Morgan Stanley: TCL’s display business enters the off-season as OLED and photovoltaics weigh on earnings

Why could demand by area still grow as LCD panel volumes decline?

TCL expects television panel shipments to decline 3% year over year in 2026, but average size to increase by 1.3 inches to 52.4 inches, driving year-over-year growth in shipment area.
Looking ahead to 2027, the company expects television panel shipments to decline 1% to 2% year over year, while shipment area could grow by about 1%. Larger screens use more area per panel, partly offsetting the decline in shipment volumes.
Supply discipline remains in place: Major Chinese panel makers lowered utilization rates during the October holiday, while Taiwanese panel makers are also gradually retiring some capacity, potentially reducing global supply slightly.

Facing higher component costs, TCL is discussing price increases for the fourth quarter of 2026 with customers to ease cost pressures. Progress in the negotiations will likely depend on end-market sales during the Singles’ Day and Black Friday promotions.
In the medium-sized panel market, TCL says AUO, Innolux and LG Display together hold a roughly 40% share. The company expects Chinese suppliers to gradually increase their market share over the coming years.

OLED faces the dual pressures of weak demand and expanding Chinese capacity: Demand is soft amid rising retail prices, while increased output by Chinese panel makers is driving down average panel selling prices and squeezing manufacturers’ margins.
Equipment move-in for TCL’s generation 8.6 inkjet-printed OLED production line, T8, began in October 2026, with mass production targeted for the second half of 2027.
The photovoltaics business remains at the bottom of the cycle, and the company plans to maintain supply-side discipline and reduce costs. Its semiconductor materials business recorded its first quarterly profit in the third quarter of 2026 and is expected to benefit from growth in semiconductor demand.

Morgan Stanley believes the core display business is entering the off-season, the OLED business is beginning to face pressure, and photovoltaics continue to weigh on earnings. As a result, it sees a lack of strong near-term catalysts and potentially subdued sentiment toward the stock.
The bank maintains its Equal-weight rating and target price of 4.70 yuan per share. Its valuation uses a forecast price-to-book ratio of 1.7 times for 2026, compared with a range of 1.1 to 3.8 times over the past five years.