The performance in 2020 was in line with expectations: annual revenue was HK $50.95 billion, a year-on-year increase of 40.2%, a record high. The three core businesses-smart screen business (TV hardware), Internet business and new smart mobile and connected equipment business (formerly TCL communications)-all achieved growth. The overall gross profit was 9.66 billion Hong Kong dollars, an increase of 29.8% over the same period last year, and the gross profit margin dropped slightly to 19.0% compared with the same period last year, mainly due to the decline in the gross profit margin of domestic TV sales caused by the rise in screen prices and the adjustment of the domestic market sales strategy. The overall expense rate remained stable compared with the same period last year, deducting the net profit of HK $1.05 billion, an increase of 25.1% over the same period last year, and the annual dividend was HK21.2 cents per share.

Overseas advantages are solid, domestic expansion: the company's overseas market TV sales of about 17.12 million units, year-on-year growth of about 27%, still maintain a high growth rate. Overseas market TV sales revenue of 26.76 billion Hong Kong dollars, an increase of 27.4% year-on-year, gross profit margin of 16.3%, year-on-year increase of 0.8ppts, mainly due to the optimization of product structure in Europe and emerging markets, the company still maintains high growth and leading market share in key markets North America and Europe. The sales volume of TV in the domestic market was about 6.8 million, slightly down 5.3% from the same period last year, with an income of 12.86 billion yuan, which was basically the same as the same period last year. Gross profit margin decreased by 3.2ppts to 21.3% compared with the same period last year, mainly due to the increase in panel prices. The company achieved a counter-trend increase in domestic market share by increasing the layout of online channels. According to Zhongyikang all-channel data, domestic TV market share increased by 3ppts to 13.7% in 2020 compared with the same period last year. The domestic user base is expected to continue to expand.

Internet business goes further: the overall revenue of Internet business has increased 97% to HK $1.23 billion compared with the same period last year, of which the revenue of Thunderbird network technology business in China has increased by 118.8% to HK $910 million. The compound growth rate of monthly active users and ARPU in the past four years is 25.9% and 43%, respectively. The growth of membership and value-added services is strong, and the ability to realize cash continues to strengthen. The revenue of the overseas Internet industry is 320 million Hong Kong dollars, an increase of 53.7% over the same period last year. We expect that Taiwan fees and revenue-sharing contributions will perform better as the company strengthens its cooperation with GOOGLE and Roku in the global market.

Adjust the target price to HK $8.50, buy rating: the company's overseas TV business is still expected to maintain strong growth, while the domestic TV market is against the trend. Although the first half of this year is expected to face upward pressure on screen prices, we expect the company to rely on the advantages of the supply chain and some price increases to absorb the cost pressure. In addition, considering the continued high growth of the company's Internet business, business certainty is becoming stronger. We accordingly adjusted the company's deduction non-net profit forecast for 2021-2023 to HK $12.7 pesque / HK $1.92 billion, and adjusted the target price for the next 12 months to HK $8.50, corresponding to the 10.5 times forecast price-earnings ratio of 15.8 pound for 2021-2023, maintaining the buy rating.

Risk hints: 1) the competition pattern of the domestic TV market has deteriorated; 2) the overseas market has not performed as expected.