BOE Technology Group: Weak demand, waiting for another cycle?
BOE Technology Group Co., Ltd. (000725.SZ) released its Q3 2024 financial report (ending September 2024) after the A-share market close on October 30, 2024, Beijing time. The key points are as follows:
1. Overall Performance: Price Decline Reappears. BOE achieved a revenue of CNY 50.3 billion in Q3 2024, a year-on-year increase of 8.6%; the gross profit margin was 17.4%, an increase of 2.6 percentage points year-on-year. The growth in revenue and gross profit margin was mainly driven by the year-on-year increase in panel prices. Analyzing the company's performance growth this quarter, both shipment volume and panel prices showed slight single-digit increases.
2. Expenses and Operating Conditions: Rising Expenses, Returning to Breakeven. $BOE(000725.SZ) reported a net profit attributable to shareholders of CNY 1.03 billion this quarter, a significant year-on-year increase, but the net profit margin fell back to 0.3%. Although the company's gross profit margin remained around 17%, the increase in expenses this quarter squeezed the company's profit performance, returning to breakeven.
Overall View of Dolphin: BOE's Financial Report is Not Very Good
In this financial report: Quarterly revenue returned to CNY 50 billion, mainly influenced by the company's panel prices. The gross profit margin remained stable quarter-on-quarter, while the rise in expenses squeezed the final profit, causing the company to return to breakeven.
Given the company's obvious cyclical characteristics, inventory status is also an important indicator. This quarter, the company's inventory decreased, returning to a relatively reasonable level. Although current panel demand remains weak, the company does not face significant inventory pressure.
From BOE's business perspective, most of the company's revenue comes from large panels. Therefore, the large panel business directly affects the company's performance. Due to the industry's characteristics, the prices of large panels are mainly influenced by market supply and demand, rather than the company itself. This quarter, large panel prices declined again, primarily due to the global TV panel demand drop. In Q3 2024, TV panel shipments were 62.1 million units, a 5% quarter-on-quarter decline; shipment area was 44.3 million square meters, an 8% quarter-on-quarter decline.
The previous round of panel price increases was mainly due to suppliers collectively reducing production capacity to adjust supply-demand relationships and meet the demand for inventory replenishment in the industry chain. Currently, there is no sustained demand in the market, which has led to a decline in panel prices again. Although BOE's overall performance this quarter was slightly better than the market average, it will still be affected by the overall weakness in the industry, returning to the breakeven line. The true upward trend in panel prices and company performance still requires attention to the sustained recovery of the TV terminal market and panel demand. **
The following is Dolphin's specific analysis of BOE Technology Group:
I. Overall Performance: Price Decline Reappears
1.1 Revenue
In the third quarter of 2024, BOE Technology Group achieved total revenue of 50.3 billion yuan, a year-on-year increase of 8.6%, slightly below market expectations (54.9 billion yuan). After more than two years, the company's quarterly revenue has returned to above 50 billion, mainly benefiting from the rise in panel prices.
Considering the panel pricing situation, the average price of large-size panels in the third quarter saw single-digit growth year-on-year.
1.2 Gross Profit
In the third quarter of 2024, BOE Technology Group achieved a gross profit of 8.76 billion yuan, a year-on-year increase of 27.6%. The gross profit margin for this quarter was 17.4%, up 2.6 percentage points year-on-year, but down 0.1 percentage points quarter-on-quarter. The change in the company's gross profit margin this quarter was mainly influenced by product prices. Entering the third quarter, the prices of large panels began to decline from their peak.
After a phase of price increases, the company's gross profit margin has returned to around 17%, bringing the overall performance back above the breakeven line.
1.3 Panel Prices
The growth in BOE Technology Group's performance this quarter was mainly due to the rise in panel prices. So, how have the panel prices performed?
According to Witsview's late October quotes, the prices for 65-inch/55-inch/43-inch/32-inch panels were $171/$124/$63/$34 respectively.
Although prices for all sizes of large panels have risen more than 30% since the cycle bottom, prices have started to decline again from the third quarter. This is mainly because there has not been a significant sustained demand performance on the demand side, leading to a stagnation in price increases.
