BOE's OLED product mix is upgrading, but memory price increases are dragging on end-demand; Goldman Sachs maintains Neutral

Overview

This report summarizes Goldman Sachs' key views following discussions with BOE management during the Hong Kong Asia Communacopia + Technology conference. The core judgment of the report is that LCD panels saw ASP improvement in 1Q26, OLED panels have opportunities for product mix upgrade in 2026, the Gen-8.6 OLED production line is expected to start mass production in mid-2026, and normalization of capex and depreciation will improve cash flow. However, rising memory prices are still suppressing demand for end products, especially smartphones, so while Goldman Sachs recognizes healthier industry competition and BOE's leading position, it maintains a Neutral rating.

Core views

Goldman Sachs holds a relatively positive view on supply-demand dynamics and the competitive landscape in the panel industry, believing BOE has a leading market position and can benefit from penetration of premium OLED panels, resilient demand from globally leading smartphone brands, and expansion of mid-sized OLED applications. The report also emphasizes that the current valuation already reflects some of the positives fairly fully, while rising memory prices are weakening demand for end devices, limiting room for a near-term rating upgrade.

Analysis framework

The report uses a combination of management discussions, industry supply-demand assessment, and relative valuation: it first evaluates LCD panel ASPs, OLED product mix, end-demand, and the timeline of the new production line, then sets the target price using a 2026E EV/EBITDA valuation framework, and combines this with industry cyclicality, market share, and new factory ramp-up risks to identify upside and downside factors.

Methodology notes

• Valuation methodology2026E EV/EBITDA

  The 12-month target price is based on 2026E EV/EBITDA

  Goldman Sachs assigns BOE a 12-month target price of Rmb4.79, with a target EV/EBITDA multiple of 4.9x, set near the company's historical average minus one standard deviation to reflect the cyclicality of the panel industry.

• Factor frameworkGS Factor Profile

  Comprehensive comparison across Growth, Financial Returns, Multiple, and Integrated factors

  Goldman Sachs' factor framework compares stocks with the market and industry peers using growth, financial returns, valuation multiples, and integrated factors. Growth metrics include sales, EBITDA, and EPS growth; financial returns include ROE, ROCE, and CROCI; valuation includes P/E, P/B, EV/EBITDA, and others.

• M&A probability frameworkM&A Rank

  Probability tiers for becoming an M&A target

  Goldman Sachs uses an M&A Rank from 1 to 3 to assess the probability that a covered company could become an acquisition target: 1 indicates high probability, 2 medium probability, and 3 low probability; if the rank is 1 or 2, an M&A component may be included in the target price.

• Research databaseQuantum

  Goldman Sachs proprietary financial database

  Quantum is used to access company financial statement history, forecasts, and ratios, and can be used for in-depth single-company analysis or cross-industry and cross-market comparisons.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• BOE (000725.SZ)

  Subject company of the report

  Strengths

  Improving LCD ASPs, upgraded OLED product mix, serving globally leading smartphone customers, the Gen-8.6 OLED production line nearing mass production, and normalization of capex and depreciation benefiting cash flow.

  Weaknesses

  Smartphone end-demand is pressured by rising memory prices, valuation is considered relatively fair, and the industry remains cyclical.

  Comparison

  Goldman Sachs' rating is given relative to other technology hardware and panel-related companies in its coverage universe; the report believes BOE holds a leading market position in the panel industry.

  Risks

  Flexible OLED shipments, gains in LCD and small-sized flexible OLED market share, new factory ramp-up, and end-demand may all deviate from expectations.

• BOE(B)

  Related security mentioned in disclosures

  Strengths

  Related to BOE's core business, with a disclosed price of HK$4.83.

  Weaknesses

  The report's investment analysis mainly focuses on BOE (000725.SZ), with limited independent fundamental discussion of BOE(B).

  Comparison

  Falls within the same company-specific regulatory disclosure scope as BOE's main listing.

  Risks

  Affected by the same company fundamentals, industry cyclicality, and disclosure relationship.

Key data

• Report date2026-05-20The body of the report shows the publication time as 20 May 2026 12:53AM HKT.
• Rating and target priceNeutral; Rmb4.79Goldman Sachs maintains a Neutral rating on BOE, with a 12-month target price of Rmb4.79.
• Disclosed current priceRmb4.31Company-specific disclosures list BOE's price as Rmb4.31; based on the target price, implied upside is about 11.1%.
• Valuation multiple4.9x 2026E EV/EBITDAThe target multiple is set near the company's historical average minus one standard deviation, reflecting the cyclical nature of the panel industry.
• LCD panels1Q26 ASP improved significantly, 2H26 demand relatively moderateManagement believes LCD panel ASP improved in 1Q26, driven by front-loaded demand from rising memory prices and global sporting events; however, market demand in 2H26 is expected to be relatively moderate.
• OLED panelsProduct mix upgrade in 2026Against the backdrop of rising memory prices, premium smartphone brands are expected to be more resilient, supporting shipment growth for high-end OLED panels such as LTPO.
• Gen-8.6 OLED production lineMass production expected in mid-2026Equipment was moved in during May 2025, and mass production is expected to begin in mid-2026, supporting penetration of mid-sized OLED and serving leading PC brands.

Impact & implications

The implication for investment judgment is that BOE shows signs of structural fundamental improvement, including OLED premiumization, better LCD pricing, mass production at the new line, and improved cash flow, but these positives need to be weighed against weak end-demand, industry cyclicality, and the valuation level. The report is better suited to support a neutral positioning and catalyst tracking rather than a clear one-way buy conclusion.

Risks

• Flexible OLED shipment growth may be faster or slower than expected.
• Market share gains in large-sized LCD panels and small-sized flexible OLED may be faster or slower than expected.
• New factory ramp-up may be faster or slower than expected, especially for the large-sized LCD-related B17 line and the flexible OLED production line.
• Rising memory prices may continue to suppress demand for end products such as smartphones.
• The cyclicality of the panel industry may lead to fluctuations in ASPs, earnings, and valuation multiples.
• If normalization of capex and depreciation is slower than expected, cash flow improvement may come in below expectations.

What to watch

• Whether LCD panel ASPs remain resilient in 2H26.
• Whether shipment growth for premium OLED and LTPO panels materializes.
• The trajectory of memory prices and their impact on smartphone end-demand.
• The progress of Gen-8.6 OLED line mass production in mid-2026 and yield ramp-up.
• The pace of improvement in capex, depreciation, and free cash flow.
• Changes in BOE's market share in large-sized LCD and small-sized flexible OLED.
• Procurement trends of BOE OLED panels by leading smartphone and PC brands.