Results in 2023 fell short of expectations: BOE Varitronics is BOE's only automotive display module and system operating platform, providing customers with in-vehicle display assemblies and smart in-vehicle display systems. 2023 revenue of HK$10.76 billion, up 0.4%; net profit of HK$475 million, a decrease of 18%, lower than market expectations. The pressure on performance was mainly due to pressure on product prices in the second quarter, depreciation of the RMB, inventory depreciation, and cost pressure brought about by a steep decline in the commissioning of the Chengdu factory.
Maintain a leading position in the industry: According to Omidia data, 1) total vehicle display module shipments, 2) medium and large size (8 inches and above) shipments, and 3) oxide and LTPS shipments, the compound global growth rates for the next 3 years will be 4.4%, 8.35%, and 18.16%, respectively. BOE Precision maintains the largest market share in the global automotive display market in terms of delivery volume and area.
We have sufficient technical reserves for oversized car displays, curved displays and display systems, PHUDs, enhanced dynamic reality head-up displays (AR-HUD), CMS, seat armrest screens, side door screens, rear-flip screens, and front passenger screens. The traditional A-Si module is under high competitive pressure this year. The company is focusing on breaking through high-end products such as LTPS/Oxide. The world's first 14.6-inch four-channel high-definition (QHD) oxide display products have begun mass production; DB Cell and Mini LED displays have already obtained projects from well-known car manufacturers; and several automotive F-OLED displays have entered mass production.
Overseas market potential is large: The overseas automotive display market is far larger than the domestic market. The company set up an overseas mission team. It is expected that 39 client projects will enter mass production in 2024, and the overseas market will achieve double-digit growth.
Chengdu vehicle display base is full production: The Chengdu vehicle display base has an annual production capacity of 15 million pieces, covering an area of 4.75-44.8 inches. It is the most advanced and mass-produced special vehicle module production base in the world. It was fully produced in 2023, with a straight forward rate of about 90% and a yield of about 97% at the end of the year. There were plenty of orders in the first half of 2024. The company implements an asset-light strategy that combines self-production and ODM. Continued optimization of the Chengdu plant will make a positive contribution to the 2024 results.
Target price of HK$9.06, purchase rating: The company's revenue for 2024-2025 is forecast to be HK$12.6 billion, HK$13.6 billion and HK$15.2 billion, respectively, and net profit attributable to the parent company is HK$550 million, HK$615 million and HK$760 million respectively. The company was given a target price of HK$9.06, corresponding to 15 times the PE valuation in 2024. There is room for an increase of 47.8% compared to the current price, and a purchase rating.