CICC has released a research report stating that the global black goods (television) industry is undergoing a significant transformation characterized by "convergence of the upstream panel cycle, midstream product technology upgrades, and a reshaping of downstream channel structures." The trend of "Chinese brands advancing while Korean brands retreating" in the competitive landscape is becoming increasingly evident.
The firm believes the narrative of Chinese black goods brands leading the global market will continue to unfold. As a leading Chinese player in this sector, TCL Electronics (01070) demonstrates strong beta and alpha attributes. CICC has raised its forecasts for the company's net profit attributable to shareholders for 2026 and 2027 by 7% and 23%, respectively, to HK$29.5 billion and HK$39.9 billion. It maintains an Outperform Industry rating and a target price of HK$21.22.
Core Television Business: Enhancing Profitability and Expanding Market Share
1) Where will profit growth come from? Firstly, as the global panel depreciation cycle nears its end and capacity is restructured, price volatility is moderating, improving profit stability for downstream finished product manufacturers. Secondly, the primary driver of industry innovation is shifting from upstream panel makers to downstream finished product assemblers, transferring value down the supply chain. Thirdly, the company adheres to a premiumization strategy, with comprehensive upgrades in products, channels, and branding, positioning it to fully benefit from the global penetration of MiniLED technology. Fourthly, the company is continuously improving organizational efficiency to reduce costs and enhance effectiveness.
2) What is the potential for market share expansion? Global color TV retail sales have remained around 200 million units annually since 2022. Chinese brands are rapidly catching up with their Korean counterparts by reshaping the cost curve through upstream panel and manufacturing capabilities, enhancing product competitiveness through midstream technological upgrades, and penetrating mature markets through downstream channel optimization and brand marketing. In the medium to long term, as Chinese brands potentially assume global leadership in the color TV industry, TCL Electronics' global shipment value share could approach the 30%-35% range currently held by Samsung.
Emerging Businesses: Broadening Growth Horizons
1) The internet business exhibits high growth and profitability. Its overseas operations have established a mature, multi-layered monetization system, while the domestic business, operated by LeiNiao Technology, focuses on AI empowerment and content delivery.
2) The photovoltaic business is expanding rapidly. Utilizing a capital-light model and leveraging upstream supply from TCL Zhonghuan alongside TCL's channel, financial, engineering, and digital capabilities, it has formed scale and cost advantages.
3) The full-category marketing business is expected to continue benefiting from the deepening channel resources, operational systems, and brand influence of the company's core television operations.
Partnership with Sony: Elevating the Premium Ceiling
The company plans to establish a joint venture with Sony to take over Sony's home entertainment business, bringing globally scarce, top-tier television assets under its umbrella. The two parties are expected to achieve comprehensive synergy across channels, branding, technology, and supply chain, accelerating the company's expansion in the global high-end color TV market. Drawing parallels with Hisense's successful integration of Toshiba's TV business, CICC believes TCL Electronics' future profit growth potential is promising.
Key Risks
Risks include a significant increase in costs, substantial exchange rate fluctuations, and intensifying industry competition.