14 Apr 2025 CMB International Global Markets | Equity Research | Company Update BOE Varitronix (710 HK) Limited impact from tariff given low US exposure We hosted an investor call with BOEVx regarding the recent US reciprocal tariffs. Overall, mgmt. believes there is limited impact on their financials given low US sales exposure. Regionally, BOEVx is positive on Vietnam's capacity ramp-up in 2025 and already received orders from the US and South Korean customers. In addition, mgmt. believes Mexico is a swee ...

Financial Performance - The company reported a revenue of HKD 13,449 million for the year ended December 31, 2024, representing a 25% increase from HKD 10,760 million in 2023[15]. - EBITDA for the year was HKD 686 million, a decrease of 11% compared to HKD 771 million in 2023[15]. - Shareholders' profit attributable to the company was HKD 391.3 million, down 18% from HKD 475.3 million in the previous year[15]. - Basic earnings per share were HKD 0.496, compared to HKD 0.604 in 2023[13]. - The company declared a final dividend of HKD 0.17 per share, down from HKD 0.19 per share in the previous year[13]. - Operating profit for the same period was HKD 437,000,000, a decrease of HKD 132,000,000 or approximately 23%, attributed to product structure changes, price adjustments, and increased inventory costs[65]. - The group proposed a final dividend of HKD 0.17 per share, down from HKD 0.19 per share in 2023, with a full-year payout ratio of 34% compared to 32% in 2023[19]. - Net profit attributable to shareholders decreased to HKD 391,300,000 from HKD 475,300,000, with basic earnings per share dropping to HKD 0.496 from HKD 0.604[67]. Cash and Debt Management - As of December 31, 2024, the company had total cash resources of HKD 4,122 million, an increase from HKD 3,572 million at the end of 2023[16]. - Bank loans decreased by 39% to HKD 376 million from HKD 620 million at the end of 2023[16]. - The current ratio as of December 31, 2024, was 1.41, down from 1.61, primarily due to investments for future business expansion[70]. - Cash resources increased to HKD 4,122,000,000 from HKD 3,572,000,000, reflecting strict control over working capital[71]. - The net cash generated from operating activities reached HKD 1,457,000,000, an increase from HKD 1,186,000,000 in 2023, primarily due to a decrease in inventory contributing HKD 136,000,000[73]. - The net cash used in investing activities was HKD 1,783,000,000, significantly higher than HKD 224,000,000 in 2023, mainly for property, plant, and equipment purchases totaling HKD 568,000,000[73]. Market Position and Growth - The company is positioned as a leading provider of automotive smart cockpit display solutions, focusing on automotive and industrial display solutions[5]. - The company aims to expand its market share in the automotive TFT display product and large and medium-sized display module markets globally[5]. - The group's revenue growth was primarily driven by the sales increase of TFT products, touch screen display modules, and automotive systems, benefiting from a significant rise in demand for new energy vehicles[17]. - Automotive display business revenue reached HKD 12,660,000,000, a 30% increase compared to HKD 9,710,000,000 in 2023, accounting for approximately 94% of the group's total revenue[20]. - The group maintained the largest market share in the global automotive display market, particularly for displays of 8 inches and above, according to Omdia data[20]. - The group successfully expanded its overseas business, achieving significant revenue growth in the U.S. despite macroeconomic challenges, supported by strategic investments in R&D and marketing[21]. - Revenue from China reached HKD 8,350,000,000, a 35% increase from the previous year, accounting for 62% of total revenue, primarily driven by the automotive display business[90]. - Revenue from the Americas reached HKD 838 million, representing a 47% increase compared to the previous year, driven by orders for TFT display modules from multiple automotive clients[98]. - The European business recorded revenue of HKD 2.444 billion, a decrease of approximately 4% year-on-year, accounting for about 18% of total group revenue, impacted by geopolitical conflicts and economic downturns[97]. - Revenue from Japan reached HKD 1,157,000,000, an increase of approximately 50% year-over-year, accounting for about 9% of the group's total revenue[100]. - Revenue from South Korea amounted to HKD 376,000,000, representing a year-over-year increase of approximately 24%, contributing around 3% to the group's total revenue[101]. Research and Development - The company is investing heavily in R&D to maintain its competitive edge in AI and smart cockpit technologies[37]. - R&D expenditure increased from HKD 237 million in 2023 to HKD 284 million in 2024, with the number of R&D personnel rising from approximately 410 to 450[44]. - The company plans to establish more laboratories in Europe and the US to meet diverse automotive R&D needs[35]. - The company is actively developing a dual-view display technology expected to produce a proof of concept (POC) prototype for market promotion in the first half of 2025[53]. - The company launched the first integrated display group standard for smart cockpits in the Chinese market in 2024, showcasing its technological expertise[36]. - The advanced super dimension switch technology (ADS-PRO) has been recognized for its superior display quality, with multiple projects secured from well-known automotive manufacturers[48]. - Multiple vehicle-mounted f-OLED displays have entered mass production, and the company is developing Tandem OLED technology for improved efficiency and longevity[50]. Environmental, Social, and Governance (ESG) - The company aims to achieve carbon neutrality by 2050 and has set targets for reducing carbon emissions, energy, water usage, and waste by 2025[43]. - The board has emphasized the importance of ESG management and will continue to assess sustainability trends and risks[106]. - The company has set a target for carbon neutrality by 2050 and is developing a roadmap and strategies to achieve this goal[107]. - The company is committed to improving its ESG performance by integrating sustainability factors into all business decision-making processes[114]. - The company has established a comprehensive ESG risk management and reporting mechanism, with the board