Main points of investment

Event: the company released its three-quarter report for 2022, with operating income of 41.993 billion yuan in the third quarter, down 9.95% from the same period last year, and net profit of-383 million yuan, down 116.59% from the same period last year. The deduction of non-net profit was 1.26 billion yuan, down 141.30% from the same period last year. In the first three quarters, the operating income was 126.515 billion yuan, an increase of 4.52% over the same period last year. The net profit returned to the mother was 280 million yuan, down 96.92% from the same period last year. The non-net profit was-1.887 billion yuan, down 122.02% from the same period last year. The results in the third quarter were in line with expectations.

Panel prices have reached a low point and are expected to stabilize and rebound in the fourth quarter. Panel prices gradually fell in the first three quarters, manufacturers reduced the rate of growth, and industry profit margins entered the bottom of the cycle. TCL Huaxing realized operating income of 52.1 billion yuan and sales area of 3267 million square meters in the first three quarters, an increase of 15 percent over the same period last year.

Panel prices began to stabilize and pick up in October, and according to witsview data, TV prices of all sizes generally rose in late October. We expect the low point of the panel cycle to be over and panel prices are expected to continue to rise in the fourth quarter.

The photovoltaic business continues to improve. In the first three quarters, TCL Central achieved operating income of 49.84 billion yuan, an increase of 71.35% over the same period last year, and a net profit of 5.49 billion yuan, an increase of 68.94% over the same period last year. The overall single crystal production capacity has been increased to 128GW, while the company has invested and started the construction of 100000 tons of granular silicon, silicon-based materials and 10,000 tons of electronic-grade polysilicon projects, promoting the stability and optimization of the supply chain in many ways.

Profit forecast and investment suggestion: we adjusted the company's net profit from 2022 to 2024 to 3.4934 billion yuan, corresponding to PE167.5/15.3/8.8 times (according to the closing price of 2022.10.24). The low point of the panel industry has passed, panel prices have stabilized and rebounded, and TCL as a leader of TV panels is expected to benefit. Maintain the "prudent overweight" rating.

Risk Tip: downstream demand is lower than expected and panel prices are not as high as expected.