TCL Electronics is the world's leading consumer electronics company, mainly engaged in research and development, production and sales of smart screens and other consumer electronic products and independent development of home Internet services. In the first half of 2021, thanks to the continued rebound in the global economy, the company's performance grew steadily and the smart screen business developed rapidly.
The demand for televisions is strong and the company's performance has improved significantly: after the COVID-19 epidemic swept the world, the global demand for televisions increased significantly, with global TV shipments of 98.3 million units in the first half of 2021, an increase of 6.8 percent over the same period last year. Due to the growth in demand, TCL Electronics' first-half revenue rose 103.7 per cent year-on-year to HK $34.9 billion, while gross profit rose 57.6 per cent to HK $5.6 billion. Affected by the rise in panel prices, the gross profit margin has dropped to 15.9%. At present, the panel industry has entered a stable stage after adjustment, and gross profit margin is expected to improve in the second half of the year.
Science and technology has changed the competition pattern in the television field, and the company's smart screen business has developed rapidly: the rapid development of science and technology such as 5G and the Internet has expanded to the television field, and the competition pattern of the TV industry is changing. Intelligent and technological television is replacing the traditional TV market.
The company attaches great importance to the design, research and development and advanced manufacturing of intelligent TV, especially the breakthroughs in the field of display technology, AI and intelligent interaction. In the first half of 2021, the company launched a number of smart screens and won wide recognition in the market, and the smart screen business developed rapidly.
In the first half of the year, global sales of TCL smart screens increased by 11.8% compared with the same period last year, reaching 11.27 million units. Smart screens have a market share of 11.6% of global TV shipments, ranking firmly in the top three in the world.
The business model begins to change, and the Internet business can be expected in the future: while based on the smart screen business, TCL Electronics follows the market and strategically arranges home Internet business around the world. The revenue of Internet business in mainland China reached 600 million yuan in the first half of 2021, an increase of 51.3% over the same period last year. The cooperation with Roku, Google and Netflix in overseas markets has been further strengthened, and the commercial transformation of TCL Channel has been completed. In the future, Internet business and smart screen business are expected to empower each other, superimposing the characteristics of high profit margin and obvious marginal benefit of Internet business, and become a new profit growth point of the company.
Investment suggestion: the development of epidemic superposition technology has accelerated the iterative speed of the TV industry. TCL has followed the market to actively develop smart screen business and successfully entered overseas markets. In the future, with the further development of its Internet business, profits will gradually increase. The average target price in the Bloomberg market is HK $6.507, corresponding to an increase of 55.67%, which is recommended to buy on the bargain.