overseeing the preparation and approval of the annual ESG report[120]. - The company is actively pursuing energy-saving projects and enhancing the use of green energy, including the establishment of photovoltaic power generation projects[117]. - The company emphasizes the importance of integrating ESG into its operations and management, aiming for long-term stability in environmental, social, and corporate value[113]. - The company has identified key sustainability performance indicators to enhance its ESG rating and corporate image, while also reducing operational costs[116]. - The company is committed to regular training for employees on anti-corruption policies and the importance of ethical behavior[131]. - The company has established a whistleblowing channel to report any suspected corruption, ensuring thorough and fair investigations of all allegations[132]. Production and Operational Efficiency - The establishment of a Quality Management Committee (QCC) in 2024 aims to enhance quality control and supplier performance monitoring across different manufacturing plants[24]. - Inventory turnover days improved from 67 days in 2023 to 55 days in 2024, effectively managing procurement delivery times to meet production needs[25]. - The Chengdu factory, established at the end of 2022, has increased production efficiency and capacity to enhance profitability in the automotive display business[25]. - The company maintains a light asset model, leveraging existing production and R&D capabilities to meet market demand with moderate investment[41]. - The company is focused on optimizing supply chain management and enhancing quality control processes to improve overall operational efficiency and customer trust[92]. - The company has implemented various measures to enhance environmental performance, including energy management systems and regular maintenance of equipment to ensure operational efficiency[156]. Sustainability Initiatives - The company is committed to developing green energy resources to effectively reduce carbon emissions and respond to national carbon neutrality policies[179]. - The company has implemented photovoltaic power generation projects in its factories to mitigate climate change risks and enhance sustainable development strategies[141]. - The company encourages employees to use public transportation and direct flights to reduce carbon emissions during business travel[142]. - The company has seen a reduction in direct carbon equivalent emissions to 11,138.60 tons for the Heyuan plant in 2024, with a revenue impact of 828.21 million HKD[145]. - The company has implemented rigorous internal controls to ensure that all related party transactions comply with listing rules and are conducted on fair terms[133]. - The company actively participates in environmental initiatives, such as Earth Hour, to promote energy conservation awareness[191]. - The factory encourages employee participation in environmental activities, fostering a culture of sustainability[192].

Core Viewpoint - The automotive display panel market is expected to grow significantly in 2024, with domestic companies making notable advancements in a competitive landscape [1] Group 1: Market Performance - In 2023, global automotive display panel shipments reached 230 million units, a year-on-year increase of 8.5% [1] - Chinese manufacturers accounted for 51.7% of global shipments, with BOE leading at 40.9 million units and a market share of 17.6% [1] Group 2: Company Financials - BOE Technology Group's subsidiary, BOE Precision Electronics, reported a revenue of HKD 13.449 billion (approximately RMB 12.572 billion) for 2024, a 25% increase year-on-year [1] - The net profit attributable to shareholders was HKD 391 million [1] Group 3: Business Segments - The automotive display business generated HKD 12.66 billion in revenue for 2024, a 30% increase, constituting about 94% of total revenue [2] - The system business is emerging as a new growth point, focusing on smart display systems and intelligent cockpit systems, with significant revenue growth [2] Group 4: Strategic Initiatives - BOE Precision Electronics has implemented a "three-step" strategy in the intelligent cockpit sector, evolving from display components to complete cockpit solutions [3] - The company aims to transition from a secondary operator to a primary operator in the smart cockpit screen system business [3] Group 5: Future Outlook - The global automotive display panel market is projected to grow at a rate of 5.4%, reaching 250 million units by 2025 [5] - The company plans to enhance its overseas market contributions, targeting over 50% of its revenue from international markets [4]

Core Viewpoint - 京东方精电's revenue for 2024 reached HKD 134.49 billion, a 25% increase from HKD 107.6 billion in 2023, driven primarily by the growth in automotive display screen business, which accounted for approximately 94% of total revenue [1] Group 1: Financial Performance - The automotive display screen business generated revenue of HKD 126.6 billion, reflecting a 30% year-on-year increase [1] - Revenue from the China region was approximately HKD 83.5 billion, a 35.3% year-on-year growth, representing 62% of total revenue [2] - Overseas revenue was about HKD 50.98 billion, showing an 11.1% year-on-year increase, accounting for 38% of total revenue [2] Group 2: Business Strategy and Growth Areas - The company is focusing on smart display systems, advanced display systems, and intelligent cockpit systems as new growth points, with significant revenue increases in these areas [2] - 京东方精电 plans to invest no less than RMB 1 billion from 2025 to 2027 to enhance AI applications and strengthen competitive barriers in the automotive sector [3] - The industrial and other display screen business generated revenue of HKD 7.89 billion, representing 6% of total revenue, with significant market opportunities identified [3] Group 3: Market Position and Future Outlook - 京东方精电 holds the largest market share in the TFT automotive display market, particularly in shipments of 8-inch and larger displays [2] - The company aims to expand its automotive display business and solidify its market leadership through a three-step development strategy [4] - There is a focus on diversifying into industrial and other display screen applications, leveraging existing resources to capture global opportunities [4]

