Guosen: TV panel production cuts in October are looming, price declines are expected to narrow.

Guosen issued a research report stating that according to TrendForce, the demand for TV panels in September is still relatively weak, and the procurement momentum from brand-side has not significantly strengthened. Major panel manufacturers will begin a two-week production halt in early October to actively control production capacity and bring supply and demand back to a balanced state, alleviating the pressure of panel price decline. Some customers may adjust production reductions or advance some demand to September to help slow down the price decline of some panel sizes in September. At the current stage, the LCD industry's production capacity is gradually stabilizing, and with overseas manufacturers shutting down production lines or selling them, the industry's market share is expected to further consolidate. With the advantage of concentrated market share on the supply side, LCD TV panel prices can be better controlled. Key points from Guosen: Market & Performance Review: Panel (Shenwan) index has dropped by 4.62% since August 2024, with the average gross profit margin of major Chinese LCD manufacturers in 2Q24 increasing month-on-month. Market Review: The Panel (Shenwan) index has dropped by 4.62% since August 2024, outperforming the Shanghai Composite Index, Shenzhen Component index, and the CSI 300 index by 2.27%, 2.99%, and 2.52% respectively. Boe Technology Group, TCL Corporation, Tianma Microelectronics, Caihong Display Devices, and Infovision Optoelectronics (Kunshan) Co., Ltd. have seen declines of 5.08%, 5.61%, 12.18%, 7.99%, and 13.56% respectively. As of September 19th, the total market value of the A-share panel industry was 428.36 billion RMB, with an overall PB (LF) of 1.16x, ranking in the 9.0th percentile in the past five years. Performance Review: According to Omdia data, the global large-sized LCD panel's monthly revenue in July was $5.769 billion, down by 17.60% month-on-month but up by 5.10% year-on-year. In the same period, the monthly revenues of large-sized LCD panels of BOE, TCL Huaxing, and Tianma Microelectronics saw year-on-year growth of 20.24%, 12.38%, and 5.01% respectively. The average gross profit margin of major Chinese LCD manufacturers (Tianma Microelectronics, TCL Corporation, Boe Technology Group, Caihong Display Devices, Infovision Optoelectronics (Kunshan) Co., Ltd., AUO, Innolux, and Truly Opto-Electronics) increased by 4.10% year-on-year and by 3.13% month-on-month to 14.04%, while the net profit margin increased by 3.35% year-on-year and by 2.66% month-on-month to 1.84%. Price: The prices of various sized LCD TV panels have fallen month-on-month in August, and a continued decrease is expected in September. TV: In August 2024, the prices of 32", 43", 50", 55", and 65" LCD TV panels were $37, $63, $104, $129, and $175 respectively, with month-on-month decreases of 5.1%, 1.6%, 4.6%, 4.4%, and 3.3%. Omdia predicts that in September, the prices of these panels will further drop to $35, $62, $100, $124, and $170, with month-on-month decreases of 5.4%, 1.6%, 3.8%, 3.9%, and 2.9% respectively. According to TrendForce, the demand for TV panels in September remains relatively weak, and major panel manufacturers will begin a two-week production halt in early October to actively control production capacity and bring supply and demand back to a balanced state, alleviating the pressure of panel price decline. Some customers may adjust production reductions or advance some demand to September to help slow down the price decline of some panel sizes in September. Laptops: In August 2024, the prices of 10.1" (tablets), 14" (laptops), and 23.8" (monitors) LCD IT panels were $16.7, $26.3, and $44.7 respectively, remaining unchanged from the previous month. Omdia predicts that prices will remain stable in September for these panel sizes. Supply & Demand: In July 2024, the global shipment area of large-sized LCD panels decreased by 5.47% year-on-year, with growth in Monitor, Notebook, and Tablet shipments but a decline in TV shipments. On the supply side, the global production capacity of large-sized LCD panels is expected to increase by 2.31% in 2024 compared to 2023. Quarter-on-quarter changes in production capacity are estimated to be +0.72%, +0.35%, +0.25%, and -0.02% for Q1 to Q4 of 2024 respectively. In 2025, the global production capacity of large-sized LCD panels is projected to increase by 0.21% compared to 2024, with quarter-on-quarter changes estimated to be -0.02%, -0.02%, 0.00%, and +0.16% for Q1 to Q4 of 2025 respectively. On the demand side, the global shipment area of large-sized LCD panels decreased by 5.47% year-on-year in July 2024, with an 8.35% decline in global TV panel shipments, a 5.38% growth in global monitor panel shipments, a 2.15% growth in global laptop panel shipments, and a 9.30% growth in global tablet panel shipments. Guosen believes that the gradual stabilization of LCD industry production capacity, along with the closure or sale of production lines by overseas manufacturers, will further consolidate the industry's market share. With the advantage of concentrated market share on the supply side, LCD TV panel prices can be better controlled. The cyclical nature of the industry is gradually fading, and growth attributes are becoming more evident. The profit stability of LCD panel enterprises is expected to strengthen gradually. Investment recommendation: focused on the LCD panel industry chain, with a emphasis on companies like Boe Technology Group. Bullish on Boe TDomestic panel leaders such as BOE Technology Group (000725.SZ) are seizing the era of consumption upgrading and localization in China, gradually increasing their profitability through the scale effect brought by high-generation lines, cost advantages, industry discourse power brought by leading market share, and pricing power. At the same time, the rise of the LCD industry has enhanced the competitiveness of domestic TV brands and ODMs in overseas markets. Recommended companies include Shenzhen Mtc (002429.SZ), Shenzhen KTC Technology (001308.SZ), and Guangzhou Shiyuan Electronic Technology (002841.SZ).Risk Alert Risks of lower than expected demand for display components; risks of price fluctuations for display components; risks of supply shortages for production equipment and raw materials.