Analysis of Government Subsidy Proportion and Profit Quality of TCL Zhonghuan (002129.SZ)

Based on the data from TCL Zhonghuan’s 2022-2024 annual reports and 2025 third quarterly report, I have conducted a systematic analysis as follows:

I. Analysis of Government Subsidy Proportion

Year	Government Subsidies Recognized in Current Period Profit or Loss (RMB 100 million)	Government Subsidies Classified as Non-Recurring Profit or Loss (RMB 100 million)	Proportion of Operating Revenue
2022	3.24	3.24	0.48%
2023	9.89	9.89	1.67%
2024	3.49	8.22	1.23%
First Three Quarters of 2025	3.49	2.56	1.62%

Key Findings:

The proportion of government subsidies to operating revenue has remained in the
1-2%
range, which is relatively moderate [1][2]
In 2023, government subsidies of
RMB 989 million
accounted for as high as
31.08%
of net profit, indicating a certain degree of reliance on subsidies for profitability [3]
In 2024, amid an industry downturn, government subsidies effectively alleviated approximately
14.2%
of the loss pressure

II. Profit Quality Assessment

1. Comparison of Core Financial Indicators

Indicator	2022	2023	2024
Operating Revenue (RMB 100 million)	670.10	591.46	284.19
Net Profit Attributable to Shareholders of Listed Company (RMB 100 million)	68.19	31.82	-57.77
Net Profit Excluding Non-Recurring Gains and Losses (RMB 100 million)	64.46	23.37	-68.82
Gross Profit Margin	17.82%	24.77%	-14.59%

2. Characteristics of Profit Quality

□ Severe Deterioration of Core Business Profitability

In 2024, the gross profit margin turned from positive to negative, plummeting from 24.77% in 2023 to
-14.59%
[1]
Net profit excluding non-recurring gains and losses has recorded substantial losses for two consecutive years, with a loss of
RMB 6.882 billion
in 2024
The price of silicon wafers has dropped by more than 50% from its 2023 peak, and industry price wars have led to a negative gross profit margin for the company’s main products

□ Profit Structure Relies on Non-Recurring Profit or Loss

In 2024, the difference between net profit and net profit excluding non-recurring gains and losses was
RMB 1.105 billion
, which mainly consisted of government subsidies and asset disposal gains [1]
After excluding government subsidies, the scale of the company’s core business loss expanded significantly

□ Deterioration of Operating Cash Flow Quality

In the first three quarters of 2025, the net operating cash flow was
RMB 632 million
, a year-on-year decrease of
75.31%
[2]

III. Industry Background and Operational Dilemmas

Downturn in Photovoltaic Industry Cycle
: In 2024, the supply-demand ratio of the industrial chain reached 2:1, with severe overcapacity, and the industry has entered a phase of in-depth restructuring
Inventory Write-Down Pressure
: In 2024, asset impairment loss amounted to
RMB 1.903 billion
Pressure of Capitalizing Construction in Progress
: Large-scale capacity investment has entered the depreciation period, eroding profits

IV. Conclusions and Risk Warnings

Assessment Dimension	Conclusion
Government Subsidy Proportion	Moderate (1-2%), but contributes significantly to profit
Profit Quality	Poor, core business loss heavily relies on subsidies
Sustainability	Questionable, industry capacity clearance has not yet been completed

⚠ Risk Warnings:

Price wars in the photovoltaic industry may continue, and the company’s gross profit margin faces the risk of further deterioration
Sustained losses may lead to an increase in asset-liability ratio and credit risks
Changes in government subsidy policies may have a significant impact on the company’s performance

References

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