Financial Performance - The company reported revenue of HKD 13,449 million for the fiscal year 2024, an increase of 25% compared to HKD 10,760 million in 2023[5]. - EBITDA for the year was HKD 686 million, a decrease of 11% from HKD 771 million in the previous year, resulting in an EBITDA margin of approximately 5.1%[7]. - Shareholders' profit attributable to the company was HKD 391.3 million, down 18% from HKD 475.3 million in 2023, primarily due to reduced government subsidies[6]. - Operating profit decreased to HKD 437,453 thousand, down 23.2% from HKD 569,723 thousand in the previous year[63]. - Net profit for the year was HKD 401,585 thousand, a decline of 16.6% from HKD 481,081 thousand in 2023[64]. - Total comprehensive income for the year was HKD 336,242 thousand, down 26.0% from HKD 454,187 thousand in 2023[64]. - Basic earnings per share decreased to 49.6 cents from 60.4 cents, reflecting a 17.5% drop[63]. Revenue Breakdown - The automotive display business generated revenue of HKD 12,660 million, a 30% increase from HKD 9,710 million in 2023, accounting for approximately 94% of total revenue[9]. - Revenue in China reached HKD 8,350,000,000, representing a 35% increase compared to the same period in 2023, accounting for 62% of total revenue[50]. - Revenue from the China market was HKD 8,349,868,000, up 35.3% from HKD 6,173,725,000 in the previous year[76]. - Revenue in the Americas reached HKD 838,000,000, representing an increase of approximately 47% year-over-year, driven by orders from multiple automotive clients[58]. - Revenue in Japan increased by approximately 50% to HKD 1,157,000,000, contributing about 9% to total revenue, attributed to orders from automotive clients[60]. - Revenue in South Korea grew by approximately 24% to HKD 376,000,000, accounting for about 3% of total revenue, primarily from in-vehicle display business[62]. - The group achieved revenue of HKD 2,444,000,000 in Europe, a decrease of approximately 4% compared to 2023, accounting for about 18% of total revenue[55]. Cash and Assets Management - The company maintained a strong cash position with total cash resources of HKD 4,122 million as of December 31, 2024, up from HKD 3,572 million at the end of 2023[5]. - The company's bank loans decreased by 39% to HKD 376 million from HKD 620 million at the end of 2023, reflecting effective working capital management[5]. - Non-current assets increased to HKD 2,269,640 thousand, up from HKD 1,936,645 thousand in 2023, representing a growth of 17.2%[65]. - Current assets totaled HKD 9,195,302 thousand, an increase of 13.6% from HKD 8,097,225 thousand in the previous year[66]. - Total liabilities increased to HKD 6,499,601 thousand, up from HKD 5,022,791 thousand, indicating a rise of 29.4%[66]. - The company's net assets increased to HKD 4,600,495 thousand, compared to HKD 4,409,711 thousand in 2023, reflecting a growth of 4.3%[66]. Strategic Initiatives - The company has established strategic partnerships with leading new energy vehicle manufacturers in China to enhance its automotive display business[9]. - The company aims to improve profitability by reducing production and operational costs while enhancing product quality and supply chain management[7]. - The company is actively seeking emerging market demands and establishing overseas production bases to mitigate potential impacts from tariffs and geopolitical tensions[18]. - The company is focusing on strategic partnerships with leading automotive manufacturers to optimize product dimensions and enhance R&D and quality systems[21]. - The company is actively exploring overseas acquisition opportunities and establishing international production bases to meet diverse supply chain needs[22]. - The group is implementing strategies including overseas acquisitions and talent development to meet international customer demands[59]. Research and Development - R&D expenditure increased from HKD 237 million in 2023 to HKD 284 million in 2024, with R&D personnel growing from approximately 410 to 450[30]. - The company is increasing investments in R&D to maintain its competitive edge in AI and smart cockpit technologies[24]. - The company has introduced the first integrated display group standard for smart cockpits in the Chinese market in 2024, showcasing its technological expertise and industry leadership[23]. - The company plans to enhance operational efficiency at the Chengdu factory to avoid potential inventory surplus and losses[18]. - The company plans to complete the prototype development of the far-field light field display technology by the first half of 2025, enhancing in-car entertainment experiences[38]. Market Trends and Outlook - New energy vehicle production and sales in China increased by 34.4% and 35.5% year-on-year, reaching 12.9 million units, highlighting the sector's growth potential[16]. - The penetration rate of new energy vehicles in China has exceeded 50%, indicating a shift towards AI, advanced display technology, and large screen functionalities in the automotive industry[21]. - The global automotive display module market is projected to grow with a compound annual growth rate (CAGR) of 3.05% for total shipments, 7.16% for medium and large size shipments (8 inches and above), and 17.24% for oxide and LTPS shipments over the next three years[19]. - The company is strategically positioned to capture the growing new energy vehicle market, with a projected growth rate of approximately 24% in 2025[51]. Quality and Compliance - The company established a Quality Management Committee (QCC) in 2024 to enhance quality control and ensure consistent supplier performance monitoring[12]. - The company received TISAX AL2 certification and ISO/IEC 27001 certification, highlighting advancements in information security management[29]. - The audit committee is responsible for reviewing the group's financial information and risk management systems, ensuring transparency and accountability[108]. - The investment committee is tasked with identifying and selecting suitable investment projects to enhance and transform the group's strategy[111]. Shareholder Returns - The company’s dividend policy remains unchanged, proposing a final dividend of HKD 0.17 per share, down from HKD 0.19 per share in 2023, with a payout ratio of 34%[8]. - Proposed final dividend of HKD 134,568 thousand, down from HKD 150,399 thousand in the previous year, a decrease of 10.5%[63].

