Investment logic:

“Trade-in” boosted domestic demand for black electricity, and domestic manufacturer brands went overseas faster. In the domestic sales market, black power consumption has improved markedly due to the national supplement policy. According to Aowei Cloud Network, since September (W35-43) TV online and offline sales have been +78% and 49% year-on-year. High-end and large screens have accelerated, and black electricity consumption is expected to continue to heat up in the fourth quarter. In the export market, there is a clear trend of “China entering and leaving Korea”. According to Euromonitor, since 2018, the total global share share of Samsung and LG has declined from 34.4% to 30.9%, while the combined share of Hisense and TCL has increased from 15.1% to 21.1%. There has been an acceleration trend in the past two years. Considering that Korean companies have basically withdrawn from competition in the LCD panel market, Chinese enterprises have obvious advantages in the supply chain and cost side, are catching up at an accelerated pace on the technology side and brand side, and there is still room for further increase in overseas market share.

Panel prices have declined and the product structure has improved, and the profitability of the industry is expected to improve. Since 23Q2, panel manufacturers have continued to control production, and competition preparation orders are strong, and panel prices have entered an upward channel. Entering 24Q3, panel prices stopped rising and stabilized as demand for the competition ended. In August-October, the price of 55-inch panels was -3.0%/-5.3%/-4.5% year-on-year, respectively. Looking ahead to Q4, the peak overseas stocking season has come to an end, and the LCD TV panel market is likely to adjust sideways. The profitability of the black power industry is expected to improve under the resonance of factors such as relieving pressure on the cost side and improving the domestic sales structure.

Hisense's domestic sales strategy is clear, and the global layout is expected to enter a phase of accelerated harvesting. In terms of domestic sales, the subsidy mechanism is more favorable to leading brands. Since the second half of the year, Hisense has strengthened its Mini LED product matrix through Vidda. The new “E7N” series is highly competitive compared to competing products. The accurate launch time is accurate, and the national compensation policy is expected to fully enjoy this round of subsidy dividends. In terms of export sales, Hisense's overseas layout has entered an accelerated harvesting stage. The global TV share increased from 5.5% in 2015 to 11.0% in 2023. Currently, Hisense has localized R&D centers and manufacturing bases in key overseas markets. “Brands, products, channels, and production capacity” are being promoted comprehensively, and there is room for further improvement in global share and brand premium capabilities.

Profit forecasts, valuations, and ratings

We predict that in 24-26, the company will achieve revenue of 58.78/64.85/72.02 billion yuan, +9.6%/+10.3%/+11.1% year over year, net profit to mother 20.0/23.7/27.6 yuan, -4.5%/+18.4%/+16.3%, corresponding EPS of 1.54/1.82/2.11 yuan, and current stock price corresponding PE is 14, 12, and 10 times. The company continues to promote vertical integration of the supply chain. Relying on self-developed image quality chip technology, ULED X platform and multi-brand layout, the leading position is stable, and the short-term domestic sales strategy is clear. It is expected to fully enjoy the national supplement dividends. In the long term, overseas growth will improve quality+acceleration, and performance is expected to accelerate as overseas profitability increases. We gave the company a PE valuation of 16.0x in 2025, with a corresponding target price of 29.10 yuan. The first coverage gave it a “buy” rating.

Risk warning

Panel prices fluctuate; overseas demand falls short of expectations.