Source WeChat public number Liu Yuwei
Author Liu Yiwei
On March 14th, 2018, I went to the headquarters of BOE Technology Group Co., Ltd. (hereafter referred to as 'BOE') in Beijing Economic and Technological Development Zone, and Mr. Chen Yanshun, CEO of BOE, Ms. Sun Yu, Executive Vice President and CFO, and Zhang Yu, Senior Vice President. , Vice President Xu Xiaoguang and others discussed.
BOE was founded in 1993. In 1997, BOE was listed on the Shenzhen Stock Exchange B-shares. In 2001, it issued additional A-shares on the Shenzhen Stock Exchange. More than ten years ago, we published an analysis report on BOE. At that time, BOE just entered the display device industry. , Poor performance, loss year after year, challenged by the market and public opinion. The chart below is a line graph of non-recurring gains and losses net profit after BOE’s listing in 1997 to 2016.
Source: BOE's annual report for the calendar year
What happened to BOE since it went public? Why did BOE develop a display device?
First, the display device is a national strategic material
BOE’s predecessor was Beijing Electronic Tube Factory. In the 1950s-1970s, the main products were core electronic components such as missiles and satellites. BOE established a TFT-LCD (Thin Film Transistor Liquid Crystal Display) technology laboratory in 1997 and set up AMOLED in 2001 ( Organic Light-Emitting Diode Displays) Technology Laboratory.
The United States invented TFT-LCD, and Japan industrialized TFT-LCD. TFT-LCD is widely used in national defense and civil use. Developed countries all attach great importance to the development and manufacture of TFT-LCD. In 1994, the U.S. government established the National Flat Panel Display Initiative ( NFPDT) provides flat panel display products and technologies for the U.S. military.
BOE's first TFT-LCD production line was mass-produced in 2005, which signified that China began to manufacture LCD screens independently. Prior to this, China’s use of TFT-LCDs was totally dependent on imports. From R&D to the first mass production of TFT-LCD production lines, From scratch, BOE spent eight years and a large amount of research and development expenses. In December 2017, the world’s highest generation line—BOE Hefei’s 10.5-generation TFT-LCD production line was put into production. This marks China’s emergence as a global leader in display devices.
In 2017, China's first flexible AMOLED production line, BOE Chengdu's sixth-generation flexible production line was mass-produced, marking China’s emergence as a leader in the new display technology AMOLED field.
Since 1997, BOE established a TFT-LCD (Thin-film Transistor LCD) technology laboratory to start research and development. By 2017, BOE will become a leader in the global display industry. BOE has experienced 20 years. During this period, BOE’s decision makers and management After 20 years, we evaluated the time spent by BOE and R & D funds are worthwhile. China has finally mastered the strategic display technology, and has reserved sufficient basic materials and technologies for the future development of the Internet of Things.
Second, the core technology determines the profitability of listed companies
According to the U.S. Patent Service Agency IFI Claims U.S. Patent Licensing Statistics Report, there are two Chinese companies in the US TOP 50 ranking of patent grants: Huawei ranked 25th in 2016 and BOE ranked 40th in 2017; Huawei ranked 20th and BOE ranked 21st. For two consecutive years, BOE ranked No. 1 in terms of growth rate of US patent grants in the global ranking TOP 50.
BOE has hosted or participated in the formulation or revision of several international technical standards for the display industry. Among them, an international standard for IEC (International Electrotechnical Commission) IEC display module, presided over by BOE, was released in 2015. This is the first of its kind formulated by our country. Product specification OLED display products international technical standards.
After 20 years of accumulation, with independent research and development of core technologies as a solid foundation, BOE’s performance began to increase explosively in 2017. BOE’s TFT-LCD sales accounted for 25% of global market sales in 2017, and it has become a global TFT-LCD. Shipment number one supplier. In 2017, BOE’s net profit is expected to reach approximately RMB 750-7.8 billion, an increase of approximately 314% year-on-year. BOE’s profitability will continue to grow in 2018.
Third, the future layout
BOE has successfully stood in the forefront of the global display device industry, and is expected to further expand its market share in the world. However, the single product sales volume of a single supplier is ceilinged. Before reaching the ceiling, enterprises should plan ahead.
The display device is the basic material of the Internet of Things. Currently, BOE is working with leading companies in various industries. For example, Boxer Freshman of BOE and Alibaba, JD's Four Seasons Selection, Carrefour, etc. have completed cooperation and BOE provides electronic shelf label system solutions. Through the electronic shelf labels, transparent display, etc. for price management, logistics management, customer behavior analysis. BOE's automotive display products have been applied to most of the world's mainstream brand cars. BOE is working with residential enterprises to develop new building materials, to provide users with photovoltaic Photothermal solutions. BOE application display, sensing, artificial intelligence and big data and other core intellectual property rights technology combined with medical and life sciences, developed genetic test products, significantly reduced the cost of genetic testing; for surgery On-stage doctor's medical screen for analyzing illness; Medical x-ray sensor for reducing X-ray radiation. BOE and Haier cooperate to develop transparent refrigerator door that can be interacted with. Very sci-fi! Very fun! Very practical!
