TCL Technology: Guangzhou T9 production line’s net profit is expected to exceed 2.1 billion in 2026

On June 2, TCL Technology accepted a survey from more than 170 institutions, explaining the reasons for canceling the private placement, expectations for future minority stake acquisitions, t9 production line operations, etc. The details are as follows:

1. Seeing that the company has made adjustments to its plan to issue shares to purchase assets, what is the reason for the company's cancellation of the additional issuance of supporting funds this time, and what other aspects have been adjusted?

Since the announcement of the project draft at the end of March, this share issuance and asset purchase project has been progressing in an orderly manner, and the cash consideration has been paid through its own funds. Apart from canceling the raising of supporting funds, there have been no other adjustments to the transaction plan. The reason for canceling the additional issuance of supporting funds is that after carefully reviewing the current operating conditions and development plans, the company believes that the development stage has changed as follows:

1. The healthy competition pattern in the LCD display industry has been consolidated. TCL Huaxing continues to maintain its leading competitiveness and has basically passed the peak period of capital expenditures and minority equity repurchases. The past few quarters have shown an inflection point in free cash flow and operating performance.

2. The company's overall operating conditions this year have been better than expected. Despite facing the complex global political and economic landscape and the impact of sharp price increases in upstream raw materials, the company's semiconductor display business and semiconductor materials business continue to maintain steady growth; the new energy photovoltaic business operation reform has begun to show results, and operating performance in the first quarter of 2026 showed good improvement year-on-year and quarter-on-quarter. TCL Technology's net profit attributable to the parent company in the first quarter of 2026 reached 1.56 billion, a year-on-year increase of 54%, and set a new high in 17 quarters.

3. Financing channels such as banks and bond markets are smooth, and financing costs are better than expected. Based on smooth external, low-cost self-financing channels, the company is confident to support the development of core businesses and key projects.

Therefore, after carefully reviewing the current operating conditions and development plans, and fully listening to the opinions of all parties, the company proactively decided to cancel the 4.6 billion yuan of supporting financing from the market. We believe that such an adjustment is more in line with the long-term interests of all shareholders. This proactive cancellation of supporting financing will not affect the company's development strategy and overall shareholder return plan.

2. In the past few years, the company's main semiconductor display business has had relatively large capital expenditures, and has been very active in acquiring minority stakes in profitable production lines. Can you review the relevant progress and the expectations for future minority stake acquisitions?

Answer: From 2021 to 2025, it is a critical window period for the production capacity construction and pattern integration of the global semiconductor display industry. During this period, the company's semiconductor display business invested in the construction of new production lines such as t5 and t9, and acquired high-quality assets such as Samsung Suzhou t10 and LGD Guangzhou t11; it also acquired minority stakes in t6, t7 and other production lines.

During the past five years, the company's investment in new production lines included mergers and acquisitions, with total expenditures exceeding 60 billion yuan; in addition, the total amount of minority equity acquisitions from local government industrial funds exceeded 30 billion yuan; during the period, the company's equity financing in the capital market was approximately 18 billion yuan, and the rest was all solved through operating cash flow and self-raised funds.

In this short time window, on the one hand, the company has improved its full-size production capacity layout and jumped to the top two in the world in LCD production capacity; on the other hand, it has promoted the industry structure from fragmentation to head concentration. Not only has it contributed to the current healthy development trend of the global semiconductor display industry, TCL CSOT has also achieved rapid growth in its own performance and maintained industry leadership in profitability.

The company's semiconductor display business has basically passed the peak period of capital expenditures and minority stake acquisitions. As of the first quarter of 2026, the proportion of TCL CSOT's net profits attributable to TCL Technology shareholders has increased to more than 80%. The remaining minority shareholders' willingness to hold shares is relatively stable. If necessary, we will still adhere to the principle of focusing on the company's operating cash flow to advance.

3. What is the current progress of the acquisition of equity in the t9 project? When is the delivery expected to be completed and reflected in the listed company's statements?

