Event description

TCL Technology released its mid-2022 report that during the reporting period, the company achieved operating income of 84.522 billion yuan, an increase of 13.60% over the same period last year; net profit of 664 million yuan, down 90.2% from the same period last year; net profit of-627 million yuan, down 111.36% from the same period last year; and net operating cash flow of 9.017 billion yuan.

Event comment

TV prices fell sharply, part of the size fell below the cash cost, taking into account the relatively high revenue of TCL Huaxing TV, which is obviously affected by the prosperity of the industry. In the first half of the year, TCL Huaxing realized a sales area of 22.496 million square meters, an increase of 26.4 percent over the same period last year. The operating income of the semiconductor display business was 37.26 billion yuan, down 8.81 percent from the same period last year, with a loss of 2.27 billion yuan.

TCL Huaxing maintains the world's leading competitiveness, TV panel market share ranks second in the world, 55 inches and 75 inches products share the world's first, 65 inches products share the second place in the world. In the first half of the year, the proportion of non-TV business income of Huaxing Optoelectronics increased to 25%, and the product structure was continuously optimized. The T9 Guangzhou G8.6 line is lit ahead of schedule, and the T9 line locates high-end IT products, which is expected to make a breakthrough in the application fields such as notebook, high-end commercial display and vehicle, helping the company transform and upgrade from a large-size display leader to a full-size display leader, and TCL Huaxing is expected to become a long-term cash flow business.

The company's new energy photovoltaic business continues to grow at a high speed, gradually forming the second growth pole. In the first half of the year, TCL Central achieved an operating income of 31.7 billion yuan, an increase of 79.7 percent over the same period last year, and a net profit of 3.225 billion yuan, an increase of 68.4 percent over the same period last year. The total production capacity of the company's photovoltaic materials reaches 109GW, and the export of silicon wafers accounts for the first place in the global market. It is expected that the company's crystal production capacity will exceed 140GW by the end of 2022, becoming a global photovoltaic silicon single crystal scale TOP1 manufacturer.

In terms of semiconductor materials business, the company adheres to Total Solution full-product solutions, through the dual-path development of characteristic processes and advanced processes. During the reporting period, the company achieved full coverage of 8 inches and less mainstream products, 12 inches has completed mass production of products below 28nm, and has the ability to provide global customers with a full range of solutions. The shipping area of polished wafers and epitaxial wafers increased by 76.2% year-on-year, of which 8-12 inch shipments increased by 107%; revenue increased by 79.9%. It is expected that by the end of this year, the company's production capacity of 6-inch, 8-inch and 12-inch products will reach more than 900, 000, 1 million and 300, 000 per month, respectively.

We continue to be optimistic about the long-term growth of the company's two-wheel drive. The fourth quarter shows that the main business is expected to repair compared with the previous quarter, the resumption of procurement by overseas leading manufacturers and industry production cuts are expected to help TV prices hit bottom and rebound, and the company's TV business accounts for a relatively high share, or first benefit from the pick-up in TV prices. It is estimated that the return net profit of the company from 2022 to 2024 is 1.558 billion yuan, 4.549 billion yuan and 7.568 billion yuan respectively, and the corresponding PE is 38.19,13.08,7.86 times respectively.

Risk hint

1. The demand for IT products is weakening and the competition pattern is deteriorating.

The price recovery of TV in the fourth quarter was affected by the epidemic more slowly than expected.