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The bull market of new energy vehicles with electrification as the core for nearly two years has entered a period of adjustment, and the focus of the market is on the new investment opportunities brought about by the intelligence and lightweight of new energy vehicles, which has driven the continuous strength of related targets such as Desay SV (002920.SZ), Quectel (603236.SH), Baolong Technology (603197.SH), Lianchuang Electronics (002036.SZ) and other related targets. In the Hong Kong stock market, BOE Precision Electric (00710), which relies on the continuous growth of the in-vehicle display business, is also a typical target of automotive intelligence.
As the only on-board display and system operation platform of BOE (000725.SZ), BOE Precision, which lays out its in-vehicle display, industrial display and solution business, has become one of the world's leading automotive display suppliers, and the company's shipments of 8-inch and above on-board display panels have remained the first in the world.
Thanks to the continuous release of in-vehicle display products, the performance of BOE Precision has accelerated. In the positive profit forecast announced by the company on January 14, it is expected that the profit attributable to shareholders in 2021 will increase by no less than 350% year-on-year, that is, not less than HK$308.7 million. Boosted by the good news of the sharp increase in performance, boe seiki shares rose 15% the next day.
For a long time, the good era of BOE Precision has just begun. On the one hand, due to the intelligent development of the automotive industry, the demand for automotive display screens has shown a multi-screen and large-screen trend, which has led to the display industry to usher in a rise in volume and price; On the other hand, the business of BOE Precision is not limited to the field of in-vehicle display, and the company's multi-faceted layout has changed from "leading display solution provider" to "leading intelligent cockpit display assembly and system solution provider", successfully expanding the company's potential market size to the level of 100 billion.
With its leading market position and clear business strategic deployment, can BOE Precision Replicate the ten-fold increase in the mobile phone industry chain in the golden age of the industry?
After the successful transformation, the shipment volume of medium and large-sized in-vehicle displays ranked first in the world
2016 is a key year in the history of the development of BOE Precision. At that time, although its automotive monochrome display products occupied a leading position in overseas markets, due to the rise of TFT products in the market, the company's share was constantly squeezed. The relevant technical reserves of BOE have matured and need channels to promote various display products.
Based on this, BOE invested HK$1.35 billion in Seiko in 2016, becoming its largest shareholder and still holds 54.41% of the shares of BOE Seiko. Since then, BOE Precision has become the only on-board display and system operation platform of BOE. Relying on the technology accumulation of BOE, BOE Precision has opened the transformation road of TFT module products.
At the time when BOE entered BOE Seiki, another major change occurred in the global automotive display field, that is, Tesla (TSLA. The new energy vehicle forces led by us have set off the curtain of the era of automobile large screens, and major automobile manufacturers at home and abroad have joined the big screen camp, and a wave of large screens has swept the world.
While carrying out product transformation based on display technology, BOE Precision also seized the industry opportunity based on product size upgrades, which led to the rapid growth of the company's performance, which is clearly reflected in the company's financial report.
From 2017 to 2020, boe precision power's revenue has grown rapidly for four consecutive years, from HK$2.882 billion to HK$4.542 billion, with a compound annual growth rate of 16.47%. With the expansion of scale and the increase in product value, the company's profitability has also increased significantly, and the profit attributable to shareholders in 2020 and 2021 increased by 174% and (not less than) 350% respectively year-on-year, and the growth rate was significantly higher than the revenue growth.
The market share of the product can also reflect the remarkable effect of BOE Precision Power Transformation. According to the financial report, in the first half of 2021, the company's revenue from traditional and new energy vehicles' TFT display modules and touch screen modules has accounted for as high as 81%; At the same time, the share of BOE Precision in the domestic market has grown rapidly, and in the first half of 2021, sales in China accounted for 63%.
In addition, according to industrial securities data, in the first half of 2021, BOE Precision Electric's shipping area ranked second in the world, with a domestic automotive market share of 30%, ranking first in the industry, and continued to maintain a leading position in the automotive display industry; And since 2020, BOE Precision has maintained the world's first display shipments in medium and large size (greater than or equal to 8 inches). Obviously, the leading position in the field of medium and large size will make BOE Precision electric become the biggest beneficiary of "big screen".
