In-Depth Analysis of Cash Flow and Transformation Capabilities of TCL Zhonghuan (002129.SZ)

---

TCL Zhonghuan New Energy Technology Co., Ltd. is a leading Chinese photovoltaic wafer manufacturer, while also developing its semiconductor wafer business. The company completed mixed-ownership reform and was integrated into the TCL system in 2020, and has actively promoted its globalization strategy and business transformation in recent years [0]. As of January 2026, the company’s market capitalization is approximately RMB 34.7 billion, with a stock price of US$8.70 (data as of January 15, 2025) [0].

---

From annual data, TCL Zhonghuan’s operating cash flow shows a clear downward trend:

Report Period	Operating Cash Flow	YoY Change
2021	RMB 4.282 billion	—
2022	RMB 5.057 billion	+18.1%
2023	RMB 5.181 billion	+2.5%
2024	RMB 3.278 billion	-36.7%

In 2024, operating cash flow dropped sharply by 36.7% YoY, mainly affected by the continued downturn in the photovoltaic industry and pressure on product prices [1]. It is worth noting that the company clearly stated in its performance forecast that “it will produce on demand in 2025, with positive operating cash flow” [1], indicating that the company has taken active measures to ensure the stability of core cash flow.

Free cash flow has remained negative, reflecting that the company still maintains large-scale capital investment at the bottom of the industry cycle:

Report Period	Free Cash Flow	Capital Expenditure
2021	-RMB 1.821 billion	-RMB 6.102 billion
2022	-RMB 6.156 billion	-RMB 11.213 billion
2023	-RMB 6.982 billion	-RMB 12.163 billion
2024	-RMB 3.674 billion	-RMB 6.952 billion

: Both free cash flow and capital expenditure narrowed significantly in 2024, improving by 47.4% and 42.8% respectively, indicating that the company is reducing investment scale and optimizing capital allocation [0].

The quarterly operating cash flow from 2024 to 2025 shows fluctuating characteristics:

• Q3 2024
  : RMB 2.497 billion (quarterly peak)
• Q4 2024
  : RMB 331 million
• Q1 2025
  : RMB 530 million
• Q2 2025
  : RMB 32 million
• Q3 2025
  : RMB 199 million [0]

Operating cash flow remained positive in all quarters, reflecting the effectiveness of the company’s “production on demand” strategy.

---

Indicator	2024	2023	Trend
ROE (Return on Equity)	-31.77%	8.23%	Deteriorated Significantly
Debt-to-Equity Ratio	2.04	1.21	Increased Sharply
Current Ratio	1.17	1.55	Decreased
Net Profit Margin	-34.78%	Negative	Sustained Loss

:

1. Profitability Pressure
   : A net loss of RMB 8.2-9.6 billion is expected in 2025. Negative ROE indicates severe damage to shareholder returns [1]
2. Increased Leverage Level
   : The debt-to-equity ratio rose from 0.68 in 2021 to 2.04 in 2024, significantly increasing the debt burden [0]
3. Tightening Liquidity Margin
   : The current ratio dropped from 1.55 in 2023 to 1.17, approaching the warning line of 1.0 [0]

:

• The company adopts a prudent financial attitude and conservative accounting treatment (high depreciation/capital expenditure ratio) [0]
• Inventory turnover and accounts receivable management have improved, with turnover days shortened [1]

---

• Strategy
  : Sell non-U.S. sales platforms and manufacturing assets in the Philippines and other regions, focusing on the high-barrier U.S. market
• Progress
  : Gradually transforming into a product, technology, brand, and channel-oriented business model [2]
• Capital Impact
  : Asset sales can recoup a certain amount of cash and reduce capital pressure

• Investment Scale
  : US$2.08 billion (approximately RMB 15 billion)
• Partners
  : RELC, a subsidiary of the Public Investment Fund (PIF) of Saudi Arabia, and Vision Industries
• Expected Production Start
  : Late 2025 to 2026
• Strategic Significance
  : It will become the first local photovoltaic crystal wafer project in Saudi Arabia, and is currently the largest crystal wafer factory overseas [1]