The company’s project of issuing shares to acquire 45% of the equity of the T9 production line is currently in the stage of responding to the exchange’s inquiry letter, and will be completed after passing the exchange’s review and the China Securities Regulatory Commission’s registration process. As long as all work proceeds in an orderly manner, it is possible that all consideration payments and industrial and commercial changes for this acquisition will be completed in the third quarter. If there is progress during this period, the company will fulfill its information disclosure obligations in a timely manner. The profit corresponding to the listed company's acquisition of 45% equity of the t9 project will be fully reflected in the listed company's profit attributable to the parent company after the acquisition is completed.

4. What is the operation and performance of the t9 production line in the first quarter? What will be the impact on the EPS of listed companies after the project is implemented?

Answer: In terms of operating conditions, t9's current orders are in short supply and its product structure continues to be optimized. It is expected to maintain high production throughout the year. Against the background of the growth in production and sales scale and the optimization of product structure, t9's operating efficiency has significantly improved. In terms of specific performance and EPS, the previous draft announcement has disclosed that based on t9's profit of 1.16 billion in 2025, shareholders' EPS can increase by 5.4% under the pro forma standard; however, t9 is still in the climbing period in 2025 and cannot reflect the true profit level.

If based on t9's profitability in 2026, we have made specific performance disclosures in the latest inquiry letter reply. t9 achieved a net profit of 510 million yuan in the first quarter of this year. It is expected that the full-year net profit in 2026 will exceed 2.1 billion yuan, and the EPS increase will be even more significant.

In addition, T9 production line oxide backplane technology has made major breakthroughs this year. TCL CSOT completed the debut of the world's highest mobility 50 oxide product at SID2026. This year, it will promote the mass production of this technology, achieve higher image quality performance and lower power consumption, and provide solutions for AIPC and next-generation display devices. Therefore, t9 will launch more high value-added products in the future, and we are confident that t9's profitability will further grow in the future.

5. How is the company's recent core business operations?

Answer: 1. In terms of semiconductor display business, TCL CSOT continues to maintain its global leadership in competitiveness, its business revenue structure is more balanced, and the seasonal impact of a single business has weakened.

In 2025, Huaxing's net profit per quarter will be about 2 billion. In 26 years and in the long term, revenue and profit are still on a growth trend, mainly due to the following three factors:

1) The company's large-size business has stable profits and high profit contribution: the large-size display industry is highly concentrated. As one of the leading companies, it promotes orderly operation of the industry, and the prices of main products are rising steadily; the company's large-size revenue accounts for about 50%, and the trend of high-end products is obvious, with the highest profit contribution.

2) The small and medium-sized LCD business is in a period of rapid growth and has become an important profit engine: taking the Guangzhou t9 production line as an example, the production line utilization rate is close to full production due to strong customer demand; at the same time, the product structure is optimized, with non-TV products accounting for more than 90%, focusing on high value-added products.

3) The OLED small and medium-sized business is affected by storage and demand seasonality, and the volume and price are under pressure. However, the company's overall strategic layout is cautious, and the impact on the report is limited. Judging from the recent operating conditions, with the mobile phone peak season stocking and the company's new brand customer development, the month-on-month trend is gradually improving.

2. In terms of photovoltaic business, after nearly 2 years of hard work, the relative competitiveness improvement of the business in the past 1-2 quarters has begun to bear fruit. In 26Q1, the net profit attributable to TCL Zhonghuan's parent company improved by 13.6% year-on-year and by more than 50% month-on-month. The company's BC strategy is leading a new round of global change and gradually transforming into a comprehensive energy solution provider. We are confident that the photovoltaic business will contribute high commercial value to TCL Technology's business portfolio in the future.

3. Investment and other businesses: In recent years, the investment business has made forward-looking plans in the fields of AI, new materials and robots. With the listing of some investment targets such as Smart Spectrum, the investment sector has the opportunity to obtain better returns this year. This will also offset the periodic lows in businesses such as OLED and help the company maintain steady growth in overall profits.