大中华区科技硬件行业研究：TCL评级为持有维诺信评级为减持

1、June 10, 2019 09:00 PM GMTGreater China Technology Hardware | Asia PacificInitiate on TCL Corp at EW, Visionox at UWTCLs recent restructuring and product mix improvement should provide some downcycle protection amid an uncertainMORGAN STANLEY TAIWAN LIMITED+Sharon ShihEQUITY ANALYST HYPERLINK mailto

2、:Sharon.Shih Sharon.Shih+886 2 2730-2865James WeiRESEARCH ASSOCIATE HYPERLINK mailto:James.Wei James.Wei+886 2 2730-2860Lily ChouRESEARCH ASSOCIATE HYPERLINK mailto:Li-Ling.Lily.Chou Li-Ling.Lily.Chou+886 2 2730-2869 Greater China Technology HardwareAsia Pacificdemand outlook and rising trade tensio

3、ns. Visionox is a pure AMOLED play, but it has yet to establish a track record.IndustryViewIn-LineExhibit 1: Ratings and price targetsOur cautious view on TFT-LCD and AMOLED development: We believeCompoany nameTickerRatingPrice Target(RMB)Current Price (RMB)PT upside/ downsidepersistent oversupply i

4、s likely to take hold in 2019-21 as a result of continued capacity additions by Chinese panel makers. Under the current expansion and exit plan, we expect the industrys glut ratio to be in a range of 10-20% after 4Q19 similar to 2015s supply/demand dynamics, when panel prices dropped 30-50% in six m

5、onths. In the meantime, Sino-US trade tensions could exacerbate the oversupply if tariffs are imposed on TVs or products like smartphones, notebooks, and monitors; gross panel area demand could decrease 3-4% in 2019- 21, we estimate. In such a scenario, the glut ratio could rise to 15-25%, and most

6、panel makers would likely see deteriorating profitability and decreasing panel shipments. On the other hand, we believe the recent Huawei restrictions could delay Chinese panel makers AMOLED development, considering that Huawei would likely be the largest driver of AMOLED adoption in 2019-21.We init

7、iate coverage of TCL Corporation at Equal-weight with an Rmb3.1 price target: We expect TCL to benefit from its recent reorganization, as it sold non- core businesses (e.g., TCL Communication, TCL Multimedia, Tonly) back to TCL Holdings. The restructuring should improve TCLs financial performance as

8、 those business are either loss-making or have low margins. We also expect TCL to see meaningful share gains in the high-end TV segment (i.e., 65 and 75), underpinned by its two new Gen 10.5 fabs. We believe its improved financial performance, as well as a better product mix, will provide some downs

9、ide protection during the industry downcycle. TCL is trading at 1.4x 2019e P/B, which is around its downcycle valuation.We initiate coverage of Visionox at Underweight with an Rmb8.5 price target: Visionox is effectively a pure AMOLED play, as 90% of its revenue in 2018 came from the OLED business,

10、leaving it less exposed to oversupply in the TFT-LCD market. However, were worried that intensifying competition from BOE and Samsung Display and weaker demand for flexible AMOLED will delay Visionoxs AMOLED ramp-up considering its lack of relationships with tier 1 smartphone OEMs. We believe it is

11、unlikely that Visionoxs AMOLED business will turn profitable in the next two to three years due to continued pricing competition from Samsung and BOE as well as a likely low yield rate, and we view its current valuation of 1.1x 2019e P/B as unjustified.TCL000100.SZEW3.13.10%Visionox002387.SZUW8.512.

