A research report from Guolian Minsheng Securities indicates that as of the fourth quarter of 2025, the combined global TV shipment share of China's top two brands has surpassed that of South Korea's top two brands. Since 2025, Chinese brands have demonstrated stronger profitability, while Japanese and Korean brands have faced profit pressures. The global competitive landscape has undergone a qualitative transformation driven by the upgrade of China's display industry chain.
TCL ELECTRONICS (01070) and Sony (SONY.US) plan to establish a new joint venture focused on home entertainment business. This venture is expected to fully unlock profit potential, with significant room for synergy across the entire industry chain. As global market share gradually concentrates in the hands of leading Chinese TV manufacturers, the profitability of these leaders is anticipated to steadily improve. TCL ELECTRONICS is recommended for attention. The main views from Guolian Minsheng Securities are as follows:
TCL ELECTRONICS has disclosed progress on its strategic cooperation with Sony in the home entertainment sector. The two companies intend to form a new entity to take over Sony's home entertainment operations. TCL ELECTRONICS will hold a 51% stake in the new company, with Sony holding 49%. The joint venture will conduct integrated operations across the full industry chain globally, encompassing products like televisions and home audio systems. The new company will be authorized to use the SONY trademark on licensed products and marketing materials. Concurrently, TCL ELECTRONICS will acquire 100% of the shares of Sony's OEM factory in Bangi, Selangor, Malaysia. The expected completion date for the transaction is April 1, 2027.
The transaction represents a win-win situation, with TCL ELECTRONICS acquiring quality assets through a cash payment. The total preliminary estimated consideration for TCL ELECTRONICS's subscription to the 51% stake in the new company and the Malaysian factory is HKD 3.781 billion, to be paid in cash. This amount represents approximately 28% of the company's cash and cash equivalents as of the end of 2025. Based on the preliminary estimated consideration and the home entertainment business's pre-tax profit of HKD 810 million from Q2 2024 to Q1 2025, the transaction implies a price-to-earnings (P/E) ratio of approximately 4.7 times. While Sony's home entertainment business is highly recognized, its profitability has been under prolonged pressure. Constrained by 2025 tariffs, global demand uncertainty, and intense competition, the business's pre-tax profit for 2025 was minimal, significantly lower than in previous fiscal years. Sony may have had a pre-existing strategy to spin off or divest this operation. This transaction allows TCL ELECTRONICS to acquire quality assets without needing to issue new shares, creating a mutually beneficial outcome.
Profit potential is expected to be unlocked, with a promising mid-term profit contribution. Using Sony's Displays and Sound total revenue of JPY 818.6 billion from Q2 2024 to Q1 2025 as a denominator, the pre-tax profit margin for Sony's home entertainment business was only 2.0%. Going forward, by leveraging Sony's technology and brand value, combined with TCL ELECTRONICS's technological and scale advantages, full-industry-chain layout, and efficient production capabilities, the new joint venture has the potential to release significant profit potential. Historically, the profit margin for Sony's Home Entertainment & Sound segment reached a high of 7.8% (fiscal year 2018). For reference, TVS Company, formerly under Toshiba, was deeply loss-making in 2017. After its acquisition by Hisense Visual Technology, the net profit margin improved to 7.0% by 2025.
The collaboration is expected to enhance overall brand image, with synergistic effects warranting attention. According to Omdia, the combined TV shipment market share of Toshiba and Hisense brands in Japan was 14.6% and 5.5%, respectively, in 2017. After Hisense Visual Technology acquired TVS, the respective shares of the two brands reached 30.0% and 14.8% by 2025. Sony holds a strong position in the high-end and large-screen TV markets. In 2025, TCL and Sony's global TV shipment shares were 14.7% and 1.8%, respectively. Within the global TV market for products priced at USD 500 and above, TCL and Sony's shipment shares were 14.4% and 4.4%, respectively. The complementary effects could be even more pronounced for products priced at USD 1,000 and above in markets like North America, Western Europe, and Japan.
Risk factors include uncertainty regarding the progress and effectiveness of the strategic cooperation; significant fluctuations in raw material costs or exchange rates; uncertainties related to tariffs or external demand; and potential profitability pressures from market competition.
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