The continued decline in the price of large-size panels puts pressure on 1Q22's performance.
TCL Technology announces 1Q22 results: revenue of 40.598 billion yuan, down 4.81% from the previous month The net profit was 1.353 billion yuan, down 43.73% from the same period last year. TCL Huaxing contributed revenue of 20.04 billion yuan, up 15.3% from the same period last year, and net profit was 340 million yuan, down 85.8% from the same period last year, mainly affected by the sharp decline in the price of large-size panels. TCL Central contributed revenue of 13.37 billion yuan, up 79.1% from the same period last year, and net profit was 1.46 billion yuan, up 96.2% from the same period last year. The gross profit margin in the first quarter was 12.26%, a month-on-month decline in 4.12pct, mainly affected by the decline in profitability of the semiconductor display business. Taking into account the rapid decline in panel prices and the relatively high proportion of the company's TV panels, we adjust our 23-year profit forecast to 62.90 TV 10.822 billion yuan (previous value: 9339 Universe 10.671 billion), 24-year earnings of 12.024 billion yuan, corresponding to EPS0.45/0.77/0.86 yuan, adjust the rating to "overweight", and lower the target price to 4.6 yuan (the previous value is 7.20 yuan), based on 1.3x 22-year PB. It is higher than the average value of industry Wind (1. 0 times 22-year PB).
The deterioration of supply and demand has led to continued pressure on the volume and price of 2Q panels. 3Q large-size panel prices or bottoming out according to Groupon Consulting data, the prices of 1Q22TV/NB/MNT panels have dropped by 10.0%, 16.2%, 13.6% respectively, especially for large-size TV panel products such as 65 "/ 75". At present, the prices of some panel products are close to the cash cost. On the demand side, we believe that under the background of the Russian-Ukrainian war, overseas inflation and repeated domestic COVID-19 epidemic situation, the demand for consumer electronic products such as TV, PC, tablets and mobile phones is weak, which is a drag on the panel demand; on the supply side, the crop rate of the major panel manufacturers remains relatively high, and the newly built production capacity of the 8.5G line in areas such as Chinese mainland and Taiwan will also be gradually released, resulting in downstream customer panel inventory is still high. We expect 2Q22 panel volume and price to continue to be under pressure, but looking forward to the third quarter, we believe that with the arrival of the industry's traditional peak season, stacked World Cup and other sports events, panel prices are expected to hit bottom in 3Q22.
The two-wheel drive strategy of "Semiconductor + Semiconductor Photovoltaic & Materials" is gradually developing in the medium and long term. As one of the leading companies in the global semiconductor display, we believe that the company will continue to strengthen its leading edge in large size, and gradually improve the layout of small and medium-sized ones, and gradually transform itself into a leader in the full-size field. In addition, the company actively arranges semiconductor and photovoltaic tracks, and has made continuous breakthroughs in the new track since it was successfully delisted from the Central mixed project in July 20. According to the company's 21 annual report, the sales volume of TCL Central photovoltaic materials ranked second in the world in 21 years, and the first in China. We believe that the company's two-wheel drive strategy will be gradually realized to provide support for medium-and long-term performance.
Downgrade to "overweight", with a target price of 4.6 yuan
Taking into account the accelerated decline in panel prices, the 23-year ASP forecast for 22gamma is lowered, reflecting the reduction of gross profit margin forecast 3.3/0.8pct to 13.5gambit 16.0%. Based on this, we adjust the 23-year profit forecast for 22gamma to 10.822 billion yuan (the previous value: 93.39max 10.671 billion), and the corresponding EPS is 12.024 billion yuan for 24 years, and the corresponding EPS is 0.45max 0.77max 0.86 yuan. Lower the target price to 4.60 yuan, based on 1.3x 22-year PB, higher than 1.0x of the industry Wind consensus average, based on the fact that the company is a global display industry leader.
Downgrade to overweight.
Risk hint: Korean factory capacity exit is slower than expected, downstream demand is lower than expected, capacity climbing is slower than expected.