Skyworth announced a share buyback offer. The company proposes to buy back up to 392.8 million shares, or about 12.8 per cent of the outstanding shares, at HK $2.80 per share. If the contract is to be fully accepted, the total consideration will be about HK $1099.8 million. In addition, the company will sell two of its subsidiaries to third parties for a total transaction consideration of 1321.2 million yuan to enhance the company's liquidity and fund other investments.

China's color TV market in the first half of 2020 is full of challenges. According to OviCloud, total TV sales in China from January to May 2020 were 16 million, down 14.8% from the same period last year, and sales fell 27.9% over the same period last year. However, during the "618" promotion period, total TV sales reached 3.3 million units, up 30.9% from a year earlier. OviCloud expects overall TV sales to be 28.9 million in the first half of 2020, down 9.2% from a year earlier.

Maintain the investment rating as "Collection" and raise the target price to HK $2.68. We believe that the share buyback will stimulate the company's share price and earnings per share will increase after the completion of the offer. We are cautious about the company's hardware profitability in the short term, but we believe that the company's content business will grow rapidly. The main downside risks include a worse-than-expected TV consumer market and fiercer competition.