TCL Technology's convertible bonds were sold at a premium of 10 billion yuan: the stock price hit a record high

 On December 1, TCL Technology issued the "Announcement on the Results and Completion of Registration of the Issuance of Shares, Convertible Corporate Bonds and Targeted Convertible Corporate Bonds for Cash Purchase of Assets", announcing that the company's 2.6 billion convertible corporate bonds for the acquisition of 39.95% of the equity of Wuhan Huaxing T3 production line were successfully issued.

The announcement showed that a total of 54 institutions and individuals subscribed to TCL Technology's 2.6 billion yuan convertible bonds, including mainstream public funds, insurance companies, well-known investment companies and international investment banks such as China Life, ICBC Credit Suisse, Harvest Fund, Hillhouse Capital, and JPMorgan Chase. The total subscription amount was nearly 10 billion yuan, more than three times the 2.6 billion yuan of supporting funds.

According to the quotation results of the institutions, the initial conversion price of the convertible bonds of TCL Technology's 2.6 billion yuan supporting funds is 8.00 yuan/, which is not only much higher than the average stock price of the previous 20 trading days, but also higher than the closing price of the secondary market on that day. The premium rate of the conversion price over the secondary market is 11%. Influenced by this, on December 2, TCL Technology's stock price hit a record high, and its market value exceeded 110 billion yuan!

According to Cinda Electronics' comments: Panel price increases exceeded expectations, and the company benefited greatly: Panel price increases continued to exceed expectations in the fourth quarter. According to Witsview's panel quotation in late November, the price of mainstream TV panels continued to rise strongly by 5%-7%. TCL Technology's TV panel market share ranks second in the world, and 55-inch panels rank first in the world. With the price increase exceeding expectations, the company's performance will be fully released in the fourth quarter and next year.

In addition, the supply and demand sides are improving, and the future panel prices are optimistic: except for short-term price increase factors, in the long run; on the supply side, the new production capacity is coming to an end, and the Korean factories have delayed the launch only to meet their own supply, and there is almost no new supply on the supply side; on the demand side, the terminal inventory level is still lower than the average of previous years, indicating that downstream sales are good and panel prices still have room to rise!

According to a report by Founder Electronics, driven by the improvement in demand in the second half of the year and the limited supply caused by the production cuts of Korean factories, panel quotations in the second half of this year have continued to exceed expectations since the TV panel prices turned upward in June. According to the latest price forecast data released by Qunzhi Consulting in late November, it is estimated that by December 2020, the average price increase of LCD TV panels below 55 inches will reach 70% compared with the low point in May. This has created a historical high in the price range increase in the same period of time. Due to the supply increase driven by the ramp-up of domestic 10.5/11 generation production capacity, the price increase of 65/75-inch panels is not as good as that of products below 55 inches, but the corresponding price increases are also 34% and 17% respectively, and it is expected that they are currently above the profit level of the production line.

Benefiting from the strong demand in the overseas market, the downstream market of IT panels (monitors, laptops) has maintained a high level of prosperity since Q2 2020. Product prices have continued to rise overall since Q1 2020. Entering Q4 2020, the overseas market demand remains strong due to the epidemic, and the supply side demand for mobile phones and TVs is strong, resulting in continued tight a-Si production capacity. Coupled with the shortage of core materials such as driver ICs, CPUs, and polarizers, panel manufacturers have an active pricing strategy, and the amount of price increases is expected to further expand. According to Qunzhi Consulting's latest November price forecast data, according to its statistics, it is expected that by December 2020, the average price increase of major-sized IT panels will reach 9.7% compared to January at the beginning of the year.

The overall high prosperity of the industry since Q3 2020 has driven the willingness of some panel manufacturers to expand their production capacity. At the same time, the withdrawal of Korean factories has also been delayed. The concerns that TV panel prices will enter a cyclical recurrence in the medium term have emerged. It is believed that with the obvious trend of head concentration in TV panel supply, the capacity adjustment of leading manufacturers still plays a leading role in the overall supply and demand. In the medium and long term, the possibility of a significant adjustment in TV panel prices is still low.