Financial Performance - Revenue for the first half of 2024 reached HKD 6,157 million, an 18% increase compared to HKD 5,210 million in the same period of 2023[12] - EBITDA for the first half of 2024 was HKD 315 million, a 3% decrease compared to HKD 324 million in the same period of 2023[12] - Net profit attributable to shareholders for the first half of 2024 was HKD 172.1 million, a 15% decrease compared to the same period of 2023[12] - Revenue increased by 18% to HKD 6,157,000,000 in the first half of 2024 compared to the same period in 2023, driven by growth in TFT products, touch screen display modules, and automotive system products[41] - Operating profit decreased by 20% to HKD 194,000,000 in the first half of 2024, impacted by price adjustments, inventory costs, and increased operational expenses[41] - Net profit attributable to shareholders for the first half of 2024 was HKD 172,100,000, a decrease from HKD 202,500,000 in the same period in 2023[42] - Revenue for the first half of 2024 increased to HKD 6,157,319 thousand, up 18.2% from HKD 5,210,217 thousand in the same period of 2023[126] - Operating profit for the first half of 2024 decreased to HKD 193,651 thousand, down 19.6% from HKD 240,842 thousand in the same period of 2023[126] - Net profit attributable to shareholders for the first half of 2024 was HKD 172,100 thousand, down 15.0% from HKD 202,512 thousand in the same period of 2023[126] - Basic earnings per share for the first half of 2024 decreased to 21.9 HK cents, down 15.1% from 25.8 HK cents in the same period of 2023[126] - Total comprehensive income for the first half of 2024 was HKD 151,601 thousand, up 10.5% from HKD 137,155 thousand in the same period of 2023[129] - Net profit for the period was HK$172.1 million, contributing to a total comprehensive income of HK$148.324 million[135] - Total equity increased to HK$4,416.822 million as of June 30, 2024, up from HK$4,409.711 million at the beginning of the year[135] - Cash flow from operating activities improved significantly to HK$794.963 million, compared to a negative HK$380.197 million in the same period last year[138] - Net cash used in investing activities increased to HK$1,176.791 million, primarily due to purchases of property, plant, and equipment (HK$436.052 million) and other financial assets (HK$472.154 million)[138] - Cash and cash equivalents decreased by HK$410.638 million, ending at HK$3,074.364 million as of June 30, 2024[138] - Bank loans received amounted to HK$221.64 million, while repayments of bank loans totaled HK$229.708 million[138] - The company paid HK$149.66 million in dividends approved from the previous year[135] - Other comprehensive loss for the period was HK$23.776 million, mainly due to exchange rate fluctuations[135] - The company repurchased shares worth HK$4.731 million under the share incentive plan[135] - Interest received during the period was HK$58.957 million, an increase from HK$46.873 million in the previous year[138] - Total consolidated revenue increased to HKD 6,157.32 million in the first half of 2024, up from HKD 5,210.22 million in the same period of 2023[144] - Government subsidies decreased to HKD 16.328 million in 2024 from HKD 47.783 million in 2023, a significant drop of 65.8%[149] - Interest income from financial assets at amortized cost increased to HKD 58.067 million in 2024 from HKD 48.065 million in 2023, a growth of 20.8%[149] - Net exchange gains decreased to HKD 13.513 million in 2024 from HKD 16.440 million in 2023, a decline of 17.8%[149] - Total other income decreased to HKD 94.770 million in 2024 from HKD 118.568 million in 2023, a reduction of 20.1%[149] - Current tax expense in Hong Kong increased to HKD 15.441 million in 2024 from HKD 6.317 million in 2023, a significant rise of 144.4%[150] - Current tax expense in China increased to HKD 28.103 million in 2024 from HKD 15.730 million in 2023, a growth of 78.6%[150] - Basic earnings per share decreased to HKD 0.219 in 2024 from HKD 0.258 in 2023, a decline of 15.1%[152] - Diluted earnings per share decreased to HKD 0.218 in 2024 from HKD 0.257 in 2023, a decline of 15.2%[153] - Additions to property, plant, and equipment increased to HKD 414.277 million in 2024 from HKD 343.258 million in 2023, a growth of 20.7%[155] - Trade receivables and bills receivable increased to HKD 2.529 billion in 2024 from HKD 2.211 billion in 2023, a growth of 14.4%[157] - Inventory write-down decreased to HK$53.3 million in H1 2024 from HK$92.3 million in H1 2023, with a reversal of HK$12.5 million recognized in profit or loss[159] - Cash and cash equivalents decreased to HK$3.07 billion as of June 30, 2024, compared to HK$3.50 billion as of December 31, 2023[160] - Trade payables and other payables increased to HK$4.24 billion as of June 30, 2024, from HK$3.81 billion as of December 31, 2023[162] - No interim dividend was declared for H1 2024, compared to HK$0 in H1 2023[165] - Final dividend for the previous fiscal year was HK$149.7 million, down from HK$181.0 million in H1 2023[166] - Fair value of financial assets measured at Level 2 was HK$405.8 million, while Level 3 assets were valued at HK$41.9 million as of June 30, 2024[168] - The company repurchased 1,000,000 shares for the share award plan at a total cost of HK$4.7 million in H1 2024[164] - Restricted bank deposits decreased to HK$41.6 million as of June 30, 2024, from HK$55.9 million as of December 31, 2023[160] - No share option plan was active during H1 2024, following the expiration of the previous plan in June 2023[163] - Trade receivables and