Incident: Company discloses 2014 semi-annual report

Revenue grew steadily, and gross margin improved quarterly: the company 24H1 achieved revenue of 93.39 billion yuan, an increase of 16.5% over the same period. There was a marked increase on the profit side. Net profit to mother was 2.28 billion yuan, an increase of 210.4%; after deducting non-net profit, it was 1.61 billion yuan, an increase of 201.8%. 24H1 gross margin was 16%, up 7 pct year on year; net margin was 1.9%, up 4 pct year on year. 24H1 sales/management/R&D expenses rate was 2.0%/3.0%/6.2%, -0.4/-0.4pct year-on-year. Looking at a single quarter, 24Q2 revenue reached 47.5 billion yuan, up 12.5% year on year, up 3.5% month on month, contributing significantly to the first half of the year's results; net profit to mother was 1.3 billion yuan, up 166.2% year on year, net profit after deducting 1.02 billion yuan, up 1117.7% year on year; Q2 gross margin was 17.5%, up 3 pcts month over month; net profit margin was 2.7%, up 1.6 pct month on month. During the reporting period, LCD TV panel prices benefited from downstream shipments and the continuous trend of a healthy pattern. At the same time, the company released new products in various sections, effectively driving a double increase in revenue and gross profit.

Focusing on the core tactic of “screen Internet of Things”, five major product segments have been updated and iterated: the company takes display technology as the core and continues to expand the field of terminal applications. 1) The business achieved revenue of 78.01 billion yuan during the period, up 14.9% year on year; gross margin was 14.0%, up 7 pct year on year. Thanks to a steady breakthrough in the shipment volume of oversized LCD products, it has relied on its technical advantages to rank first in the world in shipments among the five major mainstream applications, and its market share continues to increase. At the same time, a variety of flexible AMOLED high-end folding products have achieved exclusive supply to customers, driving flexible OLED shipments to increase by more than 25%.

It pioneered OLED+AI technology in the industry, and took the lead in formulating the industry's first industrial model group standard and China's first “General Artificial Intelligence Blue Book”, and officially released three national standards, including touch display, flexible display performance, and test methods, continuously enhancing the company's influence in the industry. 2) The IoT innovation business achieved revenue of 17.16 billion yuan, a year-on-year increase of 19.4%, gross margin of 11.0%, and a year-on-year increase of 2.3 pcts. 3) The MLED business achieved revenue of 4.03 billion yuan, an increase of 116.0% over the previous year. Thanks to the expansion of end customers in the sector, various product lines were delivered in the automotive, outdoor, commercial display, and movie screens. 4) The smart medical industry achieved revenue of 0.9 billion yuan, an increase of 13.6% over the previous year. The Chengdu Smart Medical Care Center completed the construction of the project and promoted the signing of contracts by reserve customers. The progress is good. 5) The sensing business achieved revenue of 0.02 billion yuan, a year-on-year decrease of 10.8%. Sensor products have now passed leading customer certification in photovoltaic, lithium battery, automotive, and MEMS tracks, and there is plenty of momentum for performance growth.

Promoting overseas market layout, various display products have been certified by overseas customers: BOE started the second phase of smart terminals in Vietnam, the first self-funded smart factory overseas. The goal is to produce 3 million TVs, 7 million monitors, and 4 million electronic paper per year. Mass production is expected to begin in 2025, which will help the company expand its production capacity to meet the needs of overseas customers. At the same time, the introduction of in-vehicle displays to leading overseas car companies has been completed, and the shipment volume remains the highest in the industry, contributing revenue to the company's performance.

Profit forecast and investment rating: In the context of the gradual recovery of industrial demand, we are optimistic that the company will benefit from the reversal of the panel industry cycle and rapid layout of the MLED circuit. We maintain our previous profit forecast. We expect the company's net profit to mother for 2024-2026 to be 4.55/9.04/15.5 billion yuan, respectively. The current market value corresponds to PE 31/16/9 times, respectively, to maintain a “buy” rating.

Risk warning: The progress of projects under construction falls short of expectations; competition in the display panel industry is intensifying.