Key points of investment

Maintain a leading position in the semiconductor display field and continue to drive the transformation of the Internet of Things. The net profit of 2024Q1 is expected to be between 800 and 10 billion yuan, with a year-on-year increase of 223% - 304%. In 2023, the company achieved revenue of 174.543 billion yuan. Quarterly revenue showed a quarterly growth trend. 23Q1-Q4's revenue was 379.73/422.04/463.37/48.028 billion yuan, respectively, and net profit to mother was 247/4.88/286/1,525 million yuan, respectively.

In 2023, the company continued to maintain its leading market position in the semiconductor display field, continuing to rank first in the world in overall LCD and five major application areas, continuously optimizing the product structure in the LCD field, maintaining breakthroughs in high-end flagship products, achieving the highest global shipment volume for oversized (≥85 inch) products, and ADS Pro products achieved a breakthrough in the high-end TV market (ADS Pro technology products sold nearly one million pieces). In the OLED field, the company's annual flexible AMOLED shipments were nearly 120 million pieces, a significant increase over the previous year, and the profitability of mature production lines improved markedly. Furthermore, the company actively seized market opportunities, initiated the construction of the first 8.6th generation AMOLED production line in China, and continued to consolidate its leading position in the semiconductor display industry. The company continues to promote the transformation of the Internet of Things, and market expansion results continue to emerge. IoT application terminals maintain the world's highest shipment volume in the whiteboard, splicing, and advertising machine segments; smart park solutions have reached more than 50 benchmark projects nationwide, covering more than 700 customers; smart finance platforms have been upgraded and launched in multiple bank branches across the country, achieving full coverage in 31 provinces and cities; the brand product industry's first Yunzhi splicing, smart all-in-one smart all-in-one computer C3 and E3 launched; MLED formed strategic cooperation with key customers in the Asia-Pacific and European markets, and achieved initial layout in the Asia-Pacific and European markets; the sensing business introduced a full range of code reader products into the OLED field The first flexible high-value-added FPXD product was mass-produced; the core capabilities of digital hospitals were continuously strengthened. The total number of outpatient visits exceeded 1.25 million throughout the year, an increase of about 50% over the previous year, and the total number of discharges was about 54,000, an increase of more than 65% over the previous year, and the quality of operation improved markedly.

The supply pattern is optimized, and demand is expected to pick up. (1) Supply side: LCD production capacity expansion is slowing down, and the supply pattern is optimized.

According to Omdia data, large-scale expansion of LCD production lines is gradually coming to an end, and the overall panel production capacity maintained a low growth trend (2024-2028F growth rates were 3%/3%/-1%/3%, respectively); as Korean manufacturers withdrew from this market, the LCD panel market share of mainland Chinese manufacturers increased to 70% in 2023, increasing industry concentration, pattern optimization, and voice. (2) Demand side: Overall demand was weak in '23, and is expected to pick up in '24. The overall terminal market weakened in 2023. The sales volume of the five major traditional application terminals declined year on year. With the arrival of the 23H2 peak season, the terminal market picked up. According to BOE's 2023 performance exchange data, sales of TV/MNT/NB/TPC/MBL terminals fell 0.9%/6.3%/10.9%/20.5%/3.4% year on year, respectively. With the exception of MBL, shipments of the four major application panels declined in 2023. Affected by the dynamic adjustment of the terminal's preparation pace, the 23H2 panel shipping trend is out of sync. Among them, TV terminal inventory control, and panel shipment performance is weaker than that of terminals. According to BOE's 2023 performance exchange data, the three major TV/MNT/NB/TPC application panel shipments in 2023 decreased 10.6%/6.2%/12.4%/5.1% year on year, respectively, and MBL panel shipments increased 3.1% year on year. (3) 24-year demand outlook: ① Demand for TV panels is expected to recover in 24, and large-scale expansion will continue. According to BOE's 2023 performance exchange data, TV panel shipments declined at an accelerated pace in 2023, but the average TV panel shipment size increased by 2.7 inches to 50.7”, and the TV panel shipping area remained stable in 2023; at the beginning of 2024, panel manufacturers took Spring Festival vacations and annual repairs, compounded by the Red Sea crisis, and brand manufacturers began to raise their 24Q1 procurement plans to prepare goods for promotions in advance. With the recovery in procurement demand, LCD TV panel prices rose in January Stable, with an overall rise in February and an increase in March; the 2024 French Olympics, European Cup, America's Cup and other sporting events are expected to stimulate a recovery in TV demand. As larger sizes continue, shipments and area will both increase. ② The IT panel market is expected to bottom out and rebound in '24. According to BOE's 2023 performance exchange data, looking ahead to 2024, PC software and hardware upgrades will bring switching demand, and IT panel demand is expected to improve as major brand inventories gradually become healthier; on the NB side, AI PC layout is accelerated, Intel's next-generation processor is launched, and Win10 is discontinued, which will stimulate switching demand. Q1 is a traditional low season, demand is relatively low, and 24 Q1 NB panel prices are stable. As inventory becomes healthier, Q2 prices are expected to pick up; on the MNT side, 100HZ switches are expected to pick up; on the MNT side, 100HZ switches are expected to pick up Demand, the competition brought about an improvement in consumer demand such as e-sports, etc., and commercial demand bottomed out and rebounded, which will drive demand growth. In terms of price, sales of domestic Spring Festival brands are better, demand in Europe and the US is picking up in advance, procurement increased in some regions in Q1, and MNT panel prices began to rise in March. ③ Smartphone growth is expected to continue for 24 years. Consumer buyers in 2021 may need to switch devices in 2024. Smartphone terminal shipments are expected to increase year-on-year in 2024. As demand for terminals recovers, smartphone panel shipments are expected to continue to grow in 2024.

Investment advice: Considering the overall weakness in the panel application field in 2023, industry supply and demand are expected to improve in 24. Combined with the company's 23 annual report and 24Q1 performance forecast data, we adjusted the company's original performance expectations. The operating income from 2024 to 2026 was 1,998.87 (previous value 2,013.74) /2,134.40 (previous value was 2,331.51) /2,344.21 billion yuan (new) billion yuan, growth rates were 14.5%/6.8%/9.8%, respectively; net profit to mother was 41.42 (previous value of 39.35) /81.31 (previous value was 97.12) /119.55 billion yuan (new) billion yuan, growth rates were 62.6%/96.3%/47.0%, respectively; corresponding PE was 38.5/19.6/13.3 times, respectively. Considering BOE's leading edge in traditional semiconductor display applications, superposition companies are promoting the application of new technologies in many emerging application fields such as automotive/MR/commercial displays, gradually transforming from “single device value creation” to “screen IoT value creation for the entire industry chain”, and maintaining the holdings increase-A proposal.

Risk warning: risk of international trade friction; risk of market competition; progress of the company's R&D/production line construction falls short of expectations; downstream demand falls short of expectations.