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].

Investment Rating - The report maintains a BUY rating for BOE Varitronix with a target price of HK$10.94, indicating a potential upside of 129.3% from the current price of HK$4.77 [4][9]. Core Insights - Management expects larger and high-end displays to drive sales growth, with a guidance of over 8% year-on-year sales growth, outperforming the industry average of 4% [2][9]. - High-end products are projected to achieve over 200% year-on-year growth, contributing significantly to overall sales in FY24E [2]. - The Chengdu plant is operating at full capacity, producing over 15 million pieces per month, with expectations for a recovery in utilization rates in the second half of FY24E [2][9]. - The net profit margin (NPM) is anticipated to recover in the second half of FY24E due to improved operational efficiency and ASP increases [2][9]. Financial Summary - Revenue is projected to grow from HK$10,760 million in FY23A to HK$11,699 million in FY24E, reflecting an 8.7% year-on-year increase [3][11]. - Net profit is expected to recover from HK$475.3 million in FY23A to HK$573.5 million in FY24E, representing a 20.7% year-on-year growth [3][11]. - The company is trading at a P/E ratio of 6.5x for FY24E, which is below the historical average, suggesting an attractive valuation [9][13]. Operational Highlights - The management highlighted that overseas demand for high-end products is rapidly increasing, contributing to the positive outlook for large displays and high-end products [2]. - The system business is expected to grow over 100% year-on-year in FY24E, with sales contributions projected to exceed 5% in FY24 and 5-10% in FY25E [2]. - The report indicates that the automotive display segment is also showing resilience, with expected growth in both domestic and overseas markets [8].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 10.94, based on a FY24E P/E ratio of 15 times [2][7]. Core Insights - The company is well-positioned to benefit from the ongoing upgrade trends in large and high-end displays, with management projecting an 8% year-over-year sales growth, outperforming the industry average of 4% [2][3]. - The management anticipates over 200% year-over-year growth in high-end products (oxide/LTPS/OLED) contributing significantly to FY24E sales [2][3]. - The company’s system business is expected to achieve over 100% year-over-year growth in FY24E, with sales contributions exceeding 5% in FY24 and 5-10% in FY25 [2][3]. Financial Summary - Revenue is projected to grow from HKD 10,760 million in FY23A to HKD 11,699 million in FY24E, reflecting an 8.7% year-over-year increase [3][9]. - Net profit is expected to recover to HKD 573.5 million in FY24E, up from HKD 475.3 million in FY23A, indicating a 20.7% year-over-year growth [3][9]. - The company’s EBITDA is forecasted to increase from HKD 771 million in FY23A to HKD 865.7 million in FY24E, representing a 12.3% growth [3][9]. Operational Updates - The Chengdu factory is currently operating at full capacity, producing over 15 million units per month, with expectations for UTR to stabilize in the second half of FY24E [2][3]. - Management noted that the factory has not incurred new depreciation costs and is transitioning to smaller and urgent orders rather than experiencing a demand slowdown [2][3]. Market Position - The company is experiencing rapid growth in overseas demand for high-end products, which is expected to drive ASP increases and NPM recovery [2][3]. - The report highlights the company's leadership in automotive displays and its positive outlook on order wins and overseas expansion [7].

Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 9.06, indicating a potential upside of 47.8% from the current price [2][4]. Core Viewpoints - The company, BOE Technology Group's subsidiary, is a leader in the automotive display market, providing advanced display modules and systems. Despite a challenging 2023 with revenue of HKD 10.76 billion (up 0.4%) and a net profit of HKD 475 million (down 18%), the company maintains a strong market position [1][2]. - The automotive display module market is expected to grow significantly, with global compound annual growth rates of 4.4% for total shipments, 8.35% for medium and large sizes, and 18.16% for oxide and LTPS shipments over the next three years [1]. - The company has a robust technological foundation in high-end products, including the global launch of a 14.6-inch QHD oxide display product, and is entering mass production for several advanced display technologies [1][2]. Summary by Sections Financial Performance - In 2023, the company reported total revenue of HKD 10.76 billion, a slight increase of 0.4% from the previous year. The net profit was HKD 475 million, reflecting a decrease of 18% [5][6]. - Forecasts for 2024 and 2025 predict revenues of HKD 12.06 billion and HKD 13.58 billion, respectively, with net profits expected to rise to HKD 540 million and HKD 615 million [2][5]. Market Position - The company holds the largest market share in global automotive displays, with significant advancements in ultra-large displays and various innovative display technologies [1][2]. - The overseas market presents substantial growth potential, with expectations of double-digit growth as 39 client projects are set to enter mass production in 2024 [1][2]. Production Capacity - The Chengdu automotive display base has a designed annual production capacity of 15 million units and achieved full production in 2023, with a utilization rate of approximately 90% and a yield rate of about 97% [2][5].