12、7-33%Source: Morgan Stanley Research. Share prices as at 6 June 2019Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley

13、 Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.+= Analysts employed by non-U.S. affiliates are not r

14、egistered with FINRA, may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.Order of PreferenceExhibit 2: Order of PreferenceLG DisplayInnolux

15、AUOTCLBOETianmaVisionox034220.KS3481.TW2409.TW000100.SZ000725.SZ000050.SZ002387.SZRatingEWEWEWEWUWUWUWTrading CurrencyKRWTW DTW DCNYCNYCNYCNYPrice Target19,000.07.38.93.12.910.68.5Current Price16,650.07.29.13.13.313.012.7Upside/(Downside) (%)14%1%-2%0%-12%-18%-33%Market Cap (in USD mm)5,044.32,270.0

16、2,781.06,141.416,900.33,776.0862.0Avg Daily Traded Vol (in USD mm)32.112.114.959.2303.866.313.4Street View: RatingsBuy/Overweight| 39%| 9%| 15%| 75%| 61%| 50%0%Hold/Equal-weight| 44%| 45%| 60%| 17%| 28%| 13%0%Sell/Underweight| 17%| 45%| 25%| 8%| 11%| 38%0%Bull Case Value24,000.010.011.24.44.018.512.

17、8Upside (%)44%39%23%42%21%42%1%Bear Case Value16,000.04.66.61.81.75.35.3Downside (%)-4%-36%-27%-42%-48%-59%-58%Risk/Reward Skew11.31.10.81.00.40.70.0Morgan Stanley Estimates FY19eKRWTW DTW DCNYCNYCNYCNYSales24,867,428251,886264,52470,177116,82629,4782,918EBITDA5,171,98030,95528,80010,73928,2242,994(

18、1,525)EBIT(78,020)(4,923)(8,200)2,7688,224454(1,626)EPS(298.73)(0.40)(0.62)0.170.090.55(0.29)FY20eSales25,852,316263,109256,15962,109129,91830,7794,063EBITDA6,095,68929,37229,2508,63329,4242,685(1,796)EBIT328,059(6,506)(5,750)3,4249,424447(1,897)EPS517.29(0.64)(0.50)0.180.100.46(0.30)FY19 MSe vs. Co

19、nsensus MeanSales-1.6%-3.2%-7.5%-29.3%-0.9%-6.4%NAEBITDA31.8%1.6%-8.9%-16.7%12.2%-35.9%NAEBIT-72.2%-40.2%12.0%-36.6%62.4%-74.1%NAEPS-62.8%-23.6%53.2%-46.4%-26.1%-19.9%NAFY20 MSe vs. Consensus MeanSales-3.4%2.9%-9.6%-58.2%-5.5%-13.0%NAEBITDA17.1%-2.3%-13.4%-43.1%0.1%-44.4%NAEBIT-40.0%-27.7%112.6%-41.

20、1%55.3%-76.3%NAEPS6.0%2.4%1694.1%-48.8%-40.5%-38.0%NAValuation Multiples at Last Close FY19eP/E-55.7-17.8-14.719.036.523.6-44.4P/B0.40.30.41.41.31.00.9EV/EBIT-192.5-7.1-9.423.225.889.4-15.5EV/EBITDA2.91.12.76.07.513.6-16.5EV/Sales0.60.10.30.91.81.48.6FCF Yield0.00.00.00.80.0-0.1-0.7FY20eP/E32.2-11.1

21、-18.017.033.227.9-42.2P/B0.40.30.41.31.31.00.9EV/EBIT40.4-6.6-14.619.223.490.7-13.7EV/EBITDA2.21.52.97.67.515.1-14.4EV/Sales0.50.20.31.11.71.36.4FCF Yield0.4-0.1-0.10.0-0.10.0-0.1Source: Refinitiv, Morgan Stanley Research. e = Morgan Stanley Research estimates. Share prices as of 6 June 2019Industry

22、 SummaryAs a result of non-stop capacity addition in China, the TFT-LCD panel segment is likely to face a chronic oversupply in 2019-21, and Sino-US trade tensions could spur a further rise in the glut ratio if the US imposes 25% tariffs on TVs, smartphones, notebooks, and monitors imported from Chi

23、na. Under such a scenario, we believe the industry glut ratio would head into uncharted territory, more severe than even 2015s oversupply, when panel pricing plunged 30-50% in just six months. China panel makers AMOLED development could be further delayed if the Huawei restriction is implemented as

24、planned, considering that Huawei looks positioned to be the largest user of AMOLED displays in 2019-21. Before the US ban was announced, Huawei had planned to adopt a respective 40-45mn and 65-70mn units of flexible AMOLED displays in 2019 and 2020 for its high-end models (the P and Mate series). If

