BOE (000725.SZ) announced on the evening of November 6 that it plans to subscribe for A-share shares issued by Huacan Optoelectronics (300323.SZ) for a private placement of no more than 2.1 billion yuan, becoming its largest shareholder and opening up the upstream chip link of MLED (Mini/Micro LED).
Two days ago, Qianzhao Optoelectronics (300102.SZ) also announced that its major shareholder Hisense Video (600060.SH) increased its stake to 16.8%.
From the perspective of the industry, as leading downstream panel and color TV companies accelerate their penetration into the upstream LED chip field, China's MLED industry chain is undergoing a reshuffle.
BOE bucks the trend to expand MLED business
Huacan Optoelectronics is one of the leading LED chip companies in China. Its LED chip business scale is second only to Sanan Optoelectronics (600703.SH) in the country. In the first half of last year, Huacan Optoelectronics was 24.87% controlled by Zhuhai Huafa. This transaction will allow Huacan Optoelectronics to "change ownership" again.
This transaction is also an important move for BOE to expand against the trend at the bottom of the downturn in the panel industry. Huacan Optoelectronics will issue no more than 372 million shares to BOE, with a subscription price of 5.6 yuan per share, which is 81.78% of its average price in the previous 20 trading days.
After the subscription is completed, BOE will hold 23.08% of the shares of Huacan Optoelectronics and become the largest shareholder; Zhuhai Huafa's shareholding ratio in Huacan Optoelectronics will be reduced to 19.13%, becoming the second largest shareholder, and promises not to seek control while BOE is the major shareholder of Huacan Optoelectronics; New Sure Limited, a shareholder holding 3.52% of Huacan Optoelectronics, will use its voting rights and nominations for all the shares of Huacan Optoelectronics.The rights and ancillary rights are irrevocably entrusted to BOE for management, which means BOE has 26.6% voting rights in Huacan Optoelectronics.
MLED is a new display technology that has developed strongly in fields such as backlight and outdoor large-size displays in recent years. From the perspective of the industry, this transaction can accelerate BOE’s layout of key links in the upstream LED chips of MLED, complement BOE’s current MLED business, and form a complete upstream and downstream industrial chain.
From the perspective of the MLED industry, the three core technologies are Mini/Micro LED epitaxy/chip technology, active drive backplane technology and high-speed/mass transfer technology. After BOE controls Huacan Optoelectronics, it will be able to quickly supplement the key technologies of Mini/Micro LED chips and cooperate with BOE's own active drive and high-speed transfer technology to establish a complete MLED technology system.
Mini/Micro LED industry chain includes three parts: upstream (substrate, epitaxy, chips, materials, equipment, etc.), midstream (packaging, backlight assembly, etc.) and downstream complete machine terminals. Among them, the technical threshold of epitaxial growth and chip manufacturing is high, and the equipment investment intensity is high. After this transaction, BOE will open up key links in the entire industry chain of substrate, epitaxy, chip, packaging and application.
In addition, Huacan Optoelectronics' Mini LED direct display chips have been used in many key projects of mainstream terminal manufacturers. Mini LED backlight chips have covered tablets, laptops, monitors, TVs, vehicles and other terminal products, and have rich customers and supply chain resources. The acquisition of Huacan Optoelectronics is a beneficial complement to BOE’s innovative ecological construction of IoT.
According to TrendForce forecast, the compound annual growth rate of Mini/Micro LED display applications is 18%, and the scale is expected to reach 188.6 billion yuan in 2030; MiniLED backlight applications have a compound annual growth rate of 42%, and the market size is expected to reach 121.8 billion yuan in 2030.
Huacan Optoelectronics is in the upstream, which can ensure the supply of core chips for BOE's MLED business and coordinate product iterative upgrades; BOE is in the middle and lower reaches, which can expand the "outlet" for the application of Huacan Optoelectronics' small-pitch LED chip products.
From a risk perspective, the semiconductor industry is subject to cyclical volatility, and the industry's pursuit of new technological breakthroughs has resulted in shorter product cycles. Huacan Optoelectronics' performance has been under pressure in recent years, with a low asset turnover rate and high debt repayment pressure. In addition, there are risks of talent flow. BOE stated that it will promote the improvement of Huacan Optoelectronics' operations, formulate talent retention and incentive plans, and focus on solving integration issues.
