2Q23 Revenue and net income increased month-on-month. 1H23's revenue was 85.149 billion yuan (YoY 0.74%), and net profit was 340 million yuan (YoY -48.68%). Among them, 2Q23 revenue was 45.724 billion yuan (YoY 4.01%, QoQ 15.86%), and net profit was 889 million yuan, which turned a loss into a profit over the same period last month. Benefiting from a positive supply-side pattern, prices of mainstream products have risen steadily, and the company's semiconductor display business revenue and profit have improved markedly; the revenue and profit of the new energy photovoltaics and semiconductor materials business have increased rapidly.
Losses in the semiconductor display business declined sequentially in the second quarter, and profitability increased. 1H23 semiconductor display business revenue was 35.53 billion yuan (YoY -4.7%), 2Q23 revenue was 20.41 billion yuan (YoY 18.5%, QoQ 34.9%), and net profit loss decreased by 2.15 billion yuan compared to 1Q23. The company's LCD production capacity is in the top two in the world. In the large-scale field, TCL Huaxing's high-generation line layout covers the four 8-generation line factories of T1, T2, T9, and T10, and the two t6 and t7, the world's highest 11-generation line factory. The TV panel market share is stable in the top two in the world; the company's 55-inch and above product share accounts for 78%, 55-inch and 75-inch product share is second in the world. The market share of high-end TV panels such as unscreened screens and 120HZ is steadily ranked first in the world.
The mid-size sector accelerates IT and vehicle deployment, and the small-size sector expands the VR/AR and exclusive display market. In the mid-size sector, the TCL Huaxing 6th generation LTPS production line expansion project is progressing according to plan. The T9 production line, which is positioned for mid-size IT and automotive businesses, has successfully climbed in mass production. It has completed the introduction of commercial display, display, laptop and other business brands. The medium-sized business is developing rapidly, accounting for 21% of revenue. With the rapid penetration of LTPS panels into new energy vehicles, the company's LTPS vehicle screen shipments have increased dramatically. In the small size sector, TCL Huaxing focused on LTPS and flexible OLED products through the T3 and T4 6th generation lines. In the first half of the year, LTPS mobile phone panels had the third largest market share in the world, and flexible OLED mobile phone panels had the fifth largest market share in the world. Looking ahead, prices of some mid-size products will bottom out and rise in the second half of the year, prices of small-sized products will stabilize, and operations are expected to improve significantly.
Relying on technological advantages to consolidate the leading position in the market, accelerate international layout and seize high-value market share.
1H23 TCL Central had revenue of 34.9 billion yuan (YoY 10%) and net profit of 4.84 billion yuan (YoY 50%).
The company continues to expand advanced production capacity, give full play to the scale advantages, cost advantages and market advantages of G12 products, and expand the company's leading position in the field of photovoltaic materials. As of 1H23, the company's total monocrystalline production capacity reached 165 GW, and the market share of photovoltaic silicon wafers is the highest in the world. The company is actively promoting local operations overseas. TCL Central and Saudi Vision Industries plan to jointly establish a joint venture to lay out crystal chip production capacity in the Middle East and strengthen battery module collaboration with MAXEON in Malaysia, the Philippines and other places.
Investment advice: Under the trend of LCD panel prices continuing to rise, we expect the company to have revenue of 1938, 230, and 265.7 billion yuan in 2023, 2024, and 2025, with year-on-year growth rates of 16.3%, 18.7%, and 15.5%, and net profit of 41.05, 67.87, and 8.107 billion yuan, with year-on-year growth rates of 1470.7%, 65.4%, and 19.4%, corresponding PE to 16.6, 10.0, 8.4 times, and maintain the “buy” rating.
Risk warning: downstream demand falls short of expectations; LCD panel prices fluctuate; new business development falls short of expectations.