Financial Performance - Revenue for 2023 reached HKD 10.76 billion, a 0.4% increase compared to HKD 10.72 billion in 2022[7][9] - EBITDA for 2023 was HKD 771 million, an 8% decrease from HKD 841 million in 2022[7][9] - Net profit attributable to shareholders in 2023 was HKD 475.3 million, an 18% decline from HKD 582.5 million in 2022[7][9] - Cash and term deposits balance as of December 31, 2023, stood at HKD 3.501 billion, up from HKD 2.881 billion at the end of 2022[7][9] - Bank loans decreased by 7% to HKD 620 million in 2023, with HKD 383 million being long-term loans primarily for capital expenditures[9] - Net profit attributable to shareholders decreased by HKD 107.2 million, down 18% year-on-year, primarily due to price adjustments and additional costs from new production facilities[12] - EBITDA decreased by 8% to HKD 771 million, with an EBITDA margin of 7.2%, influenced by depreciation and higher marginal costs[12] - Revenue for the fiscal year ending December 31, 2023, increased by 0.4% to HKD 10,760,000,000, driven by increased production capacity at the new facility in Chengdu and higher sales of TFT and touchscreen display modules[38] - Operating profit for 2023 decreased by 15% to HKD 570,000,000, primarily due to price adjustments, additional costs from the new facility, and higher marginal costs during the optimization phase[39] - Net profit attributable to shareholders decreased to HKD 475,000,000 in 2023 from HKD 582,000,000 in 2022, with basic earnings per share dropping to 60.4 HK cents from 78.4 HK cents[41] - The company proposed a final dividend of 19.0 HK cents per share, totaling HKD 150,000,000 for the year[41] - Cash and cash equivalents increased to HKD 3,501,000,000 in 2023 from HKD 2,819,000,000 in 2022, with significant holdings in RMB and USD[44][45] - The company's debt-to-equity ratio decreased to 14.1% in 2023 from 16.2% in 2022, reflecting efforts to reduce operational risks[42] - Cash flow from operating activities rose to HKD 1,307,000,000 in 2023 from HKD 834,000,000 in 2022, driven by optimized working capital management[43] - Net cash used in investing activities was HKD 224,000,000 in 2023, down from HKD 1,170,000,000 in 2022, with HKD 502,000,000 spent on property, plant, and equipment[43] - The company completed the use of HKD 798,800,000 raised from share placements and shareholder subscriptions, allocated to factory construction, equipment procurement, and working capital[46][47] - The company's bank loans decreased to HKD 620,000,000 in 2023 from HKD 667,000,000 in 2022, with a mix of fixed and floating interest rates[48] - Bank loans of HKD 171,044,000 were secured by land, buildings, plant, machinery, and equipment of a subsidiary, with the pledge agreement expected to take effect in 2024 after registration[49] - The group's outstanding capital commitments not provided in the financial statements amounted to HKD 346,000,000 as of December 31, 2023, down from HKD 905,000,000 in 2022[50] - Total assets increased to HKD 10,034,000,000 in 2023, up from HKD 8,283,000,000 in 2022, driven by new factory completion and higher cash and fixed deposits[40] - Inventory rose by 24% to HKD 1,947,000,000 in 2023, compared to HKD 1,568,000,000 in 2022, due to increased production capacity from the new factory[40] - The Board of Directors proposed a final dividend of 19.0 HK cents per share for 2023, with a total annual dividend of 19.0 HK cents per share, down from 23.0 HK cents in 2022[184] - The company maintains a stable dividend policy with a payout ratio of no less than 30%, subject to review and based on profits, cash flow, financial condition, and capital requirements[184] Market Position and Business Strategy - The company maintains a leading global market share in automotive TFT display products and medium-to-large display modules[3] - The company celebrated its 45th anniversary, highlighting a history of innovation and growth in the automotive and industrial display sectors[3] - The company aims to become a leading provider of automotive smart cockpit display assembly solutions[3] - The company is part of the BOE Group, focusing on automotive and industrial display solutions, and is the only automotive display and system operation platform within the group[3] - The company's vision includes expanding its impact and delivering more value to customers and communities[3] - Group revenue growth driven by increased TFT and touch panel display module production capacity, with TFT and touch panel display modules accounting for 91% of total revenue[12] - Automotive display business revenue increased by 1% to HKD 9.71 billion, accounting for 90% of total group revenue[17] - Industrial display business revenue decreased by 8% to HKD 1.05 billion, representing 10% of total group revenue[18] - New production facility in Chengdu increased capacity by over five times in 2023, enhancing production