Panel Supplier Stocks Rise 36% in 2019, Beat Most Indexes
2019 turned out to be a great year for panel supplier stocks with our Panel Supplier Stock Index (PSSI) rising 36%. Its growth exceeds the US large cap index (SPY) which rose 29% and crushed the emerging market index (EEM) which rose 15%.
The gains can primarily be attributed to China’s panel suppliers who grew between 40% and 106%. Thanks to China’s government subsidies, Taiwan and Korean suppliers are at a cost disadvantage and have been forced to idle capacity and exit commodity markets which are becoming increasingly dominated by Chinese suppliers. As a result, China’s panel suppliers have gained significant market share, shown nice growth, improved their financial performance relative to competing suppliers and consequently their stock prices have surged. Even in OLEDs, where Chinese suppliers are just starting to make inroads, we saw incredible stock price appreciation in 2019 with Visionox up 106% despite minimal revenues to date. From Q1’19-Q3’19, Visionox’s revenues were just $273M, 1/24th those of AUO, but they have nearly the same market cap at $3.1B as investors believe Visionox’s OLED business will grow fast and become increasingly profitable thanks to large subsidies. On the other hand, investors in AUO assign little value to their legacy LCD business largely due to China’s subsidies.
As shown in the annual chart by panel supplier, Visionox was followed by Tianma up 75%, BOE up 71%, CEC up 40% and JDI up 12%. Of the non-Chinese display stocks, only JDI and HannStar saw their value rise with JDI up 12% and HannStar up 15% with JDI rescued after approaching bankruptcy. The Korean and Taiwanese suppliers focused on large displays - LGD, AUO and Innolux - saw their market value drop between 13% and 17%. Visionox enjoyed a large advantage from June, but all panel suppliers gained significant ground from November as the panel pricing outlook began to change.
2019 Stock Price Performance
2019 Monthly Market Cap Trend
You can see recent annual stock price change comparisons and 2016 to date performance in the table and chart below. As indicated:
- HannStar had the best performance in 2016 and still has the best performance since 2016. It turned around its business in 2016 thanks to strong demand from the feature phone and low-end smartphone market, high utilization from a single, depreciated fab and the ability to raise prices when capacity tightened as many competitors left the a-Si mobile market.
- The SPY had the 2nd best growth, up 60%. Good time for US equities.
- Chinese suppliers BOE and Tianma appear to be on an odd year growth plan with 2016 and 2018 down and 2017 and 2019 way up. As a result, BOE had the 2ndbest company performance up 54% from 2016 followed by AUO and Tianma up 17%.
- AUO has been down the past 2 years, but is still up 17% from 2016.
- Innolux, LGD and JDI have all lost ground since 2016 with Innolux down 5%, LGD down 31% and JDI down 44%. Innolux, LGD and AUO have each been down the past two straight years.