Asian-foreign foreign investment expects that LCD panels will continue to have an oversupply trend for a long period of time, and prices are likely to decline slowly, which will erode the panel manufacturer AUO's gross profit margin and cash flow.
Asian foreign investment estimates that AUO's 2018 annual revenue will be reduced by 12%, gross profit margin and operating profit rate will decline by 6.4% and 7.3%, respectively. It is expected that large-size panel shipments will decrease by 2%, average The sale price will be reduced by 12% per year.
Looking ahead to 2019, Asian-foreign foreign investment estimates that AUO's revenue will decrease by 9% annually, and gross profit margin and operating profit rate will decline by another 2.6 percentage points and 3.3 percentage points. The price will be reduced by 11% per year.
Asian-based foreign investors believe that panel factories will start new production capacity from the second half of 2017, which will lead to excess supply of LCD panels and enter the down cycle of the economy, which may erode AUO ’s gross profit margin and cash flow. Maintain "underperform" rating and target price of 10 yuan.