The three major business structures of TCL Electronics, the top three of smart screen business in the world, the rapid growth of Internet business, and the R & D strength drive multi-service expansion and coordination. Cover for the first time to give a buy rating.
Support the main points of rating
Steadily build three major business structures, leading the world in the field of consumer electronics. TCL Electronics is mainly engaged in research and development, production and sales of smart screens, mobile communication devices and other consumer electronic products, independent development of home Internet services. With three major business structures: display, innovation and Internet business, it has become the world's leading consumer electronics company. In 2021, the company's smart screen sales are among the top three in the world, Android tablet market occupies the fourth place in the world, mobile phone market share ranks third and fourth in Canada and the United States, and mobile routers rank first in Europe in innovative business.
Smart screen business in the world's top three, optimistic about the company's long-term competitiveness in overseas markets. 1) based on product research and development, clear brand positioning and content drainage hardware, it rose from HK $700 million in 2014 to HK $22.3 billion in 2021, CAGR 65%. 2) Global supply chains help Europe and emerging markets become new overseas growth points, with European sales + 52% year-on-year and emerging market sales + 39% year-on-year in 2021. 3) the company seeks to upgrade its products, and the domestic market share will increase significantly in 2021. 4) the price of raw materials falls, which thickens the performance elasticity.
Small and medium-sized screen business mainly has long-term and in-depth cooperation with first-tier operators in Europe and the United States, achieving steady growth in scale, continuous optimization of product structure, and global expansion with the advantage of global open channels of Smart screen. The total sales of the company's 2021 business reached 25.31 million units, up 8% from the same period last year; revenue was 14.4 billion Hong Kong dollars, up 30% from the same period last year.
Internet business is growing at a high speed, thickening the profit space. 1) holding Thunderbird, the domestic home Internet business is developing rapidly. In 2021, the company's domestic Internet business revenue reached 1.5 billion Hong Kong dollars, an increase of 64% over the same period last year; gross profit margin 46%, accounting for nearly 1% of profits, which has become an important source of profit for the company. 2) join forces with overseas giants to carry out overseas Internet business, deepen cooperation with content service providers in the future, and accelerate the sharing of platform revenue.
R & D strength drives multi-service expansion and coordination. 1) with the help of the overseas market channels accumulated under the display business, the sales of smart products are rolled out rapidly. 2) sinking channel advantage, in line with the technical advantages of Central shares, quickly open up the photovoltaic market. 3) make great efforts to explore the scene and build the ecology of intelligent household appliances.
Valuation
Hardware business reference Hisense Video, Skyworth Group, Midea; Internet business reference XIAOMI Group. The company's 2022-2024 net profit is expected to be 12, 15, 1.7 billion Hong Kong dollars, as of July 19, the company's market capitalization of 10 billion Hong Kong dollars, corresponding to the 2022-2024 PE is 8.2x/6.9x/5.9x, the first time to cover the buy rating.
Main risks faced by rating
The decline in global demand; the iteration of panel display technology exceeded expectations; and the development of Internet TV fell short of expectations.