notes are generally due within 60 to 90 days from the invoice date[158] Cash and Liquidity - Cash resources as of June 30, 2024, totaled HKD 3,944 million, an increase from HKD 3,572 million at the end of 2023[12] - Bank loans as of June 30, 2024, amounted to HKD 607 million, a 2% decrease from HKD 620 million at the end of 2023[12] - The company maintains a strong cash position with net cash status, supported by strict working capital management[12] - Total assets reached HKD 10,808,000,000 as of June 30, 2024, with a 7% decrease in inventory to HKD 1,803,000,000 due to effective inventory management[41] - The company's liquidity investment portfolio increased to HKD 3,944,000,000, with cash and term deposits totaling HKD 3,496,000,000[43] - Inventory turnover ratio improved to 6 times, up from 5 times at the end of 2023, reflecting better inventory management[43] - Cash flow from operating activities was HKD 795,000,000, compared to a cash outflow of HKD 380,000,000 in 2023[46] - Net cash used in investing activities was HKD 1,177,000,000, including HKD 436,000,000 for the purchase of property, plant, and equipment[46] - The company's bank loans decreased to HKD 607,000,000, with a debt-to-asset ratio of 13.7%, down from 14.1% at the end of 2023[43][46] - Cash and cash equivalents as of June 30, 2024, were HKD 3,074,000,000, with RMB-denominated cash decreasing to HKD 1,591,000,000[44][45] - The company's foreign exchange risk is primarily managed through operations, with no financial instruments used for hedging[46] - The company's bank loans increased to HKD 202.677 million as of June 30, 2024, secured by land, buildings, and machinery[49] - The company's outstanding capital commitments decreased to HKD 161 million as of June 30, 2024, down from HKD 346 million at the end of 2023[49] - Total assets as of June 30, 2024, increased to HKD 8,572,255 thousand, up 5.9% from HKD 8,097,225 thousand as of December 31, 2023[131] - Cash and cash equivalents as of June 30, 2024, decreased to HKD 3,074,364 thousand, down 12.2% from HKD 3,500,760 thousand as of December 31, 2023[131] - Total equity attributable to shareholders as of June 30, 2024, was HKD 4,357,429 thousand, up 0.1% from HKD 4,353,595 thousand as of December 31, 2023[131] - Total equity increased to HK$4,416.822 million as of June 30, 2024, up from HK$4,409.711 million at the beginning of the year[135] - Cash flow from operating activities improved significantly to HK$794.963 million, compared to a negative HK$380.197 million in the same period last year[138] - Net cash used in investing activities increased to HK$1,176.791 million, primarily due to purchases of property, plant, and equipment (HK$436.052 million) and other financial assets (HK$472.154 million)[138] - Cash and cash equivalents decreased by HK$410.638 million, ending at HK$3,074.364 million as of June 30, 2024[138] - Bank loans received amounted to HK$221.64 million, while repayments of bank loans totaled HK$229.708 million[138] - The company paid HK$149.66 million in dividends approved from the previous year[135] - Other comprehensive loss for the period was HK$23.776 million, mainly due to exchange rate fluctuations[135] - The company repurchased shares worth HK$4.731 million under the share incentive plan[135] - Interest received during the period was HK$58.957 million, an increase from HK$46.873 million in the previous year[138] - Cash and cash equivalents decreased to HK$3.07 billion as of June 30, 2024, compared to HK$3.50 billion as of December 31, 2023[160] - Restricted bank deposits decreased to HK$41.6 million as of June 30, 2024, from HK$55.9 million as of December 31, 2023[160] - No share option plan was active during H1 2024, following the expiration of the previous plan in June 2023[163] - Trade receivables and notes are generally due within 60 to 90 days from the invoice date[158] Business Strategy and Market Position - The company is a global leader in automotive TFT display products and medium-to-large display module markets[4] - The company aims to become a leading provider of automotive smart cockpit display assembly solutions[4] - The company's revenue growth was primarily driven by the sales increase in TFT modules, touch screen display modules, and automotive system products, benefiting from the significant growth in new energy vehicles and new production capacity[13] - TFT modules and touch screen display modules accounted for approximately 93% of the company's revenue, while monochrome display revenue decreased during the period[13] - The automotive display business generated revenue of 5,752,000,000 HKD, a 24% increase compared to 4,646,000,000 HKD in the same period last year, accounting for 93% of the company's total revenue[15] - The industrial display business recorded revenue of 406,000,000 HKD, a 28% decrease compared to 564,000,000 HKD in the same period last year, accounting for 7% of the company's total revenue[17] - The company's overseas revenue remained stable, with positive growth in the US due to strategic investments in R&D and enhanced customer service capabilities[16] - The company established a new office in Nagoya, Japan, which contributed to significant revenue growth in the region[16] - The company implemented comprehensive quality control measures, including the establishment of a Quality Management Committee (QCC) in 2024, to enhance quality management and win more customer trust[16] - The Chengdu facility, established at the end of 2022, is leveraging advanced production equipment to meet market demand and improve