Guosen Securities has initiated coverage on TCL ELECTRONICS (01070) with an "Outperform" rating. The firm forecasts TCL Electronics' revenue for 2025-2027 to reach HKD 112.51 billion, HKD 126.54 billion, and HKD 138.14 billion, representing year-on-year growth of 13.3%, 12.5%, and 9.2%, respectively. Net profit attributable to shareholders is projected to be HKD 2.41 billion, HKD 2.82 billion, and HKD 3.25 billion, with growth rates of 37.2%, 16.8%, and 15.3%. Corresponding earnings per share (EPS) are estimated at HKD 0.96, HKD 1.12, and HKD 1.29, with price-to-earnings (P/E) ratios of 12.8x, 11.0x, and 9.6x. Based on a combination of absolute and relative valuation methods, the securities firm believes the stock's fair value range is HKD 15.29 to HKD 17.64 per share, corresponding to a 2026 P/E ratio of 13.7x to 15.8x.
A key recent development is the company's announcement of a non-binding memorandum of intent signed with Sony on January 20 to establish a global joint venture. This venture will be responsible for the end-to-end process of developing, manufacturing, selling, and providing customer service for Sony's home entertainment products, including televisions and home audio systems. TCL Electronics will hold a 51% stake in the joint venture, with Sony holding the remaining 49%. Future arrangements concerning patents, technology, and brand licensing are also planned.
The collaboration between TCL Electronics and Sony is expected to create synergistic advantages, accelerating the development of both Sony's and TCL's TV businesses in overseas markets. The joint venture aims to leverage Sony's advanced audio-visual technology and strong brand value, combined with TCL Electronics' expertise in advanced display technology, global scale advantages, comprehensive supply chain layout, and efficient manufacturing capabilities. This combination is anticipated to optimize Sony TV's production costs and enhance the operational quality of Sony TVs worldwide. Furthermore, the Sony and BRAVIA brands, positioned in the mid-to-high-end segment with substantial international influence, exhibit strong complementarity with the TCL brand. By combining their respective channel strengths, the partnership is poised to drive further growth for both companies' television businesses.
TCL Electronics is aggressively pursuing its goal of becoming a global TV leader. As a dominant player in China's TV industry, its business encompasses display products like TVs, internet services, and innovative ventures such as photovoltaic solutions and full-category home appliance marketing. The company ranked second globally in TV shipment volume for 2024 and held the top position worldwide for Mini LED TV shipments. From 2016 to 2024, its revenue demonstrated a compound annual growth rate (CAGR) of 14.5%, reaching HKD 99.3 billion, while net profit attributable to shareholders grew at a CAGR of 32.7% to HKD 1.8 billion. TV sales remain the core revenue driver, accounting for over 60% of total revenue in 2024. The company has a significant international presence across the Americas, Europe, and emerging markets, with overseas revenue contributing 58% in 2024.
The television industry is currently in a phase of iterative upgrade opportunities, with Chinese TV manufacturers accelerating their global expansion. Although the global TV sales market has entered a period of stability, factors such as the gradual consolidation of panel supply leading to more stable panel prices, coupled with structural upgrades like larger screen sizes and Mini LED technology, are expected to push average selling prices into an upward trajectory. Leading brands are leveraging their scale advantages to strengthen their product technology and supply chain positions, capturing greater market share. The combined market share (CR4) of the top four global TV manufacturers by shipment volume increased from 44.5% in 2018 to 56.2% in 2024, indicating an improvement in industry dynamics. Chinese leaders TCL and Hisense Visual Technology have significantly increased their market share in major global TV markets in recent years, propelled by superior product competitiveness and continuous enhancements in channels and marketing, with their shipment volumes now ranking among the top three globally.
TCL Electronics maintains a leading position in technology and supply chain layout, focusing strongly on the global market. The company has deep expertise in R&D for new technologies like Mini LED, making it a global leader in Mini LED TVs. Its recently launched SQD-Mini LED technology achieves 100% BT.2020 wide color gamut, high brightness, and high contrast, setting industry benchmarks. On the supply chain front, TCL has established a vertically integrated chain spanning from LED chips to panels and finished products, offering substantial potential for synergy and promising to accelerate breakthroughs and applications of advanced technologies. In terms of branding, the company is building a global brand-building and marketing system, adhering to sports marketing strategies and regional IP marketing sponsorships, supported by its dual-brand strategy of "TCL + Thunderbird," all contributing to enhanced global brand influence. Regarding channels, TCL is deepening its global distribution network and, leveraging its supply chain advantages and brand strength, consistently ranks among the top three in the TV industry in nearly 20 countries. Additionally, the company is actively exploring a second growth curve and new growth points, with a strategic focus on photovoltaic business, full-category marketing, AI glasses, and smart home devices.
Potential risks include intensifying industry competition; weaker-than-expected downstream demand; uncertainties in the international trade environment; significant fluctuations in raw material costs and exchange rates; and potential delays in acquisition progress.
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