This report is read as follows:

The overseas smart screen business is developing rapidly, and the Internet operation is divided into the rapid growth of business and the increase of holdings.

Summary:

Maintain the target price and increase the holdings. TCL electronic Internet operation business will continue to grow, and is currently in the stage of improving profitability, maintaining the company's deduction of non-EPS at HK $0.52 / HK $0.83 from 2021 to 2023, with a target price of HK $11.7 per PE in 2021.

The company's four major businesses are neck and neck, and the overseas smart screen business is developing rapidly. The company's total revenue from continuing business in the first half of 2021 was HK $34.93 billion (+ 103.7%). Zhiping's total business revenue reached HK $23.1 billion (+ 57.4%), accounting for 66% of the total revenue. The sales of smart screen in overseas market increased by 61.4% compared with the same period last year, accounting for 72% of the total revenue of smart screen, which is the main driving force for the growth of smart screen. Internet business revenue is 720 million Hong Kong dollars (+ 38.2%), which is expected to maintain a high growth rate in the future.

Internet operations are growing at a high speed. The company's Internet revenue in the first half of the year was HK $720 million (+ 38.3%). TCL's smart screen products in overseas markets are equipped with Android or Roku systems, and the company is also operating TCL channel, which has been launched in 18 countries. The company's Internet revenue distribution will be further improved in the future. Thunderbird reached 19.29 million active users in the first half of 2021, driving revenue growth of 49.6% and gross profit growth of 18.3%. The company's ARPU continues to grow, with the overall ARPU growing by 31.5% on a year-on-year basis, continuously increasing the company's value in users.

The cost of upstream raw materials continues to rise, and the gross profit end is under pressure. Different sizes have shown an upward trend in the past 12 months, and the company has raised prices to varying degrees in response to rising costs in the global market to absorb the cost pressure, but can still get sales growth and market share maintenance. In addition, the shortage of upstream chips has led to a rise in costs, which also has an impact on the company's mobile phone products and smart screen products to a certain extent.

Core risk: intensified competition in the industry, panel price upward risk.