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Supply To Huawei, Backed By State-Owned Assets, But Continue To Lose Money And Huihui Optoelectronics Rushed To The Science And Technology Innovation Board With 10 Billion Yuan Financing Plan

2020/9/15 10:15:00 0

State Owned AssetsSustainable DevelopmentHehui OptoelectronicsFinancingPlanningScience And Technology Innovation Board

When BOE and TCL Huaxing began to compete for the leading position of LCD, a well-known AMOLED panel manufacturer and Huiguang optoelectronics also quietly submitted the IPO application materials of sci-tech innovation board to Shanghai Stock Exchange.

On August 26, Shanghai Stock Exchange officially accepted Hehui optoelectronics's application for listing on the science and technology innovation board; on September 11, the dynamic update of its IPO project on the science and technology innovation board was "inquired".

A number of panel industry insiders told the 21st century economic reporter that this company is indeed well-known in the industry, and its OLED panel business is relatively strong, and its industry position is about the third and fourth. However, the panel industry is a highly scaled industry, and compared with the industry leader, Hehui photoelectric still has a big gap.

The panel industry is a capital intensive industry. At present, BOE, vicino, Shenzhen Tianma and TCL technology in the same industry have all landed on a shares. When a new round of panel industry competition is coming, it is more important for Hehui to land in the capital market.

The gross profit margin is negative and far lower than that of peers

The company is a well-known AMOLED semiconductor display panel manufacturer in China, focusing on the R & D, production and sales of small and medium-sized AMOLED panels. The company is the first domestic manufacturer to realize AMOLED panel mass production in the industry, breaking the long-term monopoly of AMOLED panel industry by foreign manufacturers, and starting the process of AMOLED panel localization.

At present, the company has built two production lines of different generations to meet the diversified requirements of different downstream application fields and specifications, and can produce rigid and flexible AMOLED semiconductor display panel products. Among them, the 4.5 generation AMOLED production line has a mass production capacity of 15K / month, the sixth generation AMOLED production line has a planned capacity of 30K / month, of which the mass production capacity is 15K / month, and some equipment with 15K / month capacity has been delivered to the workshop.

From the specific application point of view, the company mainly develops rigid AMOLED and flexible AMOLED semiconductor display panels around small and medium-sized AMOLED semiconductor display panels, and provides products for smart phones, smart wear, tablet / laptop and other fields. At present, the company's products are mainly rigid display panels.

Although Hehui optoelectronics is the first domestic manufacturer to realize AMOLED panel mass production, the company is still in a state of continuous loss.

In 2017-2019 and from January to June 2020, the operating revenue of Hehui optoelectronics is 616 million yuan, 803 million yuan, 1.513 billion yuan and 921 million yuan respectively; the net profit of the Company attributable to the shareholders of the parent company is - 1 billion yuan, - 847 million yuan, - 106 million yuan and - 546 million yuan respectively. As of June 30, 2020, the company's audited undistributed profit is - 746 million yuan.

Although the loss is serious, but the company is generous in R & D investment. During the reporting period, the proportion of R & D investment in operating revenue was 27.24%, 22.40%, 27.52% and 16.49% respectively.

AMOLED semiconductor display panel industry is a technology intensive and capital intensive industry. In short, it is a "money burning" industry. Since the establishment of the company, it has gradually strengthened the capacity construction of AMOLED panel industry, resulting in higher investment in fixed assets. At the same time, AMOLED panel manufacturers need a long time cycle from project construction to production capacity, completion of yield climbing, and Realization of scale benefits. The fixed cost allocation in the early stage is large, and the unit cost is high.

Gross profit rate data can be more intuitive to see the gap between the company and the same industry. During the reporting period, the gross profit margin of the company's main business was negative, which was - 99.67%, - 70.68%, - 31.45% and - 29.34%, which was far lower than the average value of the same industry.

Among the comparable listed companies in the same industry, the only company with negative gross profit margin is vicino (OLED products). Since its reorganization in 2018, the company is mainly engaged in OLED semiconductor display panel business. In 2018 and 2019, the gross profit margin of its main business was - 6.13% and - 8.3%, respectively, but its gross profit margin was also much higher than that of Hehui optoelectronic.

There are two possible reasons for the negative gross profit rate of glow discharge, one is that the bad rate is relatively high, and the other is the high depreciation rate. The panel industry is a high-scale industry, which basically makes money from several leading enterprises. At present, the scale of Hehui optoelectronics is still relatively small. " On September 14, a senior panel industry analyst told reporters.