It is expected to continue to benefit from industry trends, and the increase in market concentration can be expected
To this day, the competition of automobile screens still shows a trend of intensification. On December 26, 2021, Zhiji Automobile, an automobile brand jointly built by SAIC Motor, Zhangjiang Hi-Tech and Alibaba, was equipped with a 39-inch large joint screen + 12.9-inch OLED central control screen with a resolution of up to 4K. "Large-screen, multi-screen, high-resolution" has become one of the key directions for automakers to compete intelligently, and this trend will continue in the future.
The large joint screen and central control screen equipped with Zhiji Automobile
According to data from Guojin Securities, driven by large screens and multi-screens, it is expected that the shipment volume of global vehicle display screens will reach 200 million units in 2022, an increase of 11% year-on-year, and the market demand will continue to grow steadily in the next three years. And according to industrial securities data, the value of the large on-board screen using high-end display technology may increase by 10 times compared with the traditional screen. This means that under the increase in the volume and price of products, the car display has a broader market.
As the leader in the vehicle display industry, THE company continues to lay out high-end display technologies such as large size, multi-screen, BD cell and AMOLED to lead the development of the display industry. Up to now, BOE Precision Has reached strategic cooperation with SAIC-GM-Wuling, SAIC Passenger Vehicle, Qijing Optoelectronics, Lisheng Automobile and other enterprises to continue to provide customers with products and services.
In the 2021 interim financial report, BOE Seiki said that the company's large-size AMOLED display produced by a well-known Chinese new energy vehicle manufacturer will begin mass production for the first time in 2022; During the reporting period, the company was awarded a large-size display system project for a new electric van manufacturer in the UK. It can be seen that the company's products continue to penetrate in the domestic and foreign markets.
If you look at the long-term industry trend, the market will be concentrated in the head enterprises, which will drive the growth of BOE Precision. According to data from Guojin Securities, in the first half of 2021, the competition pattern of global automotive displays was: Shenzhen Tianma (14%), AUO (13%), JDI (12%), BOE (12%), LG (10%), Innolux (8%), and others (31%), and the market was relatively fragmented. From a sub-regional point of view, the mainland market share is 31%, Taiwan's market share is 24%, and Japan's market share is 18%, of which the market share of domestic manufacturers Shentianma and BOE continues to increase.
Due to the high technology content, high capital expenditure, and high barriers of the display field, the market concentration will gradually concentrate on the head player, the concentration of the two head players of the reference tablet pc is as high as 61%, the market share of mainland manufacturers is as high as 63%, and the market share of the top two head players in the current car display field is only 26%, and the market share of mainland manufacturers is only 31%. In the long run, BOE's market share is expected to climb to 20% to 30%, which will inevitably drive the continuous increase in the market share of BOE's vehicle display modules.
The intelligent cockpit has become a new growth curve: a variety of products and multiple system solutions have been designated by the project
If the on-board display is the core driving force of BOE Precision's current performance, then the company's intelligent cockpit business layout based on the extension of the on-board display will become a new growth curve. According to data from Guojin Securities, the global automotive intelligent cockpit market size will reach 37 billion US dollars in 2020, with an industry penetration rate of 45%, and it is expected to reach 56 billion US dollars in 2025, with a 5-year compound growth rate of 8%, and the industry penetration rate will increase to 59%.
Split point of view, the hardware of the intelligent cockpit is mainly divided into central control large screen, full LCD instrument, AR-HUD and streaming media central rearview mirror, the current penetration rate of each hardware is 80%, 30%, 10%, 7%, Industrial Securities is expected to reach 100%, 70%, 30%, 30% in 2025, each product has a large room for improvement.
