This report is read as follows:
The company signed a strategic cooperation agreement with TCL Holdings to set up a joint venture to jointly expand AR display business and create new business growth points.
Summary:
Lower the target price and increase the holdings. TCL Electronics through the establishment of a joint venture company, AR display business is expected to bring a second growth curve, maintaining the company's deduction of non-EPS for 2021-2023 at HK $0.52, with a target price of HK $7.04, with an increase in holdings by 11 times PE in 2022.
The company signed a strategic cooperation agreement with TCL Holdings to set up a joint venture to expand AR business. According to the strategic cooperation agreement, the registered capital of the joint venture is RMB 100 million, of which TCL Electronics will contribute RMB 19.99 million by injecting and transferring intellectual property rights to the joint venture, holding 19.99% of the shares, holding RMB 80.01 million and holding 80.01%. The joint venture will mainly be engaged in the research and development, production and sale of AR smart products, as well as the provision of content, software and other services related to smart products.
The new AR display is expected to create the company's second growth curve. Thunderbird Technology, a wholly-owned subsidiary of TCL Electronics holding Company, established Thunderbird Innovation Intelligence Co., Ltd. in October 21, and released Thunderbird AR glasses in overseas markets on October 15, using holographic optical waveguide and full-color MicroLED display technology.
According to the forecast of the China Academy of Information and Communications, the global AR market will reach 141.67 billion yuan in 2022, corresponding to a compound growth rate of 79% from 2019 to 2022. Ar shows that the product market space is large and the current market concentration is low, and the company is expected to create a second growth curve through AR new display products.
Set up a joint venture company to reduce business risk, TCL Group empower company AR to show business development. Due to the large investment in research and development in the early stage of AR display business, the development of AR business by establishing a joint venture company with TCL Holdings will reduce the performance stability of the company; after the development of the joint venture company in the future, the company can obtain high-quality assets through share acquisition or capital increase, similar to the merger of Thunderbird network in 2019. Huaxing Optoelectronics, a subsidiary of TCL Group, has leading AR display material technology, which is conducive to the development of AR display business of the enabling company.
Risk tips: increased competition in the industry, panel prices upward, the progress of new business is not as expected and other risks.