Citi: BOE Technology posts third-quarter loss; panel pressure may persist through 2027

Where did third-quarter results fall short of expectations?

BOE Technology reported third-quarter revenue of 48.677 billion yuan, down 7% quarter on quarter and 9% year on year, and 4% below Citi’s forecast. It posted a net loss of 996 million yuan, compared with Citi’s previous forecast of a 2.354 billion yuan profit.
Gross margin for the quarter was 15.0%, up 1.2 percentage points from the second quarter, but expenses as a share of revenue rose from 10.4% to 12.0%, and operating profit fell 16% quarter on quarter to 1.463 billion yuan.

Management attributed the weak results to softer IT demand and declines in both OLED volumes and prices. The IT business accounted for approximately 37% of the company’s revenue in the first half of 2026, with notebooks and tablets making up a relatively large share. The company has a high share at leading PC customers, so weak PC demand had a pronounced impact on quarter-on-quarter profit.
Rising memory prices weakened end demand, and demand for notebook and tablet products fell 17% year on year and 20% quarter on quarter in the third quarter. The company is seeking price increases for TV panels, but near-term increases are more difficult for IT panels. It plans to seek increases after checking customer inventories in the first quarter of 2027.
BOE shipped more than 120 million OLED panels in the first three quarters, up 9.2% year on year. However, both sales volume and prices fell quarter on quarter in the third quarter, and the combination of larger shipment volumes and low prices widened losses. The company said OLED prices continued to fall in the fourth quarter, while it expects low prices to accelerate capacity exits.

The LCD industry’s average utilization rate had fallen below 80% in October 2026. Taiwanese manufacturers are retiring capacity, and no new LCD production lines are expected globally. The company expects the overall market to move gradually toward a balance between supply and demand by the end of 2027.
Citi continues to expect weak IT and smartphone demand to keep the panel business under pressure throughout 2027, with the outlook for improvement in 2028 also uncertain. The bank cut its net profit forecasts for 2026, 2027 and 2028 by 57%, 54% and 39%, respectively, to 3.25 billion, 4.327 billion and 7.291 billion yuan.

The company produced a 24-layer glass packaging substrate sample in August 2026 and recently completed reliability testing with good results. Yields have improved rapidly over the past four months, but some key processes still need improvement.
Customer qualification is progressing smoothly, with no major issues raised so far. At the current pace, the company may receive customer requests for small batches of samples for product qualification in the first quarter of 2027. Citi believes an announcement of a mass-production line in the first half of 2027 could catalyze the share price, but expects no significant revenue contribution in 2027–2028.
Citi cut its target price from 8.7 yuan to 4.7 yuan and maintained its neutral rating. The new target is based on a forecast price-to-book ratio of 1.3 times for 2027. The bank believes potential mass production could drive a valuation re-rating, but also lowered its valuation multiple because of the recent weakening in AI market sentiment.