BOE: Core business slightly exceeds the breakeven point, when will price increases 'come to the rescue' again?

BOE Technology Group Co., Ltd. (000725.SZ) released its financial report for the second quarter and mid-year of 2025 (as of June 2025) after the A-share market closed on the evening of August 27, 2025, Beijing time. The key points are as follows:

1. Overall Performance: BOE achieved a revenue of 50.7 billion yuan in the second quarter of 2025, a year-on-year increase of 6.7%. The significant rebound in the company's revenue was mainly driven by the recovery in panel prices. Due to the lack of significant improvement in downstream demand, price increases face resistance, and the company's recent quarterly revenue has stabilized around 50 billion yuan. BOE's net profit attributable to shareholders in the second quarter of 2025 was 1.63 billion yuan, mainly affected by minority interests. Excluding this impact, the company's net profit for the quarter was 1.09 billion yuan, a year-on-year decline of about 15%, mainly due to the decline in gross profit margin.

2. Gross Profit Margin and Expense Ratio:$BOE(000725.SZ) The gross profit margin for this quarter was 13%, a year-on-year decrease of 4.4 percentage points. In fact, the company adjusted its accounting policy since the end of last year (the company included the provision for warranty expenses in "cost of main business" instead of "selling expenses"). As a result, selling expenses decreased, while cost figures increased.

Considering that the company's quarterly provision for warranty expenses is about 400-500 million yuan, if this operation is not considered, the company's gross profit margin for the quarter would rise to about 14%, still lower than the 17.5% in the same period last year, mainly due to the increase in costs.

3. Specific Business: Display devices and IoT innovation business are the company's largest sources of revenue, accounting for more than 95% of the total. In the first half of 2025, the display device business grew by 8.1% year-on-year, with growth mainly driven by increased shipments as panel prices remained relatively stable year-on-year; the IoT innovation business grew by 6% year-on-year, reversing last year's decline, but overall demand remains relatively weak.

4. Inventory and Price Changes: BOE's inventory increased to 27.3 billion yuan in the second quarter of 2025, a quarter-on-quarter increase of 7.8%. The company's inventory/revenue ratio remained at 0.54. The seasonal increase in inventory is mainly for stocking up for the peak season in the second half of the year. From the inventory ratio, the current downstream demand for the company's products is relatively stable, with no signs of significant improvement.

Dolphin Research's Overall View: "Neither starving nor full," waiting for the next price increase cycle

BOE's revenue for this quarter remained basically flat quarter-on-quarter, similar to the panel market price situation in the first half of the year. As for BOE's profit side, there are actually many influencing factors such as minority interests and asset impairment losses.

From the perspective of main business operations, BOE's real gross profit margin for this quarter (considering the impact of asset impairment, according to the original accounting standards) is 13%, still a year-on-year decline of 1.6 percentage points. Combining this gross profit margin (13%) with the company's core operating expense ratio (11%), it can be seen that the current main business is only slightly above the breakeven line (+2%).

Since more than 80% of the company's revenue comes from the display device business, fluctuations in panel prices will directly affect the company's performance, and BOE's performance also shows obvious cyclicality. Previously, when panel prices were at a cyclical low (2022), the company's net profit once showed a "loss state." After panel prices bottomed out, BOE and other manufacturers gradually reduced capacity utilization, thereby reversing the supply-demand pattern in the panel market, and panel prices also saw a significant recovery.

Since the second half of last year, the current round of price increases mainly came from active supply-side contraction, rather than a real improvement in demand. Panel price increases have been weak and show signs of falling again, so the company's performance in the first half of the year was generally mediocre. In August, panel prices showed signs of stabilizing, if there is no real improvement in downstream demand, it is difficult for panel prices to rise significantly, and the company's performance will remain relatively stable.

From a medium to long-term perspective, the large panel business, which contributes the main profit to the company, will further concentrate on leading manufacturers. BOE recently announced that it will acquire a 30% stake in Rainbow Group, and the shipment share of the top three global manufacturers has reached over 60%. With the integration of production capacity in the traditional LCD industry and the increase in panel concentration, while enhancing the industry's price control ability, it can also weaken the impact of industry cyclicality to a certain extent.

During industry downturns, panel manufacturers promote panel prices to rise from the bottom by actively reducing capacity and adjusting the "supply-demand relationship." Due to the lack of significant improvement in downstream demand, panel price increases are once again hindered. However, even after panel prices rise, the profitability of BOE's main business is only a low single-digit profit, and this "neither starving nor full" situation has persisted for more than a year. If downstream demand for panels remains weak, this situation will continue, suppressing the company. Only when capacity is further cleared or demand improves, once again improving the "supply-demand pattern," can BOE usher in a real upward phase.

The following are Dolphin Research's data charts on BOE: