Source: Yicai Global
March 26 -- BOE Technology Group's shares slid after the world's biggest maker of display screens reported a 55 percent drop in profit last year because of a fall off in global demand.
BOE [SHE:000725] lost almost 5 percent to end the day at CNY3.85 (57 US cents). That still represents a 50 percent increase in the company's share price so far this year amid a wider rally in Chinese equities. The benchmark Shenzhen Composite Index was off nearly 2 percent today.
The Beijing-based company said in an earnings report yesterday that net profit attributable to shareholders halved to CNY3.4 billion (USD511 million) in 2018 from a year earlier. It blamed weak demand for mainstream display screens from the second half, limited market growth of flexible active-matrix organic light-emitting diode screens and severe competition. Revenue rose 3.5 percent to CNY97.1 billion.
Last year was the toughest in the past five years for the global display panel industry, and BOE was no exception. The average price of large-size panels dropped more than 20 percent, with some products hitting a new low. Demand for flexible AMOLED screens was weaker than expected, resulting in a decline in output value and profit, according to Qunzhi Consulting General Manager Li Yaqin.
As a pillar of the global panel industry, BOE is bound to be affected by the downturn in the sector, said Dong Wei, vice president of Big Data solutions provider All View Cloud Data Technology, which analyses and produces reports on different industries.
Capacity Explosion
The production capacity of ultra-large size and small flexible displays is set to explode in the next two to three years, Dong said. BOE needs to find news uses for its products and give full play to its advantages across the entire industry chain, transitioning to a service provider from a device supplier, he added.
The company is trying to diversify into emerging industries such as health care services to flatten cyclical fluctuations in the panel industry. BOE also announced yesterday that it will invest CNY13.6 billion to build a life science and technology industrial base in Beijing, including smart medical engineering projects and digital hospital projects, which is scheduled to enter operation in 2022.
According to its earnings report, BOE last year ranked first globally for shipments in the five major display segments for smartphones, tablet computers, laptops, monitors and televisions, and the production capacity and yield rates of its sixth-generation flexible AMOLED panel production line in Chengdu in China's southwestern province of Sichuan, are increasing rapidly.
The company is now building sixth-generation flexible AMOLED panel production lines in Chongqing municipality and Mianyang, also in Sichuan, as well as planning to build a new production line in Fuzhou, eastern Fujian province.
BOE's revenue growth in the European and American markets last year was significantly faster than that in China. Revenue from the Chinese mainland was CNY42.9 billion, down 2.6 percent, making up 44 percent of the total.
The figure for the rest of Asia was CNY44.3 billion, a drop of 0.01 percent, making up 46 percent of the total. In Europe it was CNY3.5 billion, up 60 percent, making up just 3.6 percent of total revenue. In America it almost doubled to CNY6.4 billion, accounting for 6.5 percent of overall income.