Trainee reporter Wen Yan
On the evening of May 7, TCL Zhonghuan, which was deep at the bottom of the industry cycle, threw out an annual financial management plan of no more than 10 billion yuan.
TCL Zhonghuan closed with a total market value of 43.06 billion yuan as of May 7, and net assets of 40.583 billion yuan as of the end of the first quarter of 2024. The wealth management quota of 10 billion yuan accounts for more than half of the above values.
According to the reporter's previous incomplete statistics, only 12 of the A-share companies' idle funds in 2024 have a quota greater than or equal to 10 billion yuan.
Such a large amount of financial management makes shareholders puzzled, TCL Zhonghuan lost money in the first quarter of 2024, and it is still at the bottom of the photovoltaic industry cycle, why a large amount of idle funds is not invested in research and development or repurchase shares.
4 consecutive years of large-scale financial management
On May 7, 2024, the board of directors of TCL Zhonghuan deliberated and passed the proposal, agreeing that the company should use a maximum amount of no more than 10 billion yuan of its own funds to purchase wealth management products, and the funds within the above limit can be used on a rolling basis, and the wealth management limit will be valid for 12 months from the date of deliberation and approval by the board of directors.
TCL Zhonghuan announced that the company will strictly control risks in accordance with relevant regulations, conduct strict evaluation of wealth management products, and plan to purchase financial products with high security, good liquidity and low risk through banks, trusts, securities and other financial institutions.
In retrospect, TCL Central has continued to carry out annual large-scale idle fund management since 2020.
On December 1, 2020, January 24, 2022, and April 8, 2023, TCL Zhonghuan successively released the annual idle fund wealth management quota, which did not exceed 5 billion yuan, 7 billion yuan, and 10 billion yuan respectively.
For TCL Zhonghuan, its use of its own funds to purchase wealth management products is mainly to improve the efficiency and income level of its own funds.
TCL announced that under the premise of ensuring the daily operating capital needs and capital security, the company will maximize the role of idle own funds in stages.
Huge losses or huge financial management?
Different from the previous large-scale financial management of idle funds, TCL Zhonghuan is currently in a state of loss.
In the first quarter of 2024, TCL Zhonghuan achieved operating income of 9.933 billion yuan, a year-on-year decrease of 43.62%; The net profit loss attributable to the parent company was 880 million yuan, a year-on-year decrease of 139.05%.
According to TCL Zhonghuan, the company's operating income in the first quarter of 2024 decreased year-on-year, mainly due to the year-on-year decline in the price of photovoltaic products in the current period.
According to the company's official website, TCL Zhonghuan, founded in 1958, is a photovoltaic material manufacturer, photovoltaic cell module supplier, and smart photovoltaic solution service provider.
"The elimination of backward production capacity is accelerating, driving the industry to enter the innovation-led technology iteration cycle." TCL Zhonghuan mentioned in the first quarter report of 2024 that the industry situation puts forward a comprehensive test of the company's product technology innovation ability, industrial ability, operation ability, and globalization ability.
According to the analysis of industry insiders, the survival and development mode of photovoltaic enterprises should focus on improving the basic competitiveness and relative competitiveness based on self-technological innovation capabilities and industrial capabilities.
In this regard, some shareholders questioned why TCL Zhonghuan was at the bottom of the industry cycle, so why should it use a large amount of idle funds to manage its finances, instead of investing in research and development or repurchasing shares.
In the first quarter of 2024, TCL Zhonghuan reduced its R&D investment, with R&D expenses of 247 million yuan, a year-on-year decrease of 75.74%.
In terms of repurchasing shares, TCL Zhonghuan has been a little sluggish.
As of April 30, 2023, TCL Zhonghuan has invested a total of 62.558 million yuan (excluding stamp duty, transaction commissions and other transaction costs) to repurchase 4999968 shares of the company through centralized bidding transactions, accounting for 0.1237% of the company's total share capital.
On October 25, 2023, the board of directors of TCL Zhonghuan passed a proposal, agreeing that the company should use its own funds of 500 million yuan to 1 billion yuan to repurchase shares for employee stock ownership plans or equity incentives, and the price of repurchased shares shall not exceed 34.15 yuan per share (inclusive), and the period for repurchasing shares shall be within 12 months from the date of review and approval of the share repurchase plan by the board of directors.
As of the close of trading on May 7, 2024, TCL Zhonghuan's share price is 10.65 yuan per share, which is far below the upper limit of the price of repurchased shares.
It is difficult for the photovoltaic industry to reach the bottom
More importantly, at a time when PV is at the bottom of the industry cycle, should TCL Zhonghuan's large idle funds be spent in a more appropriate place?
In the first quarter of 2024, the performance of photovoltaic industry leaders such as Tongwei Co., Ltd. and LONGi Green Energy collectively declined. Among them, LONGi Green Energy's net profit loss attributable to the parent company was 2.350 billion yuan, a year-on-year decrease of 164.61%, mainly due to the decline in module and wafer prices, the decline in investment income of associates, and the increase in the impairment of inventory and other assets.
According to the analysis of industry insiders, as of the end of the first quarter of 2024, the production capacity of each link of the photovoltaic industry chain will exceed 1,000GW, and there is a phased supply and demand mismatch between the supply side and the terminal installed capacity.
Zhong Baoshen, chairman of LONGi Green Energy, previously introduced that in 2023, the rapid release of production capacity in the photovoltaic industry, the imbalance of supply and demand structure, and the rapid iteration of new technologies will lead to a sharp decline in the price of the industrial chain.
The photovoltaic industry has entered a stage of fierce competition. TCL Zhonghuan mentioned in its 2023 annual report that after an upward cycle in the past three years, the industry has entered a downward cycle from the third quarter of 2023, and the industrial development environment has undergone fundamental changes.
According to public information, as of the end of 2023, the production capacity of all links in the photovoltaic manufacturing industry chain has reached 900GW to 1000GW, of which more than 80% is concentrated in China, and the supply-demand ratio of the industrial chain has changed from 1.02:1 in June 2023 to 2:1 at the end of 2023.
Editor: Captain
Review: Xu Wen