Domestic LCD key raw materials, Lucky film polarizer material project trial production

On July 30, Lucky Film Co., Ltd. ("Lucky Film") announced that it had changed the use of part of the raised funds in 2023 to acquire Lucky Optoelectronic Materials Co., Ltd. ("Lucky Optoelectronics") and increase capital to construct the TAC film production line #3 project. Construction of the TAC film production line #3 project has recently been completed and entered the trial production phase. Following the completion of the trial production phase, preparations for project finalization and acceptance were completed.

On December 8, 2023, Lucky Film held its second extraordinary general meeting of shareholders for 2023, which reviewed and approved the "Resolution on Related-Party Transactions Regarding the Capital Increase of Lucky Optoelectronic Materials Co., Ltd. by Changing the Allocation of Part of the Raised Funds Following the Acquisition of 100% Equity." The resolution approved the use of 129 million yuan in unused funds raised from the 2014 private placement of shares for the "Solar Cell Backsheet Phase IV Expansion Project - Lines 14 and 15" (hereinafter referred to as "Lines 14 and 15") and 43.7949 million yuan in interest on the raised funds, as well as 53.2656 million yuan in surplus funds and 24.0449 million yuan in interest on the raised funds from the 2018 private placement of shares for the "Medical Imaging Materials Production Line Construction Project," for a total of 250 million yuan. These funds will be used to construct the TAC Film Line 3 project.

According to Lucky Film's previous announcement, in order to improve its industrial layout, leverage the advantages of its listed company platform, and achieve synergy, Lucky Film intends to use the existing raised funds to acquire 100% of Lucky Optoelectronics, making Lucky Optoelectronics a wholly-owned subsidiary of Lucky Film. After the acquisition is completed, the company will increase capital and use it as the primary vehicle for the construction of the TAC film production line #3 project. By integrating and leveraging TAC film technology, the company will gradually address its heavy reliance on imports for TAC film products, expand Lucky Film's business scope, and achieve high-quality development.

The TAC film production line #3 project targets mid-range TFT-based TAC film, primarily for small and medium-sized display products such as laptops, desktop monitors, monitors, dashcams, and digital photo frames. In 2022, Lucky Optoelectronics' major downstream customers, including Shengbo Optoelectronics, Sanlipu, Shengbaolai, and Hanqi, will demand approximately 101 million square meters of TAC film. By 2025, the planned and constructed polarizer production line will be operational, and market demand for this project's products is expected to increase to 121 million square meters. The TAC Film Production Line 3 project has a designed production capacity of 24 million square meters. Once it reaches its designed capacity, based on the estimated domestic TAC film demand of 561 million square meters in 2025, the products from the TAC Film Production Line 3 project will account for 4.28% of the total domestic TAC film market demand. The product market prospects are very promising.

According to Lucky Film's latest announcement on the evening of July 30th, the construction of the TAC Film Production Line 3 project includes the construction of a production plant, a TAC film production line within the plant, and other ancillary facilities and equipment. The project has recently been successfully completed and entered the trial production phase. The company will subsequently adjust and optimize equipment process parameters based on the actual production line trial production results, adapt the production process formula, gradually increase production speed, and improve product quality. The company will also complete the project's engineering settlement, financial finalization, and project file acceptance.

The TAC Film Production Line 3 project plans to utilize 250 million yuan in raised funds, with actual investment of 212 million yuan, leaving a remaining balance of 38 million yuan. After the project is completed and accepted, the remaining raised funds will be deposited in a dedicated account for raised funds and will not be used for any other purpose.

Lucky Film stated that the completion of the project will help improve the company's product mix, enhance its profitability, and boost its market competitiveness. Given that the project is currently in the trial production phase and requires subsequent adjustments and optimization of equipment process parameters, adaptation of production process formulas, and gradual increases in production speed, reaching full production will take some time. Subsequent production may also face potential risks, including but not limited to future changes in the market environment, industry policies, fluctuations in downstream demand, and intensified industry competition.

It is understood that TAC film is a key component of LCD polarizers. Polarizers are one of the core components of LCD displays. As a protective layer for polarizers, TAC film offers high light transmittance, low haze, and excellent weather resistance. It protects the internal polarizing film (such as PVA film) from moisture, UV rays, and mechanical damage, while ensuring uniform light transmission, enhancing the clarity and stability of displayed images.

Lucky Film stated that the completion of the project will help improve the company's product mix, enhance its profitability, and boost its market competitiveness. Given that the project is currently in the trial production stage, and will need to gradually adjust and optimize equipment process parameters, adapt production process formulas, and gradually increase production speeds, it will take some time to reach full production.