efficiency and supply capabilities[18] - Global automotive display module market expected to grow at a CAGR of 4.40% for total shipments, 8.35% for large and medium-sized displays, and 18.16% for oxide and LTPS technologies over the next three years[19] - The global automotive display system market is expected to reach nearly HKD 100 billion in China by 2026, with the global smart cockpit and smart mobility market projected to reach several hundred billion HKD by the same year[20] - The company maintained its leading market share in global automotive display deliveries, particularly for displays of 8 inches and larger, and received multiple awards from major automakers[20] - China's new energy vehicle (NEV) sales are expected to grow by approximately 21% in 2024, with NEV sales accounting for about 33% of total vehicle sales in 2023, up from 2022[20] - China's NEV sales accounted for approximately 60% of the global market share in 2023, driven by the world's largest NEV charging network[20] - The company anticipates significant growth opportunities in Europe due to the EU's ban on new petrol and diesel cars from 2035, which will drive demand for NEVs and related products[21] - The company's "HERO" project focuses on developing smart cockpit applications for health, entertainment, leisure, and office scenarios, targeting the evolving "third space" concept in vehicles[21] - The company expects China's leading NEV manufacturers to increase their market share globally, with the company already holding a significant portion of the Chinese NEV market[22] - The company is developing innovative products such as large-sized automotive displays, curved displays, and advanced systems like OLED and PHUD (Panoramic Head-Up Display) to enhance competitiveness[22] - The company's PHUD technology is expected to see significant growth, with global shipments projected to reach 500,000 units by 2025 and 7 million units by 2030[22] - The company is expanding its display module applications to various vehicle types, including agricultural vehicles, trucks, and other motor vehicles, to capture new business opportunities[23] - The company continues to develop new technologies to meet market demands, focusing on multi-screen, large-size, high-quality displays, and improved HMI for automotive manufacturers[24] - The company is expanding its automotive system business and emerging businesses like CMS, PHUD, AR-HUD, seat armrest screens, side door screens, rear flip screens, and co-pilot screens[24] - The company is collaborating with leading new energy vehicle manufacturers in China and expanding its system display solutions business overseas[24] - The company is optimizing supply chain management by shifting to lower-cost IC chip suppliers and implementing dual sourcing to maintain quality and cost efficiency[24] - The new factory, operational since 2022, is in the early production phase with higher costs and is focusing on increasing production, improving equipment utilization, enhancing product quality, and reducing production losses[24] - The company aims to improve supply chain management, strengthen product innovation, optimize production efficiency, and enhance product quality in 2024[25] - The company has secured orders for new energy vehicles and is promoting TFT display products to industrial instrument and high-end home appliance customers to expand its industrial display business[26] - The company's products are installed in various high-profile vehicles, including Geely, Aston Martin, and NIO, with advanced display technologies like AMOLED and Mini LED[27] - The company maintains a leading market share as a comprehensive automotive smart cockpit display solution provider, reaching major OEMs and new energy vehicle manufacturers[28] - The company adheres to international quality standards like ISO 9001 and IATF 16949 to meet the demands of both domestic and overseas customers[28] - The company has established competitive advantages in high-quality products, stable supply, cost-effective offerings, and excellent after-sales service[29] - The company is focusing on expanding its automotive display business, maintaining its leading position, and implementing a "three-step development strategy" to explore automotive display systems and smart cockpit solutions[29] - The company launched the "HERO" project in 2023, aiming to create intelligent cockpit experiences in health, entertainment, relaxation, and office scenarios[29] - The company has set ESG goals for 2025, including reducing carbon emissions, energy and water consumption, and hazardous waste[29] - The company has globally launched a 14.6-inch QHD Oxide display product, which is already in mass production, and showcased a 45-inch 9K ultra-large Oxide cockpit screen at CES 2024[30] - The company is developing Tandem OLED technology, which combines high efficiency and long lifespan, and has