At present, BOE's operating revenue from smart systems is close to 20% of total operating revenue. BOE's advanced layout in the Internet of Things opens up space for BOE's profitability improvement.
IV. Enlightenment from BOE to us
Why does BOE have an explosive growth in 2017? What implications does BOE's performance change give us?
(I) Correctly identifying R&D projects
BOE is a technology-based listed company. As of the end of 2016, among nearly 50,000 employees, nearly 20,000 were technical and R&D personnel. In the first half of 2017, BOE's R&D investment was 3.169 billion yuan, accounting for 7.1% of operating revenue. Since 1997, , BOE invested a huge amount of R & D funds.
Whether the huge R&D investment can achieve the expected results depends on the correct positioning of R&D projects. BOE established the TFT-LCD (Thin Film Transistor Liquid Crystal Display) Technical Laboratory in 1997 and AMOLED (Organic Light Emitting Diode Display) Technical Laboratory in 2001. The establishment of the two laboratories is not only critical for the future development of BOE, but also relates to China’s future defense security and international competitiveness. It is on the basis of BOE’s correct determination of R&D projects that BOE’s performance will be 20 years later. There has been explosive growth.
(B) A reasonable board structure
Among the 8 non-independent directors of BOE Board of Directors, there are technical experts and financial experts. In the evaluation and decision-making of R&D projects, technical experts can make full use of their role and make correct decisions. The Board of Directors' financial experts ensured BOE’s good finances. Management. According to BOE 2017 semi-annual report, BOE’s net cash flow from operating activities in the first half of 2017 was 10.6 billion yuan.
BOE proposes to grasp the 'both ends' strategy: One end is technology, and the other end is technology market application. Only by mastering its own core technology of intellectual property, can an enterprise stand firm in the market and expand its market share. When BOE entered the display technology industry in 1997, The market was completely occupied by foreign companies. After BOE had mastered the core technology of independent intellectual property rights, it used the 'swamp marketing' strategy. From foreign competitors, it not only regained the domestic market share, but also seized the international market share.
According to BOE 2017 semi-annual report, BOE's operating income for the first half of 2017 was 44.6 billion yuan, up 68.65% year-on-year, of which 48.2% of its operating income came from the domestic market. This part of operating income increased by 23% year-on-year, and more than 50% of its operating revenue. Income from foreign markets, this part of operating income increased by 92.5% year-on-year.
5. Where should investment income come from?
I discussed with BOE CEO Mr. Chen Yanshun, etc. What should be the investment income that BOE has created for investors?
Gree Electric (53.420, -0.38, -0.71%) Chairman Dong Mingzhu purchased original stocks for more than 10,000 yuan at the price of 2.5 yuan per share in 1996 when Gree was listed. Now the market value of this part of the original stock has increased to More than 10 million yuan. Dong Mingzhu bought Gree shares as long as he had money. At present, Dong Mingzhu holds 44.8885 million Gree shares, with a market value of about 2.38 billion yuan. Gree Electric is a major personal property of Dong Mingzhu. Pearl’s personal income comes mainly from Gree’s annual dividend distribution. Since its listing, Gree’s accumulated cash dividend has been RMB 41.792 billion.
Since BOE’s listing in 1997, BOE’s accumulated cash dividends totaled 1.968 billion yuan, of which 1.047 billion yuan came from dividends on April 25, 2017. Currently, BOE’s senior executives and employees have begun to purchase BOE stocks in large quantities, which means that they are in favor of BOE. The confidence of the future development also means that BOE's stock will become their main personal property, and BOE’s cash dividend will become their main personal income.
Sixth, enhance the profitability of listed companies
Kweichow Moutai (739.850, -6.62, -0.89%) has a natural monopoly advantage, and has maintained a high cash dividend since its listing. Kweichow Moutai has long-term investment value.
In addition to listed companies with natural monopoly advantages such as Kweichow Moutai, the value judgment of other listed companies must first assess the company’s core technology with independent intellectual property rights. For example, HKUST (61.500, -0.35, -0.57%) is The field of intelligent voice research has entered the no-man's area with American competitors. Currently, in this 'no man's area', there are only China and the United States.
However, compared with BOE, the 7 non-independent directors in the HKUST Newsboard's board of directors are all technical experts and have no financial experts. Therefore, they are inferior to BOE in financial management and marketing. If ITF can improve the structure of the board of directors, increase financial experts , then, HKUST will bring more surprises to investors.
At present, some listed companies have world-class core technologies, but they are not good at marketing, so the company's performance growth is slow. For this part of listed companies, we are working hard to help them cooperate with other listed companies to improve their marketing capabilities.
There are also some listed companies that are competitive in the market segments. However, due to low operating income and limited investment in R&D, the company will suffer a fatal blow in the event of disruptive technology. For this part of the listed companies, we are studying whether Merger and reorganization, increase operating income, increase investment in R&D.
postscript:
Before this article was published, I submitted this article to BOE executives and department heads and asked them to confirm the content and data in the article. BOE executives and department heads are very rigorous, practical and realistic, for each fact and each The data is guaranteed to be accurate.
BOE will become a newly emerging blue chip stock.