In order to grasp the historic new opportunities in the industry brought about by automotive intelligence to a greater extent, BOE Precision has put forward a new development strategy based on BOE's collection of existing businesses, that is, it is committed to becoming an automotive intelligent cockpit display system assembly solution provider, which means that BOE Precision will change its role from a device company that currently provides automotive display modules to a display system assembly solution provider.
The meaning behind this is that BOE Precision will upgrade from the traditional Tier 2 supplier to Tier 1 or even Tier 0.5 supplier, including the instrument, central control, rear entertainment and other screen display systems, as well as including HUD (head-up display), A Pillar (transparent A-pillar), E-Mirror (electronic rearview mirror) and other imaging systems are the focus of BOE Precision's development, the company's products will evolve in the direction of higher technology content and higher value content.
From the perspective of the layout of each product line, BOE Precision has gradually entered the harvest period. The company's large-scale display module, widescreen display, AMOLED and BOE Group's self-developed BD cell display can greatly improve the user experience; In terms of display technology, the company's LED local dimming technology, Mini-LED technology, high dynamic display technology and BD cell technology can display darker and more realistic display images.
At the same time, the company successfully developed the on-board curved display, and has won the first on-board built-in touch special-shaped curved display project of well-known car manufacturers, which proves that the product is recognized by the market. In addition, with the continuous development of automatic driving, three-dimensional spatial imaging and input interface will be the focus of future development, and the first sample of BOE Precision's 3D display has been developed and officially put into the construction of 3D user interface. The company is also developing 3D Touch technology for contactless gesture communication and hover touch technology through IR emitting and sensing infrared gesture technology and naked-eye 3D display.
Not only that, with its leading optical structure design and AR algorithm capabilities, BOE Precision's AR-HUD has been designated as a customized project for leading automotive customers in China, and the project is now in full swing. In terms of windshield HUD, the company has obtained another Chinese car company major customer multiple model project fixed points. In addition, in terms of CMS (Electronic Exterior Mirror) system, the visual communication system developed by the Ambarau imaging platform based on high-end computing and imaging system processors has been completed and the mass production project has been fixed.
At the same time that many of the above products have achieved project designation, the system solution of BOE Precision has also accelerated. With the continuous expansion of the company's system research and development and project management team, the company has obtained the project designation of new forces in China and Europe and the United States, new energy vehicle companies, including instrument display systems, multi-screen display assemblies, electronic rearview mirror display systems, OLED display assemblies with functional safety and other projects.
BOE Precision said that some projects have begun mass production in the second half of 2021, and the company is actively expanding its domestic and overseas development teams to meet more and wider customer predictions and fixed-point projects. Obviously, with the implementation of the fixed points of a variety of products and system solutions, BOE Precision will usher in the accelerated release of performance in the field of smart cockpits.
On the whole, after BOE entered the ownership, BOE Precision Relied on BOE's technology accumulation to open product transformation, and in this process seized the new trend of large-screen and multi-screen development of the automotive industry, thus achieving rapid revenue growth since 2017; And driven by the scale effect and the increase in product value, the company's profitability has gradually increased, and the profit attributable to shareholders in 2020 and 2021 increased by 174% and 350% respectively year-on-year.
With its leading position in the field of medium and large size of in-vehicle display, BOE's in-vehicle display business is expected to accelerate its development in the industry trend of large-screen and multi-screen, and in the long run, the market concentration still has a large room for growth, which will promote the continuous growth of the company's in-vehicle display business.
At the same time, the company's forward-looking layout of intelligent cockpit based on on-board display has gradually entered the harvest period, and in terms of products, including vehicle curved displays, 3D displays, AR-HUD, windshield HUDs, electronic exterior mirrors and other products have obtained customer project fixed points; At the same time, a number of solutions in the system have also been designated as projects. And these products and system solutions are gradually contributing revenue, and the smart cockpit has become the company's second growth curve.
Under the market space of 100 billion, the on-board display continues to grow and the intelligent cockpit accelerates, and the stock price of BOE Precision, which has a static valuation (2021) of only 26.56 times, may still have a large room for growth.