multiple car-mounted f-OLED displays in mass production[30] - The company has successfully developed a ~5K ultra-high-definition naked-eye 3D display and integrated it into driver monitoring systems for immersive 3D interfaces[30] - The company is advancing ADS-Pro technology, incorporating Mini LED, BD Cell, high refresh rates, high resolution, and wide color gamut for superior display performance[30] - The company has secured multiple projects with renowned automakers for BD Cell and Mini LED displays, demonstrating customer recognition[30] - The company is researching real-time 3D reverse imaging systems with zero latency and exploring multi-viewpoint 3D displays to eliminate eye-tracking systems[30] - The company completed the development of a smart surface material that passed vehicle-grade reliability testing and is now focusing on developing more surface materials with Mini-LED backlighting[31] - The switchable privacy display (POD) technology received positive feedback from Tier-1 clients in 2023, with further improvements planned for 2024, targeting completion in Q4 2024[32] - The company developed a pressure-sensitive touch technology to reduce false touches in outdoor and marine applications, particularly suitable for motorcycle dashboards and marine use[33] - A new knob-touch semi-system for cost-effective solutions like motorcycle dashboards and home appliances completed reliability testing in Q2 2023 and entered the sampling phase in Q4 2023[34] - The company completed the design of a next-generation TFT solution for AR-HUD systems and developed LCoS-based AR-HUD technology, filing 34 patents[35] - The company achieved a milestone by becoming the first in China to pass the GB15084 national standard test for a CMS system, obtaining 3C certification[36] - The company secured a core client for a 17.3-inch rear entertainment ceiling screen and completed the development of a high-performance cockpit domain controller based on the SiEngine platform[36] - The company has a strong presence in the smart cockpit industry, showcasing leading smart cockpit display technology and innovative "HERO" cockpit interactive application scenarios[177] - The company has received multiple awards, including the Harman Best Technology Award, Schneider 2023 Quality Supplier Award, and Zero Run Auto Global Partner Conference Innovation Award[178] - BOE Varitronix Limited participated in various exhibitions and forums, such as CES and the International Automotive Display Summit, promoting new AR-HUD solutions and smart cockpit technologies[179] - The company has strategic collaborations with major automotive companies like Great Wall Motors, Changan Qiyuan, and BYD, focusing on smart cockpit and display innovations[180] ESG and Sustainability - The company has set ESG goals for 2025, including reducing carbon emissions, energy and water consumption, and hazardous waste[29] - The company has committed to achieving carbon neutrality by 2050, with a specific reduction of 2,812.7014 tCO2e in 2023[65] - The company updated and optimized its environmental and social indicator reporting system in 2023 to ensure accurate data collection and reporting[62] - The company conducted a greenhouse gas emissions inventory within its operational control scope and explored pathways to achieve carbon neutrality[65] - The company implemented energy-saving projects and utilized green energy, including the construction of a rooftop photovoltaic power generation project[65] - The company's ESG report for 2023 complies with the "importance," "quantification," "balance," and "consistency" reporting principles[63] - The company's Board of Directors oversees ESG strategy and reporting, with regular reviews of ESG performance and targets[64] - The company held a new regulation training session in June 2023, covering auditor training, new standards, and operational-level consultations[64] - The company's ESG governance and management mechanisms are integrated into its operations to achieve long-term environmental, social, and corporate value[64] - The company's ESG report covers operations in China (including Heyuan and Chengdu) and Hong Kong, which are its core operational locations[59] - The company's Board of Directors conducts at least two ESG communication meetings annually to review and approve ESG strategies and performance[60] - The company has established an ESG risk management team composed of senior management and the finance department, which meets regularly to ensure proper management of ESG risks[66] - The company maintains regular communication with stakeholders through various channels to understand the impact of its activities and their demands[67] - Key stakeholder communication channels include shareholder meetings, annual reports, direct communication, and investor conferences for shareholders/investors, while customers are engaged through direct