25、 the US government follows through on its Huawei restriction, AMOLED panel demand is likely to be weaker than expected.Our base, bull and bear case scenariosWe factor a range of assumptions into our supply and demand models, and believe there are three likely outcomes for the panel industry. In our

26、base case scenario, we assume industry supply/demand mirrors that of 2015, when most panel makers reported deteriorating profitability in 2H15-1H16 as a result of non-stop ASP declines. In our bull case scenario, we assume some capacity exit from existing panel makers, while panel demand meets our e

27、xpectations, and thus panel makers profitability could see a meaningful rebound, supported by rising panel prices. In our bear case scenario, we assume a negative impact from rising tariffs on Chinese imports to the US market, and thus gross panel area demand would decrease 4% annually in 2019-21, w

28、e estimate.Subdued by such an abnormally high industry glut ratio, most panel makers would become loss-making in the period, per our assessment.Exhibit 3: Panel glut ratio analysis: Our base, bull and bear case scenariosBear caseBull caseBase caseNormalTight25%26%23%22%19%20%21%20%21%17%18%18%15%14%

29、15%15%11%12%11%14%13%12%8%14%17%15%8%8% 7%8% 8%12%13%14%6%6%5%6%11%8%10% 9%12%11%2%6%4%30%25%20%15%10%5%0%1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19e 3Q19e 1Q20e 3Q20e 1Q21e 3Q21eSource: Company data, Morgan Stanley Research. e = Morgan Stanley Research estimatesBase case (oversupply)Our base case

30、 includes the ongoing capacity expansion from Chinese and Korean players, and incorporates our expectations that gross area output will rise at a 7% CAGR in 2019-21, which is well above the 5% demand CAGR we expect in the period. Thus, we expect the industry glut ratio to be 10-20%, which is similar

31、 to 2015s glut ratio, when panel pricing fell 30-50% over a six-month period. Under these assumptions, we expect the profitability of most panel makers to trend lower on ASP declines.Exhibit 4: TFT-LCD capacity expansion breakdown by generation(mn sqm)20182019eYoY2021eCAGR (2018-21e)G523230.4%230.1%

32、G5.5660.0%60.0%G641410.0%410.0%Exhibit 5: Global: Gross area demand breakdown by applicationAutomobile Monitor2.22.42.62.88.2%Desktop Monitor22.622.722.222.3-0.3%TV157.3167.0183.0188.26.2%Mobile PC15.414.614.013.8-3.5%Application (mn m2)20182019e2020e2021eCAGRG736360.0%360.0%Mobile Phone14.315.716.0

33、16.55.0%G8/8.5153152-0.7%147-1.2%Public Display6.47.38.08.28.8%G8.6172967.3%3628.0%Others2.932.692.702.77-1.8%G10/10.51430109.7%6869.4%Grand Total220.9232.1248.5254.74.8%Total2903179.0%3587.3%YoY (%)10.5%5.1%7.1%2.5%Source: IHS Markit, Morgan Stanley Research. e = Morgan Stanley Research estimatesSo

34、urce: IHS Markit, Morgan Stanley Research. e = Morgan Stanley Research estimatesExhibit 6: Panel price trend, by size (standardized)Exhibit 7: Gross margin trend, by panel maker (standardized)110%100%90%80%70%60%50%40%200%150%100%50%0%-50% AUOInnolux TCL BOELG Display30%5-Jan-15 20-Jun-15 20-Nov-15

35、20-Apr-16 20-Sep-16 20-Feb-17 20-Jul-17 20-Dec-17 20-May-18 22-Oct-18 8-Apr-19 65 4K 55 FHD 50 FHD 42/43 FHD 32 HD-100%Dec-14Jun-15Dec-15Jun-16Dec-16Jun-17Dec-17Jun-18Dec-18Source: Company data, Morgan Stanley ResearchSource: WitsView, Morgan Stanley ResearchHowever, TCLs shipment allocation in the

