Significant improvement in performance: Overall revenue of HK$78.99 billion in 2023, up 10.7% year on year, gross profit increased 12.5% year on year to HK$14.76 billion, mainly benefiting from increased TV shipments and sales structure optimization; improved operating efficiency, overall expense ratio decreased by 1.5 ppts to 15.1%, shareholders' net profit/adjusted shareholder net profit was HK$74/80 million, up 66.4%/14% year on year; annual dividend of 16 HK cents per share, maintaining a 50% dividend ratio.

The main TV industry bucked the trend: in 2023, the company's global TV shipments increased 6.2% year on year to 25.26 million units, shipments of 65-inch products and above increased 35.3% year on year to 6.21 million units, and the shipping ratio increased to 24.6%. Overall TV business revenue was HK$48.63 billion, up 7.6% year on year, and gross margin rose slightly to 18.3%. The domestic TV market was generally weak, with shipments falling 4.3% year on year, but it still outperformed the industry. In particular, shipments in the second half of the year increased 24.8% month-on-month, and the proportion of high-end products continued to increase. Shipments of 65/75 inches and above increased 10.3 and 11.2 ppts respectively, driving domestic market revenue up 5.4% year on year to HK$16 billion, and the company's domestic market share increased to 18.1%, ranking in the top two. The domestic market shipment growth rate remained strong in the first quarter of 2024, with a year-on-year increase of 24%; overseas market shipments increased 10% year on year, among which Shipments of 65-inch and above products increased 60.3% year over year, driving overseas TV revenue up 8.7% year over year to HK$32.62 billion. In the first quarter of 2024, the company's global TV shipments increased 5.3% year on year to 5.84 million units, shipments of 65-inch products and above increased 23.1% year on year, and shipments and high-end performance continued to be strong.

The innovative business became the second growth curve: Internet business revenue increased 20.2% year on year, gross margin increased 4.6 ppts to 55.1% year on year, profit contribution continued to expand, software and hardware collaboration logic between the company and the top three overseas streaming media companies continued to be implemented. Overseas internet revenue increased 40% year over year to HK$700 million; revenue from innovative business increased sharply by 78.5% year on year to HK$18.64 billion, with revenue from all categories of marketing (white power) increasing year on year. Revenue and profit grew steadily by 26.3% to HK$10.4 billion.

Target price of HK$7.0, purchase rating: The global layout of the company's TV business+the growth of the middle and high-end categories is expected to bring about a continuous increase in share and profit. We expect the company to maintain the growth rate of overseas and domestic shipments and a positive year-on-year increase in average prices to gross profit this year. At the same time, through TCL's optimization of global brand operations, the business scale of non-strong categories such as mobile phones can be reduced, and the collaboration of all product and channel advantages is expected to improve overall operating efficiency. We are optimistic about the continued high-quality growth of the company's profit and revenue side. In summary, we adjusted the company's 2024-2026 revenue to HK$846/931/100 billion, and deducted non-net profit of HK$11.1/14.8/HK$1.69 billion, giving a target price of HK$7.0 for the next 12 months, corresponding to a projected price-earnings ratio of 15/12/10 times 2024-2026, and maintained the buying rating.

Risk warning: 1) Deterioration in the domestic TV market competition pattern 2) Overseas market performance falls short of expectations