TV Panel Price Hikes to Extend into April, but Valuations for AUO and Innolux Turn Less Attractive

The current cyclical upturn in TV panel prices, driven by brand pre-stocking for key promotional events, is expected to extend into April. However, this positive momentum is largely priced into the shares of Taiwanese panel makers AU Optronics and Innolux, whose valuations have reached mid-cycle levels. With TV resolution migration plateauing and the price cycle maturing, the investment focus should pivot from chasing short-term pricing to recognizing the structural improvement in industry profitability. Within the sector, we prefer BOE for its scale, business concentration, and more attractive valuation relative to its peer TCL. Our overall stance on the display panel sector remains Equal-weight.

Evidence Chain

TV and IT pricing dynamics remain positive but are approaching an inflection point. TV panel prices rose 2% MoM in March, with mainstream sizes up 1-3%, and we expect further increases in April. This is driven by brands securing supply ahead of the FIFA World Cup and China's 618 sales event, alongside high component costs encouraging earlier procurement. Concurrently, supply-side discipline persists, with industry utilization stable at 80-85% in Q1. The investment implication is that the price cycle's tailwind, while still present, is losing momentum and largely anticipated by the market. Meanwhile, IT panel prices stabilized in March (monitors +0.4%, notebooks flat), indicating a new equilibrium between cost pressure and brand demand.

Structural changes in supply are more durable than the current cyclical uptick. The industry's shift towards a "production-to-order" model and strategic focus on profitability represent a fundamental improvement. Consolidation moves and sustained utilization discipline support a higher baseline for industry returns. This structural shift reduces earnings volatility and supports a higher valuation floor over the long term, a factor we believe is not yet fully appreciated relative to the focus on monthly price fluctuations.

Valuations reflect the cycle, favoring BOE within the China A-share universe. AUO and Innolux now trade at 0.8x and 1.0x 2026e P/B, respectively, near or at their post-2022 mid-cycle averages, leaving limited upside from the current price cycle. Their emerging business contributions remain negligible. Among Chinese players, BOE trades at a 2026e P/B of 1.1x, a discount to TCL's 1.6x, while offering superior scale and focus on the display segment. The investment implication is clear: rotate away from Taiwanese names where the cycle is priced in, and favor the relative valuation and business quality advantage of BOE over TCL.

Key Risks

• Weaker-than-expected end-demand for TVs or IT products, leading to earlier-than-anticipated panel price softening.
• A breakdown in production discipline among panel makers, disrupting the managed supply-demand balance.
• Slower-than-expected progress in non-commodity display businesses (e.g., OLED, advanced packaging), impairing long-term growth narratives.

Valuation and Trade Implications

Given the maturing price cycle and elevated valuations for Taiwanese suppliers, we recommend reducing exposure to AUO and Innolux. Within the panel sector, we favor a rebalancing towards BOE, which offers a better combination of valuation and business profile compared to TCL. The sector call remains Equal-weight, emphasizing selectivity and the long-term rerating story linked to structural supply improvement over short-term cyclical trades.

Appendix Data Summary

Exhibit: Selected TFT-LCD Panel Price Trends (USD)

Exhibit: Display Fab Capacity Utilization Industry average utilization has stabilized in the 80-85% range since Q3 2025, reflecting ongoing supply discipline.