The downstream applications of large-size panels are concentrated in the TV sector, and in the third quarter of 2024, global TV panel shipments reached 62.1 million units, a year-on-year increase of 1% but a quarter-on-quarter decline of 5%; the shipment area was 44.3 million square meters, down 2% year-on-year and 8% quarter-on-quarter. This indicates that the overall demand for large-size panels remains weak, and panel prices have declined again.
II. Expenses and Operating Conditions: Rising Expenses, Returning to Breakeven Line
2.1 Operating Indicators
As a typical cyclical stock, inventory and operating indicators are also quite important.
① Inventory Situation: This quarter's inventory was 24.472 billion yuan, a quarter-on-quarter decline of 6%. The inventory/revenue ratio for this quarter has risen to 0.49. Considering market demand and shipment conditions in the third quarter, although the industry's demand has declined, the company has managed to reduce inventory, and the current inventory situation has returned to a reasonable level ② Accounts Receivable Situation: This quarter is 33.532 billion yuan, a quarter-on-quarter increase of 2.4%. The ratio of accounts receivable to revenue is 0.67, maintaining a relatively reasonable level.
2.2 Expense Ratio Situation
In the third quarter of 2024, BOE's total four expenses amounted to 6.798 billion yuan, an increase of 3.8% year-on-year. The increase in expenses mainly comes from the rise in selling and financial expenses, leading to an increase in the company's four expense ratio to 13.5%.
1) Selling Expenses: This quarter is 1.386 billion yuan, a year-on-year increase of 51.1%, with a selling expense ratio of 2.8%. Although there is a certain correlation between selling expenses and company revenue, the company still increased its spending on sales-related expenses this quarter;
2) Management Expenses: This quarter is 1.446 billion yuan, a year-on-year decrease of 5.5%, with a management expense ratio of 2.9%. The company's management expenses are relatively rigid and are not significantly affected by revenue;
3) R&D Expenses: This quarter is 3.018 billion yuan, a year-on-year increase of 4.8%, with an R&D expense ratio of 6%. The company's R&D expenses are the largest portion among the four expenses, remaining relatively stable;
4) Financial Expenses: This quarter is 948 million yuan, a year-on-year increase of 47%, with a financial expense ratio of 1.9%. The company's financial expenses increased significantly this quarter, mainly due to the rise in interest expenses and others.
2.3 Net Profit
In the third quarter of 2024, BOE achieved a net profit attributable to the parent company of 1.03 billion yuan, a significant year-on-year increase. The company's performance rebounded mainly due to the rise in panel prices.
In the third quarter of 2024, the company's net profit margin rebounded again, falling back to 0.3%. The rise in panel prices drove the company's overall gross profit margin up to around 17%, while the increase in the company's expenses caused the net profit margin to fall back to near the breakeven line.
Dolphin Investment Research BOE Historical Article Review:
Earnings Report Season
Earnings report commentary on August 27, 2024: “BOE: 'Hidden Thunder' Appears, Can't Escape the Curse”
Earnings report commentary on April 29, 2024: “BOE: A Big Year for Sports, Will the Panel Change?”
April 1, 2024 Company Communication Meeting: BOE: The growth and profitability of panels in the next 3 years are promising (23Q4 Communication Meeting)
April 1, 2024 Financial Report Commentary: BOE: Panel prices rise again, is this time really going to survive?
October 31, 2023 Financial Report Commentary: BOE: Price increases are not a real recovery, demand is the hard truth
August 28, 2023 Financial Report Commentary: BOE: Real price increases, fake recovery
April 28, 2023 Financial Report Commentary: BOE: Recovery expectations have been fulfilled, can the peak season make a big comeback?
April 6, 2023 Financial Report Commentary: BOE: Having survived the dire straits, now we just watch demand's "expression"
October 31, 2022 Financial Report Commentary: BOE: Three signals of bottoming out and recovery
August 31, 2022 Financial Report Commentary: BOE: What you buy is not performance, but a cycle reversal
In-depth
July 26, 2022 Company In-depth: 360-degree analysis of BOE: Why short-term risks do not hinder long-term value?
July 5, 2022 Industry In-depth: From dual "heroes" to dual "bears": Have the cycles of BOE and TCL come to an end?
July 21, 2021 Top Analysis: Panel cycle peaks, there is no bottom to buy
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