Set to Supply OLED components for Laptops and Tablets
The author is an analyst of NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com. -- Ed.
BH Flex is expected to benefit as its North American client is set to adopt OLED panels for its laptops and tablets from 2024. As the prices of OLED components for laptops and tablets are 3~4 times higher than those for smartphones, it should contribute significantly to earnings. Reflecting the firm’s earnings growth, we view its shares as being excessively undervalued.
From smartphones to laptops and tablets
BH Flex is set to supply components for its North American client’s laptops and tablets, as well as its smartphones. As the OLED panels installed in laptops and tablets are larger than those installed in smartphones and the number of FPCB layers is higher, unit price should climb significantly compared to existing smartphone products. The new venture should become a mid/long-term growth engine along with the electronics business.
The firm’s North American client is highly likely to install OLED displays in its notebooks and tablets from 2024. BH Flex, which currently supplies OLED display FPCBs for smartphones to the North American company, is expected to benefit.
Although the client’s notebook and tablet sales volume is lower than its smartphone sales volume, the number of FPCB layers in notebooks and tablets is higher and the display areas are larger, so unit price is expected to be 3~4 times higher. BH Flex could begin mass production from as early as Sep 2023, and even if the shipment size is small, the contribution to earnings should be significant.
Concerns over share price decline overblown; current share price excessively undervalued
On Jul 13, BH Flex’s share price fell on reports that Chinese display maker BOE will again supply panels to the North America client. However, from our understanding, the volume to be supplied by BOE will be significantly lower than before. Also, we view the recent concerns as being overblown, believing that the volume and the unit price of the products supplied by BOE will be lower than market expectations.
Given the growth potential of: 1) BH Flex’s main business, on product mix improvement and market share expansion towards the North American client; and 2) the electronics division, which should turn to profit from 2H22, we view the firm’s current share price, which is equivalent to a 2022E P/E of 6.5x, as being excessively undervalued.