Currently, the global display panel industry is at the bottom of the downward cycle, and BOE is also under pressure. BOE achieves revenue in first three quarters of 2022132.744 billion yuan, a year-on-year decrease of 19.45%, and net profit attributable to the parent company was 5.291 billion yuan, a year-on-year decrease of 73.75%. Among them, in the third quarter of this year, BOE achieved revenue of 41.134 billion yuan and a net profit loss of 1.3 billion yuan attributable to its parent company.
Recently, the display panel industry has shown signs of recovery. According to a research report by research firm Omdia, LCD TV panel prices are expected to stop falling and rebound in October 2022 after falling for 15 consecutive months. BOE is also expanding against the trend, seeking a new round of growth. Last week, it announced that it plans to invest 29 billion yuan to build a new 6th generation semiconductor display device production line project in Beijing, focusing on the VR display product market. This time, BOE plans to take a controlling stake in Huacan Optoelectronics to further expand and strengthen its MLED business.
The MLED industry chain is facing reshuffle and reorganization
The LED chip industry is in a cycleAt the bottom, it has become an industry consensus that MLED new display will be the next growth point of the LED chip industry, which provides opportunities for downstream panels and color TV leaders to integrate upstream.
Huacan Optoelectronics achieved revenue of 1.767 billion yuan in the first three quarters of 2022, a year-on-year decrease of 26.11%, and a net profit loss attributable to the parent company of approximately 41.15 million yuan, a year-on-year decrease of 283.87%; of which, in the third quarter of this year, it achieved revenue of 480 million yuan, and a net profit loss attributable to the parent company was 52.59 million yuan.
Obviously, Zhuhai Huafa has been controlling Huacan Optoelectronics for more than a year, but it has not been able to change the passive situation of Huacan Optoelectronics in terms of performance. BOE's "taking over" the controlling stake of Huacan Optoelectronics will help Huacan Optoelectronics better form upstream and downstream synergies and bring opportunities for performance improvement.
Huacan Optoelectronics released its share price plan for the next three years (2023-2025) on the evening of November 6East Return Planning revealed that the profits distributed in cash each year are not less than 20% of the average annual distributable profits realized in that year, and the cumulative profits distributed in cash in the past three years are not less than 30% of the average annual distributable profits realized in the last three years; when the net profit in the first half of the current year increases by more than 30% year-on-year, and the ratio of net cash flow generated from operating activities to net profit is not less than 20%, mid-term cash dividends can be carried out.
Another leading domestic LED chip company, Qianzhao Optoelectronics, achieved revenue of 1.218 billion yuan in the first three quarters of 2022, a year-on-year decrease of 17%, and a net profit loss attributable to its parent company of approximately 21.73 million yuan, a year-on-year decrease of 113.2%; among them, in the third quarter of this year, Qianzhao Optoelectronics achieved revenue of approximately 390 million yuan, and a net profit loss attributable to its parent company of 35.81 million yuan.
Hisense Video has successively increased its holdings in Qianzhao Optoelectronics this year. According to Qianzhao Optoelectronics’ announcement on the evening of November 4, Hisense Video increased its stake in Qianzhao Optoelectronics through centralized trading on the stock exchange. After this increase in holdings, Hisense Video is drying lightingThe shareholding ratio of Qianzhao Optoelectronics has increased from 11.82% to 16.82%. Currently, Hisense Video has become the largest shareholder of Qianzhao Optoelectronics. In the next 12 months, Hisense Vision does not rule out the possibility of further increasing its stake in Qianzhao Optoelectronics.
As one of the top three companies in China and the world in terms of color TV shipments, Hisense Video is also actively deploying and developing its MLED business. Becoming a major shareholder of Qianzhao Optoelectronics will help Hisense Video obtain upstream LED chips and accelerate MLED collaborative innovation.
Previously, Sanan Optoelectronics, China's largest LED chip company, and TCL Huaxing, another leading display panel company in China (the parent company is TCL Technology (000100.SZ)), have already carried out in-depth strategic cooperation. They jointly established a joint laboratory for MLED chips in Xiamen and jointly launched a variety of Micro LED product samples.
With theThe deep bundling of domestic leading downstream panel and color TV companies with leading upstream LED chip companies will help accelerate the maturity of China's MLED industry chain and improve its competitiveness in the global market.
On November 4, BOE rose 2.02% to 3.54 yuan/share; Huacan Optoelectronics was suspended, and the stock price before the suspension was 7.41 yuan/share; Hisense Video rose 2.38% to 13.31 yuan/share; Qianzhao Optoelectronics rose 0.16% to 6.37 yuan/share.
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