China Display Optoelectronics Proposes Higher Sales, Purchase Limits with TCL; Shares Jump 14%

China Display Optoelectronics proposes higher sales and purchase limits with TCL, leading to a 14% jump in shares. TCL Technology Group forecasts an up to 101% jump in H1 profit and completed the acquisition of a 21.5% stake in Shenzhen China Star Optoelectronics Semiconductor Display Technology Co. LG Display plans to invest KRW700 billion in OLED facilities in South Korea.

Universal Display (NASDAQ:OLED) is poised for significant growth in the coming years, driven by several key factors. The company's focus on organic light-emitting diode (OLED) technologies and proprietary phosphorescent emitter materials positions it well for the next generation of display technologies. Despite near-term revenue growth looking unremarkable, the long-term prospects are promising, with multiple large-scale OLED panel fabs under construction and increasing demand from IT and automotive applications [1].

One of the most significant developments is the readiness of the phosphorescent blue emitter, which has cleared commercial performance thresholds on a customer's production line [1]. This milestone represents a potential structural uplift across both material sales and intellectual property (IP) monetization. The company's licensing-heavy model and asset-light operations already deliver high margins and strong cash generation, and the introduction of the blue emitter could further enhance these metrics.

The company's business model is designed to scale with minimal incremental cost, offering both topline visibility and product-driven optionality. The construction of Gen 8.6 fabs, which are purpose-built to serve IT formats like laptops, tablets, and monitors, is expected to go live in 2026, providing a clearer path to higher materials volumes [1]. Additionally, the form factor shift towards foldables and larger, curved OLED panels in automotive applications is expected to drive material content per unit, further boosting demand.

Universal Display's gross margin held steady at 77.2% in Q2FY25, while operating margin improved to 39.9%, driven by high-margin licensing and relatively flat operating expenses [1]. The company's model is designed to handle the volume increase within its current footprint, offering strong operating leverage and minimal need for additional capacity.

The current valuation of Universal Display is trading at a discount to its historical average and peer group multiples. The stock is currently valued at 28.0x FY25e EPS of $5.2 and 25.2x FY26e EPS of $5.2, compared to a historical average forward P/E of 43.4x [1]. The company's forward EV/EBITDA multiple of 21.0x is also the lowest in its peer set, indicating an undervalued nature.

In conclusion, Universal Display appears to be well-positioned for significant growth in the coming years, driven by the readiness of the phosphorescent blue emitter, increasing demand from IT and automotive applications, and the construction of new fabs. The company's strong margins, cash generation, and asset-light model make it an attractive investment opportunity.

References:
[1] https://seekingalpha.com/article/4809352-universal-display-stock-gearing-up-for-next-oled-cycle