• Business Positioning
  : “Domestic Leadership, Global Catch-Up” strategy
• Revenue Scale
  : Achieved operating revenue of RMB 4.24 billion from the start of 2025 to the end of Q3 [2]
• Technology Direction
  : Focus on semiconductor wafers and their extended industries, exploring applications for HBM high-bandwidth memory chips [2]

Transformation Project	Capital Requirement	Cash Support Capability	Risk Assessment
20GW Saudi Project	US$2.08 billion	Medium (external financing required)	Overseas project approval progress falls short of expectations
Maxeon Restructuring	Cash recovery from asset sales	Good	Long transformation cycle
Semiconductor Business Cultivation	Sustained R&D investment	Limited	Revenue contribution is still small

---

Assessment Dimension	Score	Explanation
Operating Cash Flow	6/10	Remained positive in 2024, expected to stay positive in 2025
Free Cash Flow	4/10	Sustained negative, but has improved significantly
Debt Burden	5/10	Debt-to-equity ratio rose to 2.04, increasing debt repayment pressure
Liquidity	6/10	Current ratio of 1.17, marginally tight but still controllable
Overseas Project Support	7/10	Saudi project progressing as planned, financing capability to be verified
Transformation Business Contribution	7/10	Semiconductor business contributed RMB 4.24 billion in revenue

:

:

• Operating cash flow remains positive, providing basic capital support for transformation
• Capital expenditure has been significantly reduced (down 42.8% YoY in 2024), freeing up more funds for debt repayment and business transformation
• The company clearly stated that it will “optimize organizational processes, innovate business models, ensure financial health, and achieve sustainable development” [2]

:

• Lingering at the bottom of the industry cycle, with product prices adjusting at low levels; profitability recovery will take time
• Large overseas investment projects (US$2 billion in Saudi Arabia) pose high requirements for financing capability
• Rising debt levels may limit future investment space

The company clearly stated in its performance forecast:

• 2026 Goal
  : Significant improvement in operations
• Strategic Direction
  : Consolidate the relative competitiveness of the photovoltaic materials business, enhance the competitiveness of new energy battery modules, and optimize overseas business layout and global marketing capabilities
• Core Strategy
  : Guided by technological innovation, product R&D, and quality improvement [1]

---

1. Cash Flow Status
   : Operating cash flow remains positive but is on a downward trend; free cash flow remains negative but has improved significantly. In 2024, operating cash flow was RMB 3.278 billion, free cash flow was -RMB 3.674 billion, and capital expenditure was reduced to RMB 6.952 billion [0].
2. Transformation Support Capability
   : The current cash flow situation can
   basically support
   the existing transformation strategy, but
   there are major uncertainties
   . Positive operating cash flow provides basic support for transformation, but sustained losses and rising debt limit investment space.
3. Key Risks
   : Continued supply-demand imbalance in the photovoltaic industry, overseas project approval progress, semiconductor business cultivation progress, and rising debt pressure.
4. Positive Signals
   : The company is actively adjusting capital allocation, reducing investment scale, and promoting Maxeon restructuring; management has clearly proposed the goal of significant operational improvement in 2026.

• The duration of the photovoltaic industry’s bottom cycle may be longer than expected
• The effectiveness of the industry’s initiatives to mitigate cut-throat competition remains to be observed
• Overseas geopolitical risks may affect the progress of the Saudi project
• Rising debt levels may trigger an increase in financing costs

---

[0] Jinling API Data - TCL Zhonghuan Financial Analysis, Market Data, Technical Indicators

[1] China Business Network - “TCL Zhonghuan Expects Q4 2025 Net Loss to Increase Over 50% QoE; Overseas Projects Still Progressing Steadily” (https://finance.sina.com.cn/roll/2026-01-14/doc-inhhhhqr8358285.shtml)

[2] Securities Times Network - TCL Zhonghuan Investor Q&A and Company Announcements (https://www.stcn.com/quotes/index/sz002129.html)

---

: January 16, 2026

: Jinling AI Financial Analysis Department