CAIHONG DISPLAY DEVICES CO.(SH:600707) Tianfeng Securities·2025-04-10 12:18Investment Rating - The report assigns a "Buy" rating for the company with a target price of 9.9 CNY, based on a valuation of 22x PE [6]. Core Viewpoints - The company's cyclical profitability is highlighted, with the glass substrate business forming a second growth curve. The company has shown strong performance during the upcycle of the LCD panel industry, with significant revenue and profit growth [1][4]. - The LCD panel business is expected to benefit from supply-side consolidation and government subsidies, leading to an increase in both volume and price [2]. - The glass substrate market is characterized by a tight supply-demand balance and high overseas market concentration, providing substantial room for domestic substitution [3]. Summary by Sections Company Overview - The company, established in 1992, specializes in the manufacturing of LCD glass substrates and panels, transitioning from CRT to LCD technology. It has developed a dual business model focusing on both panels and substrates, with significant investments in high-generation glass substrate production lines [1][14][16]. Financial Analysis - The company reported a revenue of 9 billion CNY in the first three quarters of 2024, a year-on-year increase of 4.61%, and a net profit of 1.23 billion CNY, up 301.85% [1][29]. The gross margins for LCD panels and glass substrates are 24.27% and 20.44%, respectively [1][31]. - The company has shown a recovery in ROE from -12.70% in 2022 to 5.88% in 2024, indicating improved profitability and operational efficiency [1][45]. LCD Panel Industry - The LCD panel market is expected to see a volume and price increase due to government policies and a shift in production capacity towards major domestic manufacturers. The company has a flexible production capacity of 170K/month at its 8.6 generation line [2][50]. - The report notes that the LCD panel remains the mainstream choice in the market, with a significant share of the global display industry [50]. Glass Substrate Industry - The glass substrate market is projected to grow, with a forecasted global shipment of 650 million square meters in 2024, reflecting a 7.3% year-on-year increase. The company is positioned as the only domestic manufacturer capable of mass production of 8th generation glass substrates, with substantial potential for domestic substitution [3][28]. - The company plans to increase its production capacity significantly, with projections indicating an annual output of 14.55 million pieces by 2029 [3][20]. Investment Recommendations - The company is expected to achieve revenues of 114.65 billion CNY, 132.16 billion CNY, and 153.90 billion CNY from 2024 to 2026, with corresponding net profits of 12.22 billion CNY, 16.22 billion CNY, and 20.31 billion CNY [4][5]. The valuation is supported by comparisons with similar companies in the industry [4].