“Investors Network” Huang Yunxin
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This summer, the heatwave surged across the country, and the practice of green and low carbon became a hot topic of discussion. On August 24, the General Office of the Ministry of Industry and Information Technology, the General Office of the General Administration of Market Supervision, and the General Department of the National Energy Administration issued the “Notice on Promoting the Collaborative Development of the PV Industry Chain Supply Chain”. According to the research report of Zhongyuan Securities, the domestic photovoltaic industry is currently facing development opportunities for dual carbon emissions reduction, global energy structure transformation, and a shortage of phased energy sources.
Driven by the two layers of markets and policies, the transformation and upgrading of related enterprises is also in full swing. TCL Technology has strongly laid out the NEV sector through the acquisition of Zhonghuan Group in recent years, forming a main business centered on semiconductor displays, new energy photovoltaics and semiconductor materials.
On August 27, TCL Technology released its 2022 semi-annual report. The company's revenue for the first half of the year reached 84.522 billion yuan, an increase of 13.6% over the previous year. The revenue of TCL Central, a subsidiary of TCL, reached 31,698 billion yuan in the first half of the year, an increase of 79.65% over the previous year; deducted non-net profit attributable to shareholders of listed companies was 2,901 million yuan, an increase of 116.33% over the previous year.
Business structure optimization achieves a double parallel pattern
Data shows that in recent years, TCL Technology has adapted to the changing times and continuously optimized its business structure.
In the first half of 2021, the company's semiconductor showed that business revenue accounted for 54.92% of operating income, and that share fell to 44.09% in the first half of 2022. Accordingly, the company's new energy photovoltaic business revenue rose from 23.71% to 37.5%. The semi-annual report mentions that the company's new energy photovoltaic and semiconductor materials industries have made full use of their technological leadership, and their share of revenue and performance contributions has increased significantly.
The company's business structure has gone from focusing on the semiconductor display business to now that the semiconductor display business and the new energy photovoltaic business go hand in hand, and its resilience to risks has been enhanced.
Affected by the downturn in the consumer electronics industry, TCL Technology Semiconductor showed that its performance in the first half of 2022 was under pressure. During the reporting period, TCL Huaxing achieved a sales area of 22.496 million square meters, an increase of 26.4% over the previous year, and the semiconductor display business achieved revenue of 37.26 billion yuan, a year-on-year decrease of 8.81%.
However, from a long-term perspective, the trend of optimizing the semiconductor industry pattern has not changed, and the concentration of the industry has increased. According to a report by research agency Lotto Technology, mainland Chinese panel manufacturers shipped 84 million pieces in the first half of 2022, with a global market share of 67%, and TCL Huaxing steadily ranked in the top three. Guoxin Securities stated in the LCD industry monthly report earlier, “We are optimistic that domestic panel leaders such as TCL Technology will seize the era dividends of China's consumption upgrade and localization, and achieve a steady increase in profitability through the scale effects, cost advantages, and industry voice and pricing power brought about by leading market share.”
“According to TrendForce data, as panel manufacturers began to regulate production capacity one after another, prices for 55-inch panels and below stopped falling in early July, and the decline in 65-inch panels also subsided.” Great Wall Securities believes, “As the panel industry approaches the bottom, TCL Technology Company, as the leading panel industry, will benefit first from industry recovery.”
Meanwhile, TCL Zhonghuan's performance has continued to grow since the merger, becoming an important increase in TCL Technology's profit contribution. According to Dongfangcai.com data, from 2019 to 2021, TCL Central's non-net profit growth rates were 98.38%, 53.48%, and 307.56%, respectively. In the first half of 2022, the revenue volume of TCL Central and TCL Huaxing was already close. TCL Huaxing's revenue was 32.43 billion yuan, and TCL Central's revenue was 31,698 billion yuan.
The vertical and horizontal layout of the new growth pole has the highest production capacity in the industry
The most popular tracks for investment in recent years have been new energy and semiconductors. Under the segmented circuit, the market prospects for new energy photovoltaics and semiconductor materials are broad.
According to the forecast of the China Photovoltaic Industry Association, under conservative circumstances, China's new PV installed capacity will reach 90 GW in 2025. Compared with 48.2 GW in 2020, the compound growth rate is 13.3%. According to SEMI data, the global semiconductor materials market reached US$64.3 billion in 2021, an increase of 16% over the previous year, a record high.
