The company's recent situation

The global market share of TCL TV continues to increase: According to AVC Revo data, 1Q24 TCL's global color TV shipment share is 13.4%, up 0.4ppt from 2023. Among them, in the European and Middle Eastern African markets, the company's shipment growth rate is still superior to the industry; in the domestic market, TCL's share of online retail sales in May was +4.3ppt to 27% year-on-year; the global share of the company's color TV business continued the previous upward trend since 2024.

reviews

The advantages of industrial chain integration are obvious, and the global production capacity layout is perfect. 1) After more than ten years of hard work, China's panel industry chain has grown into a global dominant industry. Among them, the company and its brother company Huaxing Optoelectronics have formed an integrated advantage in the industrial chain, which has synergetic effects in technology research and development, product development, etc., which has also led to an increase in the company's product strength and continuous increase in global share. 2) TCL's color TV business has formed a global production capacity layout. Currently, overseas production bases include Mexico, Vietnam, Poland, Brazil, Egypt, India, etc., which can respond flexibly to changes in tariff policies.

Globalization continues to advance, and the regional share continues to rise. 1) The company's color TV business has entered a period of global expansion since 2017. According to AVC Revo, TCL's global color TV shipment share increased from 6.8% to 13.0% in 2017-2023, standing in the top 3 in the world. 1Q24 TCL's share of shipments was 13.4%, up 0.4ppt from 2023. 2) Overseas markets, according to the company's announcement, in 2023, TCL held the second place in the US market, ranking in the top five in the share of more than 10 countries in emerging markets. The market share of France, Poland, and Sweden in Europe increased to second place in 1Q24. The growth rate of 1Q24 TCL's shipments in the European, Middle Eastern and African markets also clearly outperformed the company as a whole, and the overseas market share continued to increase.

3) In the domestic market, from January to May 2024, TCL's overall online/offline retail sales share was 20%/16%, compared with +1.1/+1.4ppt. The advantage in the high-end mini LED field is even more obvious.

The global color TV business has ushered in quantitative to qualitative changes, and profits are expected to gradually improve. Previously, investors were concerned about color TV as a mature category, intensifying competition in domestic and foreign markets, and increasing panel prices, but we believe that with the continuous improvement of the company's competitiveness in large-scale and high-end products and the gradual optimization of the channel structure in the North American market, the average global shipping price and profitability of TCL color TV is expected to continue to improve in the future, leading to qualitative changes. In addition, mobile phone business operations in the European and American markets have been hampering the company's performance. After business adjustments in 2023, we expect further loss reduction this year.

Profit forecasting and valuation

Considering the continuous optimization of the company's product structure and overseas channel structure, it is expected that the profit level will continue to rise. We have raised our profit forecast for 2024/2025 by 10%/20% to HK$1,322 billion/HK$1,653 billion. The current stock price corresponds to 2024/2025 12.1 times/9.6 times P/E. Maintaining an outperforming industry rating and considering the increase in the overall valuation of the Hong Kong stock sector, we raised our target price by 37.5% to HK$8.36, corresponding 15.9 times/12.7 times the 2024/2025 P/E, with 32.3% upside compared to the current stock price.

risks

Risk of panel price increase; mobile phone business operation risk; risk of LeTV shareholders reducing their holdings.