occurrences

According to the results announcement:

24H1: Revenue of HK$45.5 billion (YOY +30%), adjusted net profit to mother of HK$0.65 billion (YOY +147%).

Revenue splitting

Division of business:

1. Display business: revenue of HK$30.1 billion (YOY +21.3%); large-scale display: revenue of HK$25.9 billion (YOY +23%), including revenue of HK$8.35 billion (YOY +21%) in the Chinese market and HK$17.56 billion (YOY +24%) in the international market. The growth mainly benefits from active development of the global market and effective increase in brand influence. Combined with product structure optimization, the share of high-end products continues to increase.

TCL TV shipped 12.52 million units (YOY +9%) in the first half of the year, with Q1\ Q2 being 5% and 13%, respectively. The company's H1 shipments in China and international markets were 5.4% and 10.4%, respectively. Among them, Thunderbird brand shipments in the Chinese market reached 66% year on year.

Small to medium size display: Revenue of HK$3.76 billion (YOY +11%).

Smart commercial display: revenue of HK$0.46 billion (YOY +11%).

2. Internet business: Revenue of HK$1.21 billion (YOY +9%), mainly due to continued breakthroughs in commercialization and monetization of overseas Internet businesses.

3. Innovative business: revenue of HK$13.95 billion (YOY +61%); PV business: revenue of HK$5.27 billion (YOY +213%), mainly due to the expansion of photovoltaic business regions and channels.

All-category marketing: Revenue of HK$7.75 billion (YOY +28%), mainly benefiting from the rapid development of global brand strength and channel synergy.

Smart connectivity and smart home: Revenue HK$0.931 billion (YOY +0.1%).

Profit side

Gross profit margin of 17% (YOY-1.6pct) and net profit margin of 1.4% (YoY+0.53pct). The decline in gross margin was mainly affected by the decline in gross margin level of large-scale display businesses.

Gross profit margin by business:

Display business: 16% (YOY-1.9pct), of which 20% in the Chinese market (YOY-2.4pct), mainly due to changes in brand structure, 16% in overseas markets (YOY-2.2pct), mainly due to the increase in sales share in low-margin regions and the increase in panel prices.

Internet business: 54%, basically the same as the previous year;

Innovative business: 14% (YOY+0.3pct), mainly due to the continuous improvement of the product structure due to the full utilization of existing brand and channel resources in all categories of marketing services; and the continuous expansion of PV business operations, resulting in scale effects and further improvement in profitability.

Expense rate

Sales, administration, and R&D expense ratios were -0.9/-1.2/-0.7 pct, respectively. The reduction in cost rates mainly benefited from scale effects, quality and efficiency improvements, and precise marketing strategies.

Profit forecasting

We adjusted our profit forecast. We expect the company's revenue for 2024-2026 to be HK$93.4, 104.4, and HK$114.2 billion (HK$90.58, 99.04, HK$106.27 billion before 24-26), and net profit to mother of HK$1.34, 1.6, and 2 billion (HK$1.34, 1.63, 2 billion 24-26), and the corresponding EPS is HK$0.53/0.79 (24-26) The previous year's value was HK$0.53/0.65/0.79). Based on the closing price of HK$4.71 on August 26, 2024, the corresponding PE was 8/7/5 times, respectively, maintaining the “gain” rating.

Risk warning

Downstream demand falls short of expectations, increased industry competition, falling short of expectations, risks such as fluctuations in upstream raw material costs, etc., risks of untimely delivery of goods due to rising shipping rates and port blockages, risks of iterative technology, deviations in industry space measurements, risk of third party data distortion, and the risk that public data used in research reports may be delayed or updated in a timely manner.