At present, OLED has become the general trend to replace LCD, and Ruilian new material is also well prepared to drain every drop of its value while LCD is still in the “age of war”. At the same time, we should lay out OLED. When LCD begins to decline, OLED will continue to protect its performance.
While the mobile phone industry is still echoing the voice of “LCD is never a slave”, in the upstream material field of OLED display, some companies have quietly begun to lay out.
Ruilian new material is one of the leading enterprises of OLED materials in China. After years of development, more than 1300 kinds of “OLED front-end material compounds” have been developed, and more than 1800 kinds of synthesis routes have been independently developed. The products have achieved the full coverage of “luminescent layer materials” and “universal layer materials”.
Idemitsu, DuPont, Merck, Doosan, duksan and other international leading enterprises occupy about 70% of the global market share of OLED terminal materials. Ruilian new materials has all established cooperative relations.
At the same time, Ruilian new material is also a leading manufacturer of “single liquid crystal” in the world. With its liquid crystal monomer products, Ruilian new material has become the core supplier of Merck and JNC, which occupy about 80% of the global mixed liquid crystal market. Ruilian new material has established stable cooperation with 800 million time space (688181), Hecheng and Chengzhi Yonghua.
In recent years, the rapid development of OLED seems to be a trend to replace LCD. On the other hand, the LCD industry is in a “low ebb” as excess capacity continues to drive down the price of LCD panels.
Under such a situation, how will Ruilian Xincai balance these two businesses? Can it rise in the wave of product update iteration?
Drain all LCD value
In recent years, the business scale of Ruilian new materials has grown steadily. From 2017 to 2019, its revenue has increased from 720 million yuan to 990 million yuan, with a compound annual growth rate of 17.3%; its net profit has also increased from 78 million yuan to 148 million yuan.
Among them, liquid crystal material is the revenue pillar of Ruilian new material. From 2017 to 2019, its liquid crystal material business achieved revenue of 378 million yuan, 597 million yuan and 569 million yuan respectively, accounting for 53.6%, 69.8% and 57.6% of the current total revenue.
The liquid crystal material produced by Ruilian new material is mainly single liquid crystal. The single liquid crystal is mixed together in different proportions, which is the “mixed liquid crystal” finally used in the manufacture of LCD panel.
In 2019, the sales volume of Ruilian new material liquid crystal monomer products will account for 16% of the global market. The success is also due to its in-depth cooperation with Merck and JNC. In the current period, Merck of Germany and Nakamura of Japan (designated buyer of JNC) are the top two customers of Ruilian new materials, and they jointly contributed nearly half of the operating revenue of Ruilian new materials.
However, although the liquid crystal material business is still the main revenue source of Ruilian new material, its revenue growth has declined. At the same time, the revenue of Ruilian new material OLED increased by 50% year-on-year to 230 million yuan.
In the “ebb and flow” of revenue scale of these two businesses, does it mean that the LCD material business has really reached the top?
In fact, the LCD material business of Ruilian new material has not reached the upper limit, and its LCD monomer sales have been growing, from 80.49 tons in 2017 to 131.08 tons in 2019. The decrease of LCD material revenue is mainly due to the impact of the decrease of LCD panel price, which leads to the corresponding decrease of upstream material price.
With Samsung, LG and other display panel manufacturers gradually reducing or withdrawing LCD production capacity, the world’s production capacity is further transferred to China, and the price of LCD is gradually warming up.
In addition, the downstream LCD display panel market still has some room for development.
This is because, although the development of OLED is gradually eroding the LCD market, LCD is still the mainstream of the flat panel display market. In 2019, the global flat panel display market will reach US $105.2 billion, of which the LCD panel market will reach US $79.3 billion, accounting for 75.37%.
Driven by the trend of large-scale LCD TV panel and the new generation of information technology such as 5g, the market scale of LCD panel will continue to grow. According to IHS data, in 2019, the global LCD panel shipment area is 216 million square meters, and it is expected that by 2023, the LCD panel shipment area will increase to 239 million square meters.
At that time, as the upstream material supplier of LCD panel, Ruilian new material will continue to benefit.
In order to meet the increasing demand for liquid crystal materials, Ruilian new materials plans to raise 300 million yuan in the project of applying for listing this time to build two new high-end liquid crystal display material production workshops.
Preemptive layout of OLED
Throughout the development process of display technology, from “CRT TV” to “plasma TV”, and then to today’s LCD, the alternation of new and old technologies is common. LCD, which once won the competition with plasma display technology, is now facing the impact of OLED.
OLED, or “organic light-emitting diodes”, and OLED display is made of organic light-emitting diodes. According to the different driving methods, OLED can also be divided into “PMOLED” and “AMOLED”, AMOLED is the main development direction.
From the light-emitting principle of LCD and OLED, LCD light-emitting mainly depends on “backlight module”, which is usually composed of a large number of LED backlights, and the liquid crystal material is equivalent to “shutter switch”. Unlike LCD, OLED does not need backlight module or liquid crystal layer to control the amount of light. It can realize self illumination.
And more importantly, because the structure of OLED display is different from that of LCD display, the “filter”, “polarizer”, “backlight” and “mixed liquid crystal” used in LCD are replaced by “OLED terminal material”. Therefore, in the whole panel manufacturing, the cost of OLED material accounts for much more than that of liquid crystal material. The cost of OLED materials accounts for about 30% of the cost of OLED panel materials.