operational efficiency for the automotive display business[16] - The company is focusing on improving production, R&D, and customer service capabilities to support rapid business growth[22] - LCD remains the primary solution due to its cost competitiveness compared to OLED, with advanced technologies expected to be applied in the future[23] - The company plans to leverage its major shareholder's new 8.6-generation OLED production line in Chengdu to enhance competitiveness[23] - The automotive market is rapidly consolidating around top new energy vehicle manufacturers, expected to create additional revenue and profit opportunities[23] - The company is exploring the establishment of overseas production facilities to meet diverse customer needs, with capital expenditures to be gradually invested based on order volumes[23] - The company is focusing on expanding its automotive display business and maintaining its leading position, with a clear short-term and long-term strategy, including the "Three-Step Development Strategy" to consolidate its automotive display equipment business and explore opportunities in smart cockpit solutions[26] - The company has successfully developed and mass-produced a 14.6-inch QHD Oxide display product, and showcased a 45-inch 9K ultra-large Oxide cockpit screen at SID 2024, with several other Oxide display products under development[32] - The company's "HERO" plan, targeting smart automotive applications, includes health, entertainment, relaxation, and office scenarios, aiming to integrate more innovative products and solutions into vehicle designs[28] - The company has made significant progress in enhancing internal competitiveness and ensuring sufficient cash and resource reserves to support rapid expansion, while maintaining a light-asset model by leveraging existing production capacities of BOE Technology Group[26] - The company is committed to sustainability, with goals to reduce carbon emissions, energy and water consumption, and waste by 2025, and aims to achieve carbon neutrality by 2050[26] - The company's ADS-Pro technology, which combines Mini LED, BD Cell, high refresh rate, high resolution, and high color gamut, has gained recognition from major automotive manufacturers[33] - The company has developed f-OLED technology, with several automotive f-OLED displays already in mass production, and is working on Tandem OLED technology for higher efficiency and longer lifespan[34] - The company has overcome challenges in curved display solutions, with a dual 12.3-inch curved (R3000) cockpit display module already in mass production[35] - The company has developed a ~5K ultra-high-definition display with naked-eye 3D capabilities, integrated into driver monitoring systems for immersive 3D display interfaces[35] - The company is collaborating with global partners to create more smart cockpit experiences, leveraging its deep technical expertise and innovation in the automotive industry[28] - The company completed the development of a CMS system, becoming the first in China to pass the GB15084 national standard test for Class III indirect vision devices[40] - The company is developing a switchable 2D&3D technology for automotive displays, expected to be evaluated and promoted in Q4 2024[38] - The company has developed a new AR-HUD system using a 3.6-inch LCD PGU and LCoS technology, with 34 patents applied[38] - The company is advancing directional sound technology, integrating it with displays for applications in automotive, business, and entertainment scenarios[39] - The company has developed a BVP (BOE Vision Plus) image enhancement technology, improving image clarity and detail using a dedicated image processing chip[40] - The company is preparing for mass production of a rotating structure assembly for rear ceiling and seatback screen projects[40] - The company has established a dividend policy with a payout ratio of no less than 30%, subject to profitability and financial conditions[41] - R&D expenses for the period were HKD 138,000,000, accounting for 2% of the company's revenue, maintaining a stable ratio[42] - Total equity as of June 30, 2024, was HKD 4,417,000,000, with a current ratio of 1.49, down from 1.61 at the end of 2023[42] - The company's liquidity investment portfolio increased to HKD 3,944,000,000, with cash and term deposits totaling HKD 3,496,000,000[43] - Inventory turnover ratio improved to 6 times, up from 5 times at the end of 2023, reflecting better inventory management[43] - Cash flow from operating activities was HKD 795,000,000, compared to a cash outflow of HKD 380,000,000 in 2023[46] - Net cash used in investing activities was HKD

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Viewpoints - The company has solidified its leading position in the global automotive display market, with significant growth in overseas markets and Tier 1 business [1] - Revenue for 1H24 reached HKD 6.157 billion, an 18% YoY increase, driven by strong domestic customer orders and overseas market expansion [1] - Automotive display revenue grew 24% YoY to HKD 5.752 billion, while industrial display revenue declined 28% YoY to HKD 406 million [1] - Net profit attributable to shareholders decreased by 15% YoY to HKD 172.1 million, with a net profit margin of 2.79% [1] - The company's global market share in automotive TFT displays increased to 17.6%, with a 21.1% share in large and medium-sized (≥8 inch) displays [1] - OLED product revenue doubled in 1H24, and LTPS products saw a 15%+ market share increase in China [1] - The company's gross margin