36、high-end panel market (i.e., large-size TVs and public displays) should increase, underpinned by its new Gen 10.5 fab. As such, we expect TCLs blended ASP to rise, which should partially mitigate the panel price decline.Exhibit 8: Blended ASP (US$) trend by panel maker180 AUOBOE TCL Innolux Corp.LG

37、Display Samsung16014012010080604020-1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19e 3Q19e 4Q19e 1Q20eSource: IHS Markit, Morgan Stanley Research. e = Morgan Stanley Research estimatesBull case (balanced supply and demand dynamics)Our bull case scenario assu

38、mes a meaningful legacy capacity exit from existing panel makers (Exhibit 9), while panel area demand rises at a 5% CAGR in 2018-21. In this case, the industry glut ratio recedes to normal levels, at 5-15%, and panel pricing sees a meaningful rebound. Under these assumptions, share gainers (i.e., BO

39、E and TCL) shipments and profitability levels should increase while share losers (i.e., AUO and Innolux) improved profitability is partially offset by decreased panel shipments.Exhibit 9: Capacity that is likely to exit or be restructuredCompany Fab name GenerationMax. Capacity(K/Month)Gross Area Ou

40、tputRamp-up Year Fully Depreciated Year Original EOL Year(mn sqm)SamsungL8-1-18.5805.3200720132022SamsungL8-2-18.5804.1200720132022SamsungL7-27.01609.1200620112019LG.DisplayP55.01001.1200220072018AUOL3C3.25600.3199920062017AUOL3D3.25650.4200120082015AUOL4A3.5600.4200120082017AUOL5A5.0500.820032009AU

41、OL5D5.0751.320032011InnoluxFab 35.01452.5200320102018InnoluxT04.0200.4200420092018InnoluxT15.0601.0200420102018BOEB15.0951.6200820162016SharpTaki No. 2C3.5450.220002005SharpTaki CGS B4.0950.7200320102018Source: IHS Markit, Morgan Stanley ResearchExhibit 10: Glut ratio analysis before and after the a

42、forementioned legacy capacity shutdownCurrentAft. legacy capacity shut downNormalTight19%15%14%20%21%18%18%15%14%14%15%14%12%13%11%12%11%11%8%8% 7%8% 8%8%9%6%6%5%6%10%11%12%6%8%6%6%2%4%25%20%15%10%5%0%1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19e 3Q19e 1Q20e 3Q20e 1Q21e 3Q21eSource: Company data, Mo

43、rgan Stanley Research. e = Morgan Stanley Research estimatesBear case (uncharted oversupply)Our bear case assumes that the US imposes 25% tariffs on TVs, smartphones, notebooks, and monitors imported from China, and thus gross panel area demand decreases 3-4% in 2019-21. In this scenario, overall su

44、pply/demand dynamics are heavily in oversupply, at 15-25% an historically high glut ratio for the panel industry and we would expect panel makers to temporarily shut down some fabs as most panel prices would sink well below cash costs as a result of decreasing demand and a margin squeeze from TV mak

45、ers. Under such conditions, we would expect the majority of panel makers to be loss-making, trading at around trough valuations.Exhibit 11: Glut ratio analysis before and after the aforementioned legacy capacity shutdown30%25%20%15%10%Aft. US tariffsBase caseNormalTight25% 26%23%22%20%21% 20%17% 18%

46、17%14%14% 15% 15%12%13% 12%18%11%10%8%8%8%12%6%6%5%6%2%5%0%1Q173Q171Q183Q181Q19e3Q19e1Q20e3Q20e1Q21e3Q21eSource: Company data, Morgan Stanley Research. e = Morgan Stanley Research estimatesChina panel makers AMOLED progress: Slower than expectedChinese panel makers AMOLED development has been slower

47、 than expected because of low production yields and utilization rates; thus, the conversion ratio remained low in 2018. We view the current AMOLED bottleneck as a chicken-and-egg situation, meaning that panel makers are struggling to ramp-up production yield because of a lack of panel shipments, whi

