand, 20Q1 industry TV panel prices are expected to accelerate upward, the company is also expected to achieve monthly operating profits in 20H1, the overall operating profit for the whole year.
The company still has room for 12K capacity expansion when designing the 8.6G line, and will expand production in 2020 according to the needs of downstream customers, the scale effect of operation is expected to further appear, and continue to benefit from the upward trend of LCD TV panel prices.
8.5 generation glass substrate to achieve mass production supply, domestic replacement space is broad September 2019 the company has fully independent knowledge products of 8.5 generation glass substrate, has achieved batch supply, the company is one of the few domestic enterprises with 8.5 generation glass substrate supply capacity. According to the fund-raising project plan, the company will build six 8.5Tech 8.6 generation glass substrate production lines one after another, with a monthly production capacity of close to 50K.
According to our estimates, by the end of 2020, there will be 22 production lines of 8.5 LCD 8.6 generation in the world, including 12 in Chinese mainland region. At present, more than 8.5 generations of glass substrates in the world, only Corning of the United States, Japan Electric nitrate, Asahi nitrate and other enterprises have the capacity of mass production and supply.
Glass substrate as the largest single material, the total cost of the display panel above 32 inches is expected to account for about 15%, but at present, domestic manufacturers have only achieved mass production and supply to downstream customers under 6 generations of production lines. There is a broad space for domestic substitution in the market for more than 8.5 generations of glass substrates. With the expansion of the production capacity of the 8.5 generation glass substrate and the improvement of yield, it is expected to gradually realize the domestic supply to the downstream panel manufacturers in the future.
Investment rating and valuation
We forecast that the company's revenue from 2019 to 2021 will be 60.09,86.28 and 9.77 billion yuan respectively, the net profit will be-0.09,1.44 and 424 million yuan, the EPS will be 0.00,0.04,0.12 yuan, and the corresponding PE will be-1582X ~ (102) X PB. Considering the continuous improvement of the future profit stability of LCD panels and the broad domestic alternative space for glass substrates, the company is currently 0.7X PB. We believe that the reasonable valuation of the company is 1.1-1.3X PB, with a "recommended" rating.
Risk hint
Due to the impact of the epidemic, the demand downstream of LCD fluctuates; the production capacity withdrawal progress of overseas manufacturers is not as expected; and the company's capacity release progress is not as expected.