improved from 9.1% in 1H23 to 11.4% in 1H24, driven by increased capacity utilization at the Chengdu base [1] - The company is accelerating its overseas business, with double-digit growth in revenue and ASP in overseas markets, and securing orders from international brands like Toyota and Hyundai [1] - The company has established a new overseas intelligent automotive solutions BG and is building a production base in Vietnam, expected to be operational by 2025 [1] Financial Performance - Revenue for 2024E is projected at HKD 12.411 billion, with a 15.3% YoY growth [2] - Net profit attributable to shareholders for 2024E is forecasted at HKD 388 million, a 31.1% YoY increase [2] - EPS for 2024E is estimated at HKD 0.49, with a P/E ratio of 9 [2] - The company's total assets are expected to reach HKD 9.567 billion in 2024E, with total liabilities at HKD 4.906 billion [5] - Operating cash flow for 2024E is projected at HKD 1.463 billion, with free cash flow at HKD 974 million [6] Market Data - The company's total market capitalization is HKD 3.388 billion, with a total share capital of 792 million shares [3] - The stock price range over the past year was HKD 4.02 to HKD 8.74 [3] - The 3-month turnover rate is 15.3% [3] Industry and Company Outlook - The company is expected to benefit from the easing of price wars among domestic automakers, with product price pressures likely to ease in 2H24 [1] - The company's Tier 1 business and overseas operations are expected to continue driving growth, supported by its parent company BOE Group's technological and cost advantages [1] - The company's long-term development logic remains clear, with potential for further profitability improvement as new production lines ramp up [1]

Financial Performance - The company reported revenue of HKD 6,157 million for the six months ended June 30, 2024, an increase of 18% compared to HKD 5,210 million for the same period in 2023[3]. - EBITDA for the same period was HKD 315 million, a decrease of 3% from HKD 324 million in the previous year, resulting in an EBITDA margin of approximately 5.1%[5]. - Shareholders' profit attributable to the company was HKD 172.1 million, down 15% from HKD 202.5 million in the prior year[3]. - Total revenue for the six months ended June 30, 2024, was HKD 6,157,319, representing a 18.2% increase from HKD 5,210,217 for the same period in 2023[40]. - Operating profit decreased to HKD 193,651, down 19.6% from HKD 240,842 in the prior year[40]. - Net profit for the period was HKD 175,377, a decrease of 13.2% compared to HKD 202,043 in the same period last year[41]. - Basic earnings per share decreased to 21.9 cents from 25.8 cents year-on-year[40]. - Total comprehensive income for the period was HKD 151,601, compared to HKD 137,155 in the previous year, reflecting an increase of 10.5%[42]. Cash and Liabilities - The company maintained a strong cash position with total cash resources of HKD 3,944 million as of June 30, 2024, up from HKD 3,572 million at the end of 2023[4]. - The company has reduced bank loans to HKD 607 million, down 2% from HKD 620 million at the end of 2023, with HKD 432 million classified as long-term loans[4]. - Total liabilities increased to HKD 5,753,095 from HKD 5,022,791, reflecting a rise in financial obligations[44]. - The company's equity increased slightly to HKD 4,416,822 from HKD 4,409,711, indicating stable financial health[44]. - The group’s bank loan balance as of June 30, 2024, was HKD 607,000,000, slightly down from HKD 620,000,000 as of December 31, 2023[72]. Revenue by Region - Revenue in China reached HKD 4,666,000,000, an increase of approximately 26% compared to the same period in 2023, accounting for 76% of total revenue[33]. - Revenue in Europe decreased by approximately 13% to HKD 667,000,000, representing about 11% of total revenue, impacted by geopolitical conflicts and economic downturns[34]. - Revenue in the Americas increased by approximately 25% to HKD 440,000,000, contributing about 7% to total revenue, driven by strategic investments in R&D and enhanced customer service[35]. - Revenue in South Korea decreased by approximately 10% to HKD 153,000,000, accounting for about 2% of total revenue, primarily due to reduced marketing efforts by customers[36]. - Revenue in Japan increased by approximately 13% to HKD 40,000,000, representing about 1% of total revenue, attributed to successful project production and advanced product technology development[37]. Business Segments - The automotive display business generated revenue of HKD 5,752 million, a 24% increase from HKD 4,646 million in the same period last year, accounting for approximately 93% of total revenue[7]. - The industrial display business recorded revenue of HKD 406 million, a decrease of approximately 28% compared to HKD 564 million in the same period of 2023, accounting for about 7% of the group's total revenue[10]. Strategic Initiatives - The company is focusing on enhancing quality management through the establishment of a Quality Management Committee (QCC) to ensure consistent supplier performance monitoring[8]. - The company plans to continue exploring new applications in the automotive sector to drive additional growth[7]. - The company plans to enhance production, R&D, and customer service capabilities while exploring the need for overseas production facilities to meet diverse customer demands[15]. - The company is focused on expanding its automotive display business and has established a clear short-term and long-term strategic goal to maintain its leading position in the