TCL Tech_Solid visibility into 2025-26 earnings_FCF upcycle; upgrade to Buy

Summary of TCL Tech Conference Call Company Overview - Company: TCL Tech - Industry: LCD and OLED display panel manufacturing - Market Position: Second-largest LCD display panel supplier in China, largest gaming monitor and LTPS panel maker globally [doc id='34'] Key Financial Insights - Earnings Forecast: Earnings forecast raised by 12-18% for 2025-26, reflecting a positive outlook on TCL's panel business [doc id='1'][doc id='31'] - Revenue Growth: Expected panel business revenue CAGR of 16% from 2024-26, driven by large panel area shipments and improved ASP [doc id='9'][doc id='2] - Free Cash Flow (FCF): Anticipated sustained improvement in FCF due to disciplined capex and enhanced operating cash flow [doc id='3'][doc id='1'] Valuation and Price Target - Price Target: Increased from Rmb4.00 to Rmb6.00, implying a 1.9x 2025E P/BV [doc id='4'][doc id='28] - Current Stock Price: Rmb4.88 as of February 24, 2025 [doc id='6'] - Market Capitalization: Rmb91.6 billion (approximately US$12.7 billion) [doc id='6'] Panel Business Insights - Panel Shipments: Large panel area shipments expected to grow at a CAGR of 15% from 2024-26, supported by the acquisition of LGD Guangzhou G8.5 fab and ramp-up of T9 fab [doc id='2'][doc id='9] - Average Selling Price (ASP): Anticipated increase in large-size LCD panel ASP by 3% in 2025 and 1% in 2026 due to improved product mix [doc id='2'][doc id='9] - Gross Profit Margin (GPM): Expected GPM growth of 2.7ppt in 2025 and 1.7ppt in 2026, driven by product mix improvement and peak depreciation in 2026 [doc id='17'][doc id='2] Risks and Market Sentiment - Stock Performance: TCL's stock has underperformed the A-share Electronics Index by 22ppt since October 2024, indicating market skepticism about the sustainability of panel price recovery [doc id='20'][doc id='9] - Debt Levels: Net debt projected to decrease from Rmb144.8 billion in 2024E to Rmb138.6 billion in 2025E [doc id='5'] Industry Outlook - Supply-Demand Dynamics: Expected undersupply in large panels in 2024, with a potential oversupply in 2025, followed by another round of undersupply from Q3 2026 [doc id='35'] Additional Insights - Capex Plans: Total capex expected to decline by Rmb5 billion in 2025, stabilizing in 2026 [doc id='3] - Depreciation Trends: Combined depreciation for the panel business expected to peak in 2026, allowing for faster revenue growth compared to depreciation [doc id='2'][doc id='9] This summary encapsulates the critical insights from the TCL Tech conference call, highlighting the company's financial performance, market position, and future outlook.