It is worth mentioning that after the merger and acquisition of TCL Zhonghuan, TCL Technology had a unique advantage in the new energy photovoltaic and semiconductor materials circuit. TCL Zhonghuan has gone through two important downturns in China's photovoltaic industry and is one of the leading companies in China's photovoltaic industry.
In terms of new energy photovoltaic production capacity, by the end of the first half of 2022, TCL midring crystal production capacity reached 109 GW. With the expansion of production capacity in the 50GW (G12) solar grade monocrystalline silicon material smart factory for crystals in Yinchuan, Ningxia, it is expected that the company's crystal production capacity will exceed 140 GW by the end of 2022, becoming the world's largest manufacturer of photovoltaic silicon monocrystals; in terms of semiconductor material production capacity, the shipping area of polishing sheets and epitaxial film products increased 76.2% year-on-year in the first half of 2022, of which 8-12 inches increased 107% year-on-year and revenue increased 79.9% year-on-year in the first half of 2022 to achieve domestic Leading position.
Furthermore, after years of accumulation, TCL Zhonghuan achieved comprehensive coverage of domestic customers and breakthroughs with many leading international customers. On August 12, TCL Central issued an announcement stating that it plans to use its own funds to subscribe for 5-year convertible bonds issued by MAXN. The latter's business covers more than 100 countries, covering Africa, Asia, Oceania, Europe and America. The products cover the global PV roof and power plant market. This move is of great significance to TCL Zhonghuan's development of the international market for the new energy photovoltaic industry.
In addition to owning TCL Zhonghuan, TCL Technology also issued an announcement in the first half of the year stating that it will join hands with GCL Group to invest in electronics-grade polysilicon and granular silicon. On August 25, the commencement ceremony for the 10,000 ton/year electronic-grade polysilicon and 100,000 ton granular silicon project in collaboration between TCL Technology and GCL Technology (03800.HK) was held in Hohhot, Inner Mongolia. Li Dongsheng, founder and chairman of TCL, said at the commencement ceremony that TCL Zhonghuan's upstream cooperation with GCL Technology on a granular silicon project is an inevitable choice for reducing comprehensive energy consumption and developing collaboratively; further extending the chain through semiconductor polysilicon raw materials downstream is a necessary path to strengthen supply stability.
The valuation is at the bottom or there is a lot of room for a premium
Judging from the performance of the secondary market, after March 2021, TCL Technology's stock price fell all the way down. As of the close of trading on August 26, the company closed 4.31 yuan/share. However, whether the company is already at the bottom of historical valuations can be referred to the previous round of stock price fluctuation cycles.
In the previous cycle, the low of TCL Technology's stock price occurred roughly at the end of 2018, and the high stock price was at the beginning of 2021. According to Flush data, TCL Technology's net market ratio hovered around 1.2 times at the end of 2018, and the company's net market ratio reached 4.5 times in early 2021.
Currently, TCL Technology's net market ratio fluctuates around 1.5 times. Excluding the reasonable valuation increase generated by TCL Technology's acquisition of Zhonghuan over the years, it can be seen that the current position of the company's valuation is more similar to the situation at the end of 2018, which means that the company is currently at the bottom of historical valuations.
TCL Technology's net market ratio valuation reached a high of 4.5 times in the previous cycle, which is far higher than the company's current net market ratio. The valuation may have a lot of room for improvement. In addition, the company's valuation is closely related to market sentiment and business development. As market sentiment improves and the company's layout business develops rapidly, the valuation is expected to soar.
In July, Everbright Securities gave TCL Technology a “buy” rating. The agency pointed out that considering that TCL Zhonghuan's photovoltaic and semiconductor materials business is booming and that the superimposed panel industry is at the bottom of the cycle, it believes that the company's market value of 67.5 billion yuan is significantly underestimated.
In addition, several brokerage firms have recently given TCL Zhonghuan a “buy” rating. Among them, Zheshang Securities said that the company is a dual leader in photovoltaics and semiconductor silicon wafers, and its overall competitiveness continues to improve; Southwest Securities expects the company's net profit CAGR of 40.34% in the next three years.
“The development of new photovoltaic energy sources is a major strategic choice for TCL.” The continuous development of an enterprise consists first of seeing opportunities, and then arranging troops. Whether TCL technology, which accelerates its driving on low-carbon roads, can stand invincible in the changing pattern of the times, time will tell.(Produced by Thinking Finance) ■