The overall production withdrawal progress of Korean factories is still in line with expectations. Samsung's delayed production withdrawal is mainly due to the requirements of downstream customers such as Samsung Electronics. Due to the shortage of material inventory and limited module production capacity, Samsung Display's production capacity supply in 21Q1 is very limited. From the perspective of supply reduction factors, LG Display's current monthly effective supply of P7 (G7.5) and P8 (G8.5) in South Korea is less than 100K (large substrates). Among them, P8 is mainly used to produce IT panels, and the progress is in line with production reduction expectations. P7 is mainly used to produce TV panels. It is expected that the capacity withdrawal will be delayed until the end of 2021, accounting for about 1% of the global total production capacity, and the impact is relatively small.

Due to the requirements of downstream core customers such as Samsung Electronics, Samsung Display has delayed the shutdown of its local L7 (G7) and L8 (G8.5) lines twice. After being postponed from October 2020 to December, it is currently expected that the final shutdown time will be postponed to no later than the end of March-April 2020. However, from the perspective of effective monthly supply, Samsung Display's LCD production capacity continues to decline month-on-month. The downstream Samsung Electronics' complete machine inventory is usually 10-12 million units (2-2.5 months). At present, the demand in downstream markets such as North America continues to be strong, and the inventory level has dropped to 3-4 million units (less than 1 month). Taking into account the overall tight supply of LCD production capacity, Samsung Electronics requires Samsung Display to extend its production capacity supply as much as possible.

However, Samsung Display's focus has long been on OLED display, and the repeated delays in the shutdown of local LCD lines have led to insufficient stocking of upstream core materials. At the same time, the production capacity of large-size TV panel modules mainly depends on the Suzhou line. Considering that the production line has been sold to TCL Huaxing, the module segment capacity is also restricted. Samsung Display's overall supply in 21Q1 is also very limited, and monthly shipments are expected to drop from the current 2 million pieces per month (TV small pieces) to about 1 million pieces in 201Q1.

After the Korean factories reduced their production capacity, the possibility of restoring and increasing their production capacity is also extremely low. On the one hand, the number of workers has been reduced, and on the other hand, increasing production capacity not only requires a long ramp-up time, but also the additional supply is not conducive to maintaining prices and the profitability of other production lines. Therefore, the overall capacity reduction of Korean factories is still a certain trend.

In addition, from the perspective of domestic manufacturers, small and medium-sized manufacturers such as HKC and Rainbow Shares have also shown a certain willingness to expand production in the medium term due to the industry's prosperity. Rainbow Shares' Xianyang G8.6 expansion to 170K, HKC Chuzhou G8.6 expansion to 180K, Mianyang G8.6 expansion to 150K. At the same time, Foxconn Sharp Guangzhou G10.5 also plans to expand the production line to 90K.

However, at present, due to the continuous impact of the overseas epidemic since 2020, the progress of equipment installation in Japan and South Korea, as well as the exchanges of engineers and personnel have been affected to varying degrees. Including the shortage of 10.5-generation line glass substrates, which also affects the progress of Foxconn Sharp's Guangzhou production line. There are manufacturers in Guyuan who have plans to increase production capacity, and the completion progress is also uncertain. It is expected that the full production time of the new mass production lines TCL Huaxing T7 and HKC Changsha G8.6 in 2021 will also be postponed to 2022.

In addition, BOE G10.5 also has plans to expand production, and TCL Huaxing plans to build a new IT product production line. However, for large manufacturers such as BOE and TCL Huaxing, capacity expansion is mainly based on the order requirements of downstream customers. The overall capacity demand visibility is high, and the progress is relatively controllable, which also has a strong influence on the overall market supply and demand and price.

In summary, although small and medium-sized TV panel factories have certain expansion plans on their existing production lines, they are constrained by the reserved space in the original factory buildings of the production lines, and the production capacity ceiling is also relatively obvious. Secondly, due to the impact of the epidemic on the progress of the supply chain, it is expected that the possibility of concentrated release of production capacity in the short term is also very low.