TCL Zhonghuan Earnings: Decent Profitability Despite Falling Solar Wafer Price

TCL Zhonghuan’s first-half result met our expectation. Although revenue in the second quarter declined by 6% year on year due to falling solar wafer prices, net income rose by 42% year on year to CNY 2.3 billion boosted by higher wafer shipments and decent profitability. We increase our 2023 net income estimate to CNY 10.3 billion from CNY 9.8 billion after raising our unit profit assumption for solar wafers. Our fair value estimate remains CNY 25.70. We see Zhonghuan as fairly valued and suggest investors wait for better entry points to allow for some margin of safety.