The luminescent layer material is the core part of OLED terminal materials. According to the different colors, the luminescent layer materials can be divided into blue, red and green materials.
At present, Ruilian new material products have covered these three kinds of luminescent layer materials and realized large-scale sales. At the same time, Ruilian new materials is also one of the few domestic enterprises that can produce OLED materials on a large scale. In 2019, Ruilian new materials will occupy about 14% of the global “materials before OLED sublimation” market.
Due to the relatively simple structure, OLED panel is lighter and thinner than LCD panel. At the same time, the material characteristics of OLED also make it possible to achieve flexible display and transparent display. These features also make OLED panels gradually replace LCD panels in smart phones, VR and smart watches, becoming a new choice for device manufacturers.
Take mobile phones as an example, the flagship machines of major mobile phone brands have abandoned liquid crystal display (LCD) and turned to OLED. Even apple, a loyal LCD user, has adopted OLED display in its X and XS series.
However, due to the limitation of evaporation technology, yield and other reasons, the price of OLED is significantly higher than that of LCD, and the market of OLED materials will also focus on small and medium-sized screen products in a short time.
However, unlike the LCD panel market that has entered the stock competition, the OLED market can be said to be a blue ocean.
As a new display technology, more and more commercial applications of OLED display have been made in recent years. The shipment area of AMOLED panel has increased from 1.55 million square meters in 2014 to 6.59 million square meters in 2018, with a compound growth rate of 43.6%. According to IHS’s forecast, by 2023, AMOLED display panel’s shipping area will increase to 22.4348 million square meters.
The downstream volume will also promote the development of upstream OLED raw material industry. IHS also predicts that the market demand for OLED terminal materials in 2019 will be about 82.34 tons, an increase of 42.36% over 2018. In the future, with the increasing output of OLED display panels, the demand for OLED display materials will continue to expand.
At that time, as a supplier of OLED front-end materials, Ruilian new materials will rapidly expand its OLED business scale.
Digs in the field of pharmaceutical intermediates
The display material market alone can no longer satisfy the appetite of Ruilian new materials. It has also extended its business to the field of “pharmaceutical intermediates” and successfully expanded its pharmaceutical “CMO / cdmo” business.
When the revenue of liquid crystal materials declined, the overall revenue of Ruilian new materials could continue to grow. In addition to OLED materials business, Ruilian new materials also contributed half of pharmaceutical intermediates. In 2019, the revenue of pharmaceutical intermediates business is 156 million yuan, with a year-on-year growth of 160%.
The so-called CMO, namely “pharmaceutical contract production”, refers to accepting the entrustment of pharmaceutical companies to provide customized production services such as “pharmaceutical intermediates”, “APIs” and “pharmaceutical preparations”.
The emergence of cdmo is due to the fact that with the pharmaceutical enterprises constantly strengthening the requirements of cost control and efficiency improvement, the single OEM production service has been unable to fully meet the needs of customers. Pharmaceutical enterprises hope that CMO enterprises can use their own technology accumulation to undertake more innovative service functions of process R & D and improvement, so as to help pharmaceutical enterprises improve synthesis efficiency and ultimately reduce manufacturing costs.
At present, in order to reduce the cost of drug R & D and production, most multinational pharmaceutical enterprises will entrust CMO enterprises to produce customized intermediates and APIs, and improve the efficiency of new drug R & D through specialized division of labor.
According to the statistics of business insights, the market size of China’s CMO in 2017 is about 31.4 billion yuan. By 2021, the market size of China’s CMO is expected to increase to 62.6 billion yuan, with a compound growth rate of about 18.83%.
Pharmaceutical intermediates refer to all kinds of compounds before the production of “API”. Although they seem to be different from display materials, they are all organic materials in essence. The successful cross-border is also due to the technical experience of “chemical synthesis”, “purification”, “trace analysis” and “mass production system” accumulated by Ruilian new materials in the field of display materials.
“Pa0045”, entrusted by Ruilian new materials to complete the research and development of synthetic route and large-scale production, is the main revenue source of pharmaceutical intermediates. In 2019, the revenue of pa0045 products will be 144 million yuan, accounting for 92.3% of the total revenue of pharmaceutical intermediates. It is also an intermediate of a new drug for the treatment of non-small cell lung cancer, which has been registered in Japan, the United States, Europe and other places.
Although the number of mature pharmaceutical intermediates developed by Ruilian new material is relatively small, Ruilian new material has more than 10 pharmaceutical intermediates projects in the research stage. With the promotion of the research and development stage of terminal preparations corresponding to the products in research, more pharmaceutical intermediates will be gradually realized, and pharmaceutical intermediates will become another core business of Lianrui new material.
With years of deep cultivation in the field of organic materials, Ruilian new materials has been able to establish a diversified business system with liquid crystal display materials as the core. At present, it is a general trend for OLED to replace LCD to become the mainstream of display technology. Ruilian new material is also well prepared to drain every drop of value of LCD while it is still in the “age of war”. At the same time, it is necessary to lay out OLED in the future. When LCD begins to decline, OLED will continue to protect it from being affected. With the gradual maturity of CMO business, it will also provide more possibilities for the performance growth of Ruilian new materials.
Editor in charge ajx