China Securities Co., Ltd.: The black electrical industry is ushering in a positive resonance, a win-win situation is expected.

China Securities Co., Ltd. released a research report stating that, from a historical perspective, the profit margins of upstream panel manufacturers and downstream assembly manufacturers in the black electronics industry seem contradictory, but this "historical contradiction" is due to the cyclical nature and competitive landscape. Since the 2024 national subsidy, the industry's trend towards larger sizes and MiniLEDs has accelerated, breaking the "curse of black electronics" and making it highly likely for a "win-win-win situation" to occur - with an increase in upstream panel average prices and profit margins, improvement in the structure and profitability of downstream assembly manufacturers, and consumers getting cheaper products. There will be significant investment opportunities in both the upstream and downstream of the industry chain. Key points from China Securities Co., Ltd. are as follows: Trends: Large screens and MiniLEDs Consumers are constantly seeking better viewing experiences, leading to an increase in the average size of panels. The average panel size reached 52 inches in 2024. At the same time, shipments of MiniLED TVs are increasing significantly, and it is expected that by 2025, the penetration rate in the Chinese market will reach 45% and global shipments will exceed 20 million units. Panels: Changes in the center and cycle With the competition and capacity of the panel industry gradually stabilizing, it is expected that in the next 3-4 years or even a shorter period of time, the supply-demand ratio may continue to be below the 5% balance line. This means that the oversupply situation of LCD panels will end and the price centralization and utilization rate of panels will increase in the future. At the same time, the cyclical nature of panels will weaken, and the profit release cycle of the LCD TV panel industry is expected to arrive, with the peak profits of leading companies expected to reach historic highs. Assembly: Structural optimization and profit margin improvement It is expected that the CAGR of shipments of super large size TVs in the domestic and international markets in the next three years will reach around 40%; by 2028, global shipments of MiniLED TVs will reach 47.23 million units, with a CAGR of over 60% from 2024 to 2028 and a penetration rate of 22%. With the implementation of national subsidy policies and interest rate reductions overseas, there is still significant room for improvement in the profit margins of leading Chinese assembly manufacturers, with MiniLED TVs expected to increase gross margins by over 5% and net margins by 1.8% in 2025. Investment advice: The curse of black electronics is likely to be broken, with significant investment opportunities in the upstream and downstream of the industry chain It is highly likely that there will be a "win-win-win situation" with rising panel average prices and profit centers, improved structures and profitability of assembly manufacturers, and consumers getting cheaper products. Mainland Chinese panel companies will benefit more from the future panel price increases and industry profit cycles, with a focus on TCL Corporation (000100.SZ); Chinese TV companies with resources in super large size panels and LED industry chains are gradually demonstrating their advantages and are expected to weather the cycles, recommended investments include Hisense Visual Technology (600060.SH) and TCL Electronics (01070). Risk warning: Decrease in market demand, trade and tariff risks, fluctuations in the RMB exchange rate.