48、le smartphone OEMs are also unwilling to introduce or increase flexible AMOLED display adoption in their mainstream models because of the higher cost. We highlight BOE as the panel maker most likely to ramp-up its AMOLED production, underpinned by Huaweis increasing adoption in 2019-21. However, if

49、the US restriction on Huawei continues, we see increasing risk of pushing out or canceling its new model rollouts in 2H19 and 2020, which would hurt Chinese panel makers AMOLED development.Chinese panel makers AMOLED conversion rate remained low in 2018Chinese panel makers have been adding AMOLED ca

50、pacity since 2015, and gross panel supply should, we estimate, increase to 24mn sqm in 2021 from 4.4mn sqm in 2015.However, the overall learning curve for Chinese panel makers seems to be longer than expected. In 2018, Samsung had the highest conversion ratio, at 41%, while others suffered from eith

51、er low utilization rates or low production yields. EDO and Visionox have higher conversion rates than their Chinese peers (i.e., BOE and Tianma), which is mainly because of relatively lower designed capacity as well as their focus on rigid AMOLED panels in 2018.Exhibit 12: Gross area output before y

52、ield rate (mn sqm) breakdown,Exhibit 13: AMOLED capacity to shipment conversion ratio in 2018 20152016201720182019e2020e2021e (000 sqm)(000 sqm)Samsung3,7644,6017,0318,8549,0979,21810,069AUO83910%LGD893234617641,5542,4052,648BOE61271%BOE94941586121,9083,5284,759EDO1454833%CSOT1616161657624988LG Disp

53、lay76411715%Others4075107031,5112,9314,4335,402Samsung8,8543,64541%Total4,3705,5448,37011,75715,54620,20823,866Tianma418123%Source: Morgan Stanley Research. e = Morgan Stanley Research estimatesVisionox3597521%by panel makerMax OLED area outputShipment OLED areaConversion ratio (%)Source: IHS Markit

54、, Morgan Stanley ResearchChinese AMOLED progress will be delayed if Huawei ban continuesWe highlight BOE as a panel maker that is more likely to see a breakthrough in terms of production yield for AMOLED technology, underpinned by Huaweis increasing adoption of BOEs flexible AMOLED display in 2019-2

55、0. Before the US ban, Huawei had planned to adopt a respective 40-45mn and 65-70mn units of flexible AMOLED displays in 2019 and 2020 for its high-end models (the P and Mate series). As such, the US ban on Huawei poses a significant challenge to not only Huaweis smartphone business but also to BOEs

56、AMOLED progress. If the US follows through on its Huawei ban after the 90- day grace period, a key growth driver for China AMOLED development could potentially diminish, prolonging China panel makers AMOLED ramp-up process.Exhibit 14: Huaweis flexible AMOLED adoption rate prior to the US banExhibit

57、15: BOE and LG Displays flexible AMOLED panel shipmentsBOELG Display(mn units)6817%432%36%1125%100806040200ShipmentAdoption rate201720182019e2020e30%25%20%15%10%5%0%654433 321-0.30.40.10.110.10.00.225432101Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19eSource: Morgan Stanley Research. e = Morgan S

58、tanley Research estimatesSource: IHS Markit, Morgan Stanley Research. e = Morgan Stanley Research estimatesTCL Corporation: Reorganization to Enhance Core CompetencyWe initiate coverage of TCL Corporation at EW with a price target of Rmb3.1, implying 1.4x 2019e P/B. We think TCL Corporation can leve

59、rage its upcoming new capacity to increase its market share in the high-end panel segment (i.e., 65 and 75); thus, its improved product mix should provide some downside protection from deteriorating panel ASPs.Exhibit 16:Reuters: 000100.SZ Bloomberg: 000100 CH Greater China Technology HardwarePrice

60、TargetRmb3.1Up/downside to price target-Shr. Price close (June 3 2019)Rmb 3.152-Week RangeRmb4.44-2.27Sh out, dil, curr (mn)13,550Furthermore, as TCL Corporation sold its non-core businessMkt cap, curr (mn)US$6,276back to TCL Holdings, we expect this to have a positiveimpact on TCL Corporations fina