BOE's 2Q26 net profit guidance beats expectations, but quality is affected by non-recurring gains

Overview

This report focuses on BOE Technology's 2Q26 net profit guidance. The company's 2Q26 net profit and adjusted net profit guidance both indicate quarter-on-quarter improvement. Reported net profit is significantly above Citi and market expectations, but the report emphasizes that the outperformance mainly comes from non-recurring gains, such as changes in the fair value of financial assets held for trading; therefore, the quality of core operating profit is not equivalently strong.

Core views

Citi's core view is that investors have gradually placed less emphasis on panel-cycle fluctuations and are focusing more on glass substrate developments and optical connection-related opportunities. However, because glass substrate expectations may already be reflected in the share price, the rating remains Neutral. In the near term, LCD utilization may decline marginally after inventory replenishment in 1H, while OLED shipments are constrained by weak smartphone demand.

Analysis framework

The report uses the company's 2Q26 net profit guidance, adjusted net profit, LCD utilization, OLED shipments, and panel demand as its main analytical threads, and assesses the target price within a valuation framework. Valuation uses P/B rather than simply P/E because BOE is a cyclical, asset-heavy company.

Methodology notes

• Valuation methodsPB valuation

  Determine the target price using a 2.3x multiple of 2026E book value per share

  Citi uses 2.3x 2026E book value per share, implying a target price of Rmb8.7. The multiple is set at the five-year high to reflect the concentration and improved profitability of the LCD business, as well as potentially positive market sentiment from glass substrate applications starting in 2027.

• earnings_qualityrecurring versus non-recurring profit analysis

  Distinguish between reported net profit and recurring profit

  2Q26 net profit guidance is above expectations, but approximately Rmb1.8bn comes from non-recurring gains; therefore, the report believes recurring profit may be slightly below expectations.

Asset mapping & comparison

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

• BOE Technology (000725.SZ)

  Research subject; A-share display panel company

  Strengths

  2Q26 reported net profit is above expectations; improved concentration and profitability of the LCD business; glass substrate applications may generate positive sentiment from 2027.

  Weaknesses

  2Q26 outperformance is mainly driven by non-recurring gains; recurring profit may slightly miss expectations; 3Q26 LCD utilization and OLED shipments face marginal pressure.

  Comparison

  2Q26 midpoint net profit is 76% above CitiE's approximately Rmb2.019bn and 78% above BBGe's approximately Rmb1.991bn.

  Risks

  Panel prices, panel demand, end-market sales, and the pace of glass substrate adoption may all cause the share price to deviate from the target price.

Key data

• 2Q26 net profit guidanceRmb3.3-3.8bnMidpoint of approximately Rmb3.543bn, up 108% quarter-on-quarter and 117% year-on-year.
• 2Q26 adjusted net profit guidanceRmb1.6-1.9bnMidpoint of approximately Rmb1.757bn, up 22% quarter-on-quarter and 89% year-on-year.
• Non-recurring profitApproximately Rmb1.8bnMainly from gains on changes in the fair value of financial assets held for trading.
• 1H26 OLED shipments80mn+1Q26 was 40mn+; 3Q26 is expected to be approximately 40mn.
• LCD utilization82%Omdia data indicates approximately 82% in 2Q26 and approximately 83% in 1Q26; Citi expects it to decline to 80% in 3Q26.
• Target priceRmb8.7Based on 2.3x 2026E book value per share.
• Market capitalizationRmb280,405M / US$41,423MFrom the valuation summary on the report cover.

Impact & implications

Near-term reported earnings outperformance may support sentiment, but because profit mainly comes from non-recurring gains, the signal for an upgrade to core earnings is limited. Market focus may continue shifting from the traditional panel cycle toward glass substrate and optical connection developments, but if related expectations are already fully priced in, further share price upside may be limited.

Risks

• Panel price recovery is faster or slower than expected.
• Panel demand is stronger or weaker than expected.
• End-market sales perform above or below expectations.
• The pace of glass substrate adoption or application accelerates or slows.
• Weak smartphone demand may weigh on OLED shipments.

What to watch

• Whether 3Q26 LCD utilization declines to approximately 80% as expected.
• Whether 3Q26 OLED shipments remain approximately 40mn.
• Progress in glass substrate applications and whether the market continues to assign a valuation premium.
• The trend in recurring earnings after excluding non-recurring gains.
• Changes in panel prices and the inventory replenishment cycle.