market[17]. - The company is actively exploring new automotive applications for its products, including agricultural vehicles, to drive future growth[35]. Technology and Innovation - The company launched the "HERO" plan in 2023, focusing on creating diverse smart cockpit experiences, including health, entertainment, relaxation, and office scenarios[19]. - The company has successfully mass-produced a dual 12.3-inch curved display module, overcoming challenges related to automotive reliability and mechanical durability[24]. - The company is actively developing a new far-field light field display technology to enhance in-car entertainment experiences by providing a large screen display with reduced visual fatigue[27]. - The company is working on a switchable privacy display technology (POD) to enhance driver safety and prevent distractions from passenger displays, with evaluations expected to complete in Q4 2024[29]. Market Trends - The global automotive display module market is projected to have a compound annual growth rate (CAGR) of 4.34% over the next three years, with larger displays (8 inches and above) expected to grow at 7.98% and oxide and LTPS displays at 20.40%[14]. - The automotive display market is experiencing significant growth, driven by the demand for smart cockpit applications, with increased adoption of next-generation displays in various scenarios[19]. - The geopolitical tensions and high inflation have created challenges for the global economy, impacting consumer demand for automobiles, particularly in Europe and the U.S.[11]. Corporate Governance - The company has adopted a code of conduct for securities trading by employees, revised on July 24, 2024, which meets or exceeds the standards set by the listing rules[78]. - The audit committee is responsible for reviewing the financial information of the group and ensuring effective internal controls and risk management systems[78]. - The investment committee is tasked with identifying and selecting suitable investment projects to enhance and transform the group's strategy[81]. - The company has complied with the corporate governance code as per the listing rules as of June 30, 2024[76].

Investment Rating - The report maintains a "BUY" rating for BOE Varitronix, with a target price of HK$9.9, indicating a potential upside of 121% from the current price of HK$4.47 [12][11][5]. Core Insights - The company is expected to report a 15% year-on-year revenue growth in 1H24, driven by high-end displays, overseas client orders, and the ramp-up of the Chengdu plant. However, net profit is projected to decline by 16% year-on-year [2][11]. - For 2H24, revenue and net profit are anticipated to improve due to order seasonality, a better product mix, and rising utilization rates [2][11]. - The report highlights BOE Varitronix's leadership in the global auto display market, with expectations for ASP and margin recovery in the second half of the year [2][11]. Financial Summary - Revenue is projected to grow from HK$10,760 million in 2023 to HK$12,873 million in 2024, and further to HK$15,561 million in 2025, reflecting a compound annual growth rate [14]. - Net profit is expected to recover from HK$401 million in 2024 to HK$519 million in 2025, and HK$623 million in 2026 [14]. - The operating margin is forecasted to improve slightly from 3.9% in 2024 to 4.0% in 2025 and 4.2% in 2026 [14]. Market Position and Strategy - BOE Varitronix remains the global number one auto display supplier in terms of total and medium- to large-size shipments as of 2Q24 [2]. - The company is focusing on expanding its overseas market presence, with a target for overseas sales to reach 50% by FY26E [2][11]. - The Chengdu plant is noted as the world's largest and most advanced auto display module facility, currently operating at full capacity, which is expected to enhance profitability in 2H24 [2][11].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 9.90, reflecting a potential upside of 121.6% from the current price of HKD 4.47 [2][9][10]. Core Insights - The company is expected to see a revenue increase of 15% year-on-year in 1H24, driven by high-end display orders and a surge in overseas customer demand, despite a projected net profit decline of 16% [2][3]. - For 2H24, improvements in revenue and net profit are anticipated due to seasonal orders, better product mix, and increased utilization rates [2][3]. - The automotive display market share is growing, with the company remaining the largest global supplier in this segment [2][3]. - The management has reiterated its guidance for overseas sales to reach 50% of total sales by FY26, emphasizing the importance of high-end automotive display products [2][3]. Financial Summary - Revenue is projected to grow from HKD 10,760 million in FY23 to HKD 12,873 million in FY24, representing a year-on-year growth rate of 19.6% [3][12]. - Net profit is expected to decline from HKD 475.3 million in FY23 to HKD 400.9 million in FY24, with a year-on-year decrease of 15.7% [3][12]. - The company’s earnings per share (EPS) is forecasted to decrease from HKD 0.60 in FY23 to HKD 0.51 in FY24 [3][12]. Valuation Metrics - The new target price is based on a price-to-earnings (P/E) ratio of 15x for FY25E, compared to the previous P/E of 15x for FY24E [2][9]. - The company is currently trading at P/E ratios of 8.8x for FY24E and 6.8x for FY25E, indicating attractive valuation levels [2][9]. - The price-to-book (P/B) ratio is projected to remain at 0.4 for FY24E and FY25E, suggesting a solid valuation relative to its book value [3][14].