The company's recent situation

TCL Electronics Releases Global Shipment Data 1:1) Global shipments of 1-3Q24 TCL TVs were 20.01 million units, +12.9% year-on-year. Among them, 3Q24 global shipments were 7.49 million units, +19.7% YoY (+24% overseas, +5% domestic YoY). 2) Driven by large-scale sporting events, the 3Q24 overseas growth rate exceeded market expectations, product structure optimization continued to advance, and the company's competitiveness was further enhanced.

reviews

Seizing the opportunities of large-scale sporting events, European and American shipments grew at an accelerated pace: 1) In 3Q24, driven by major events such as the Olympics/European Cup, global color TV shipments improved significantly. According to DiXian data, global color TV shipments were +1%/+10%/+19% year-on-year in June/July/August 2024, and the share concentration of the top 5 global brands increased to 53.1% in August. 2) The company implemented more accurate marketing campaigns in Europe and America. 1-3Q24 Europe/US/emerging market shipments were +36%/+6% year-on-year, respectively. Among them, 3Q24 shipments in the North American market were +28% year-on-year, reversing the downward trend in the first half of the year and steadily ranked second in retail sales in the US market. 3) Firmly implement a large screen and high-end strategy. In 3Q24, shipments of 75-inch products and above in overseas markets were +98%, with shipments of 75-inch and above products in Europe/North America +127%/+73% year-on-year.

The domestic dual-brand strategy bucked the trend, and the policy promoted structural upgrading: 1) Since the beginning of the year, TCL continued to promote the “TCL+ Thunderbird” dual-brand strategy. 1-3Q24's domestic TV shipments were +5.3% year-on-year. Among them, Thunderbird benefited from the cost-effective consumer trend, and shipments were +46.6% year-on-year. 2) Historically, color TV level 3 energy efficiency products account for more than half. This trade-in is driving structural upgrading and high-end acceleration in the domestic color TV market.

The average size of 1-3Q24 and TCL TVs in the Chinese market was 61.5 inches, and shipments of 75 inches and above were +14.3% YoY, accounting for 32.7% (+2.5ppt); Mini LED shipments were +181% YoY, accounting for 11% (+6.9ppt). 3) Thanks to Thunderbird's strong growth, the 3Q24 TCL brand's share of domestic online and offline retail sales reached 24%/19%, compared to +5ppt /+3ppt.

The global competitiveness of color TV has improved, and the quality of operation has continued to improve: 1) Since 2017, TCL has continued to explore overseas markets, deeply cultivate various aspects such as products, brands, and channels, and has the top 3 global share. 2) The company improves internal operating efficiency and clarifies strategic planning. At the beginning of 2024, TCL Electronics introduced equity incentives to deeply bind management interests. 1H24's net profit to mother was HK$0.65 billion, +147% year-on-year. The mobile phone, photovoltaic, and distribution businesses all improved. We expect the company's profitability to continue to recover in the future.

Profit forecasting and valuation

As all of the company's businesses continue to have a good growth trend, we raised our 24/25 revenue forecast by 6% each to 93.7 billion/105.2 billion HKD, but considering the increase in panel costs, we have basically kept our 2024/2025 profit forecast unchanged. The current stock price corresponds to 2024/2025 11.3x/9.0x P/E. Maintain the outperforming industry rating and keep the target price of HK$8.36 unchanged, corresponding to 15.8x/12.6x 2024/2025 P/E, with 40% upside.

risks

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