Lin Zhi, chief analyst of witdisplay, further analyzed that "Hehui optoelectronics has 4.5 generation line and 6 generation line, with monthly production capacity of 15K. Rigid AMOLED has relatively small capacity and small supply, and mainly supplies to some non brand manufacturers, with low profit. The investment of OLED production line is high, the recovery cycle is long, and the annual equipment amortization is large, so AMOLED production line is easy to generate losses at the initial stage

Preparing for a new round of panel competition

Despite the loss, Hehui still has many bright spots.

From the perspective of equity structure, the company is 100% state-owned, the actual controller is Shanghai SASAC, and the equity structure is relatively simple. Three shareholders Lianhe investment, Shanghai integrated circuit fund and Shanghai Jinlian held 75.12%, 20.88% and 4% respectively.

From the client side, in the field of smart phones, the well-known brand manufacturers of the application company's products include Huawei and Xiaomi; in the field of intelligent wear, the well-known brand manufacturers of the application company's products include Huawei, Bubugao (Xiaotian), Xiaomi, oppo and vivo; in the field of tablet / notebook, the well-known brand manufacturers of application company's products include Bubugao and Lenovo.

Backed by state-owned assets, it supplies Huawei, Xiaomi and other well-known manufacturers. Compared with many other companies, Hehui optoelectronics has a higher starting point.

After a good hand, the next step is how to develop. However, in the face of the financial constraints of the panel industry, which is a capital intensive industry, Hehui photoelectric obviously needs more financing channels.

"Hehui optoelectronics is in the second and third echelon of domestic AMOLED industry. Landing on the scientific and technological innovation board is conducive to Hehui optoelectronics to raise funds, expand production capacity, increase R & D investment, and enhance the competitiveness of enterprises." Lin Zhi said.

According to Hehui optoelectronics, most of the companies in the same industry are listed at home and abroad, with strong financing capacity. Samsung Electronics and LGD are overseas listed companies, BOE, vicino, Shenzhen Tianma and TCL technology are all A-share listed companies. In contrast, the company's current financing channels are relatively limited, which is not conducive to solving the capital needs in the process of rapid development of the company.

At the same time, Hehui optoelectronics is also aware of the importance of economies of scale. It said that compared with other companies in the same industry, the company's current overall capacity is smaller than Samsung Electronics, LGD, etc., which is not conducive to the company's further production and marketing scale economy effect.

In fact, compared with vicino, which has a more consistent business, there is a gap of more than 1 billion yuan between Hewlett Packard and Hehui optoelectronics. The latter's revenue scale last year was 2.69 billion yuan, while that of Hehui optoelectronics was 1.513 billion yuan.

This time, he Huiguang plans to raise 10 billion yuan to invest in the capacity expansion project of the sixth generation AMOLED production line and supplement the working capital. It is self-evident that the intention of expanding the production capacity with the help of the capital market is self-evident.

It should be pointed out that at present, the panel industry is undergoing in-depth adjustment, and many Korean enterprises have withdrawn from LCD production lines and turned to OLED to accelerate the process. Undoubtedly, people in the industry believe that it is necessary to raise funds from the perspective of the industry.

However, it should be noted that the industry generally believes that the next opportunity for the panel industry is mainly flexible AMOLED semiconductor display panel, while the advantage of Hehui optoelectronics lies in the rigid AMOLED panel.

At present, the price of Samsung's rigid OLED depends on whether Samsung's strategy of introducing display is the highest. At present, Samsung display rigid AMOLED has launched price competition with LTPS LCD, and the overall market price of rigid AMOLED will also be affected. "The main production capacity of Hehui optoelectronics is rigid AMOLED, which will be affected by the price war and reduce the gross profit margin."

According to the prospectus, Hutchison's production line has the ability to produce flexible and rigid display panels. In the prospectus, it admitted that with the further increase of large screen demand, smart phones are facing great challenges in portability and operability, and flexible folding screen design emerges as the times require. However, flexible folding screen still has a large optimization space in crease and wear, and relevant technical key points need to be further improved. At present, there is no large-scale mass production application in the terminal market.

What is the current production situation of Hehui flexible panel? How can the company win in the fierce market competition in the future? In the face of these problems, the company's directors and secretaries office failed to reply before the press deadline.

But according to the prospectus, Hehui has mastered a number of related technologies. Founder Securities research paper pointed out that flexible OLED is the deterministic trend of smart phones, and domestic manufacturers are accelerating the rise. With the improvement of product yield and the release of production capacity, the cost of flexible OLED is expected to drop rapidly, thus opening the industry ceiling.

 

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