In 2021, China’s PET optical basement membrane market reached 7 billion 900 million yuan, Chinese mainland’s supply and demand gap reached 370 thousand tons without considering imports. Our conservative calculation shows that in 2021, the demand for PET base membrane in Chinese mainland was 790 thousand tons, of which the demand for PET base film was 440 thousand tons, the demand for MLCC in the non display industry was 256 thousand tons, the demand for automobile and building windows was 95 thousand tons, while the supply side capacity was only 520 thousand tons, considering that the industry was in the initial stage of development, and there was a good rate of improvement. With regard to the ramp up of new investment capacity and the time of customer introduction, under the optimistic / neutral / pessimistic conditions, we assume that the capacity utilization rate is 80% / 70% / 60% respectively, and the gap reaches 37.3/42.5/477000 tons. The above is a conservative calculation of the amount of optical base film under the general structure of each product. Due to the complex and great difference of panel structure, the demand for pet base film for functional optical films such as OCA optical glue, antireflection film and quantum dot film is not included. We judge that the actual localization supply and demand gap may be greater than this calculation data. The annual import volume of BOPET film is about 300000 tons, most of which are high-end optical base films such as MLCC and OCA. The overall optical base film market is in a tight pattern of supply and demand.
The global consumer electronics industry has an output value of US $300 billion, and it maintains a 3% growth rate driven by the development of new display technology and consumption. With the global panel industry chain transfer, the panel capacity is concentrated in Chinese mainland, forming the global supply situation in Chinese mainland, and the demand for upstream materials will usher in a great explosion. It is estimated that the Chinese mainland’s PET optical basement membrane demand will reach 8 billion 700 million yuan in 2023. First, according to DSCC data, the capacity of Chinese mainland LCD and AMOLED will reach 69%/47% in 2025, and CAGR will be 7% in 5 years, which will exceed the global 3% growth rate. Second, the localization rate of downstream applications of optical base film has been continuously improved. The localization rate of brightening film, diffusion film and reflection film for backlight module has reached 50%, and the localization rate of polarizer and color filter in liquid crystal panel has reached 18% / 45%. The low self-sufficiency rate of optical base film has become an important restrictive factor for the capacity expansion of application materials. Third, the optical base film is a neck material with high barriers and high value. The United States, Japan and South Korea have a high monopoly and have a certain risk of supply restriction and interruption. The state has paid more attention to the autonomy of the supply chain, and the stability of the base film supply has also become an important consideration for downstream enterprises to select optical film manufacturers.
Technological breakthrough + price advantage + supply chain delivery advantage to promote the acceleration of domestic substitution of optical base film. Chinese optical base film manufacturers have made progress in technology and product quality. Their products can meet the requirements of industrial technical standards and gradually enter the downstream customer supply system. On the premise of ensuring product quality, on the one hand, compared with foreign brands, Chinese brand products have significant price advantages. The price of imported BOPET is 4-6 times higher than that of local products. The price difference mainly comes from cost (labor cost, transportation cost) and brand premium. On the other hand, local manufacturers have short transportation distance and short delivery time, which can quickly respond to the needs of downstream manufacturers. The industry pattern of downstream panel manufacturers has gradually stabilized and developed from the stage of scale competition to the stage of cost competition. At present, the panel is in the profit depression of the display industry chain, with a gross profit margin of (- 20%) – 30%. Low cost has become the key to enhance competitiveness. The cost of panel materials accounts for 77%, and the cost related to its Costar Group Co.Ltd(002189) film accounts for 21-34%. Therefore, the price advantage of domestic optical base film is prominent.
The Chinese mainland optical film industry is in the stage of technology accumulation. It is mainly attacking the low and middle end market. Reducing costs and high-end is the key to enhance the competitiveness of enterprises. The layout of the basement membrane can form a deep moat with cost plus technology. The factors affecting the cost include product yield, raw material cost, labor cost and transportation cost. There is little difference between the labor and transportation costs of Chinese enterprises. The first two are the key factors to open the gap. The base film accounts for about 70% of the optical film raw materials, and the quality of the base film directly affects the yield of the finished film, In addition, the optical base film is the link with the highest production barrier (optical base film > composite film > other optical films). The base film layout can form a deep moat of cost + technology, which is very important to the release of enterprise profits and capacity expansion.
Investment suggestion: the optical film industry is still in its infancy. The continuous expansion of downstream markets and the acceleration of localization process bring plate dividends. The bottleneck of supply capacity and supply chain stability of high-end base film in the industrial chain needs to be broken through. The breakthrough of base film technology has become the winner and loser of relevant enterprises. It is suggested to pay attention to the integration of industrial chain from base film to finished film Functional film platform companies with long-term technology accumulation focus on Jiangsu Shuangxing Color Plastic New Materials Co.Ltd(002585) , Jiangsu Sidike New Materials Science & Technology Co.Ltd(300806) and Sichuan Em Technology Co.Ltd(601208) .
Risk tip: technological breakthrough, customer introduction process and demand growth are lower than expected.
