Reviewing the cycle history of the LCD panel industry, the current LCD panel industry is gradually getting out of the bottom, and the industry will recover in 2023. The main logic is:
1) From the perspective of industry structure: In 2023, the industry concentration will be closer to that of Chinese panel manufacturers, domestic LCD production capacity will account for more than 60%, the ability to control production and price will be further improved, and profitability is expected to gradually recover.
The reason is that Korean manufacturers (Samsung, LG) have completed the withdrawal of LCD panel production lines in Korea, Taiwan-funded manufacturers are determined to transfer LCD production capacity to IT, and industry supply and market competition have improved significantly. BOE, TCL, and Huike have a global market share of over 60% % (CR3 is expected to be 61%-65%).
2) From the perspective of price: starting from 2023Q1, panel prices are expected to rise, and Q2 will usher in a profit turning point. Under the background of the general loss of the entire LCD industry in 2022, relying on the advantages of production capacity, my country's top LCD manufacturers have changed the previous operation mode of full production and full sales, and transformed into a market price-oriented mode of production based on sales, which is expected to gradually return the price of LCD panels to Run above profit.
3) From the perspective of production capacity planning: by 2025, there will be almost no new production lines for LCD panels in the world, and the increase in production capacity will mainly be based on expansion, and the overall growth rate will be close to zero. We expect that in the next three years, the increase in production capacity will mainly come from TCL Guangzhou T9 production line and Shenzhen Tianma TM19 production line, and the three-year incremental CAGR will only be about 1%.
4) From the perspective of demand: the trend of large size continues, the demand for OLED mobile phones has increased steadily, and the increase in industry demand is greater than the total supply. According to preliminary estimates, from 2022 to 2025, panel shipments will maintain a growth rate of 1-2%, panel demand CAGR will remain above 4%, and demand growth will exceed capacity growth.
5) From the perspective of technology trends: in the next 5-8 years, LCD will still be the absolute mainstream. OLEDs will still be dominated by small sizes, while large-sized LEDs require huge capital investment, so the replacement threat posed by OLEDs and Mini LEDs to LCDs is expected to be controllable.
6) From the perspective of industry valuation: the industry as a whole is currently undervalued. According to historical data, the panel industry is: 1) PB is close to 1 times; 2) when the panel price falls below the cash cost, it is often a signal of bottoming out, and the valuation bottoming out is more certain.
To sum up, we believe that the bottom of the current panel industry cycle has obvious characteristics, and the recovery of the industry is imminent in 2023, and the panel leaders in the recovery of the LCD panel industry will benefit significantly.