communication, site visits, and the company website[68] - The company has identified highly important ESG issues, including recruitment and promotion, health and safety, and greenhouse gas emissions, among others[70] - The company emphasizes environmental protection, with emissions and waste treatment policies fully compliant with local regulations and ISO 14001 certification obtained since 2005[75] - The company generated 881.35 units of non-hazardous solid waste, with a recycling rate of 81.91%[76] - The company has a robust risk management and internal control framework based on the "three lines of defense" model, overseen by the board of directors and the audit committee[72] - The company maintains a zero-tolerance policy towards corruption, with strict compliance with anti-corruption laws and regular employee training on ethical behavior[73] - The company ensures all related-party transactions are conducted fairly and transparently, with strict internal controls and regular monitoring to safeguard shareholder interests[74] - The Chengdu factory, covering 151,000 square meters, began mass production in October 2022 and completed environmental protection acceptance in February 2023[77] - The Chengdu factory achieved ISO14001:2015 environmental management system certification in June 2023[77] - Total greenhouse gas emissions at the Heyuan factory decreased from 60,154.81 tons in 2022 to 54,726.43 tons in 2023, a reduction of 9%[78] - Direct CO2 equivalent emissions at the Chengdu factory were 34,652.42 tons in 2023, compared to no data available for 2022[78] - Non-methane total hydrocarbon emissions at the Heyuan factory decreased by 5% from 1.115 tons in 2022 to 1.060 tons in 2023[79] - The Chengdu factory's waste gas collection rate exceeds 90%, with organic waste gas emissions being less than 10% of Sichuan's local emission limits[79] - The Heyuan factory has been using bio-alcohol oil as fuel since December 2018, effectively reducing emissions[79] - Wastewater discharge at the Heyuan factory decreased from 863,197 tons in 2022 to 694,554 tons in 2023, a reduction of 19.5%[78] - Hazardous solid waste at the Chengdu factory was 48.48 tons in 2023, compared to no data available for 2022[78] - The Chengdu factory's natural gas vacuum hot water boiler uses low-nitrogen combustion technology, keeping pollutant concentrations below Chengdu's emission limits[79] - Direct CO2 emissions (Scope 1) from the Heyuan plant increased by 343.95 tons in 2023, reaching 448.75 tons, a 374.66% increase per unit of product compared to 2022[80] - Indirect CO2 emissions (Scope 2) from purchased electricity at the Heyuan plant amounted to 54,277.68 tons in 2023[80] - Total greenhouse gas emissions (Scope 1 and 2) for the Heyuan plant in 2023 were approximately 54,726.43 tons[80] - The Chengdu plant's total greenhouse gas emissions (Scope 1 and 2) in 2023 were approximately 18,483.92 tons, with Scope 1 emissions at 347.64 tons and Scope 2 emissions at 18,136.28 tons[80] - The company plans to purchase 6 million kWh of green electricity in 2024 to promote low-carbon energy[81] - Wastewater discharge at the Heyuan plant decreased by 19.5% in 2023 compared to 2022, totaling approximately 168,600 tons[83] - The Heyuan plant's wastewater treatment facility has a maximum daily treatment capacity of 4,000 m³, with current daily treatment at approximately 2,000 m³[83] - The Chengdu plant does not have an industrial wastewater treatment station as it does not involve toxic or harmful wastewater discharge[83] - The company is implementing ISO 50001 energy management system construction and certification to promote energy conservation and carbon reduction[

Investment Rating - The report maintains a "Buy" rating for BOE Technology Group Co., Ltd. (00710.HK) [2][7] Core Views - The company reported a revenue of HKD 10.8 billion for 2023, a year-on-year increase of 0.4%, while the net profit attributable to shareholders was HKD 480 million, a decrease of 18% [2] - The second half of 2023 saw a revenue of HKD 5.6 billion, down 6% year-on-year, with a net profit of HKD 270 million, also down 18% [2] - The automotive display segment remains a stronghold, with revenue of HKD 9.7 billion, while the industrial display segment generated HKD 1.1 billion, accounting for 90% and 10% of total revenue respectively [2] - The company is expected to transition into a Tier 1 supplier in the automotive sector, with a projected market size of nearly HKD 100 billion by 2026 [2] Financial Summary - Revenue for 2024 is projected to be HKD 11.7 billion, with a growth rate of 9.02%, and net profit is expected to reach HKD 536 million, reflecting a growth rate of 12.69% [5] - The company's P/E ratio is forecasted to be 8, 7, and 6 times for 2024, 2025, and 2026 respectively [2][5] - The return on equity (ROE) is expected to improve gradually from 10.92% in 2023 to 11.99% in 2026 [5][6]