SDIC Securities has issued a research report stating that TCL ELECTRONICS (01070) is a leading global enterprise in the television industry, actively advancing its mid-to-high-end and globalization business strategies. As the company increases its investment in overseas brand marketing and expands channel coverage, it is expected to continue enhancing its market share in overseas television sales. Leveraging the brand strength, channel resources, and advantages of full industrial chain vertical integration accumulated from its display business, the company's innovative segments such as photovoltaic operations and full-category marketing have entered a phase of rapid development. The forecasted EPS for 2026-2028 are HK$1.18, HK$1.40, and HK$1.66 respectively. Applying a 16x P/E ratio valuation for 2026 results in a six-month target price of HK$18.96. The 'Buy-A' investment rating is maintained. The key points from SDIC Securities are as follows:

Event: TCL ELECTRONICS announced its Q1 2026 results. In Q1 2026, the company achieved revenue of HK$29.23 billion, a year-on-year increase of 15.3%, and a net profit attributable to shareholders of HK$360 million, surging 123.6% year-on-year. The firm believes the company's television business has broad prospects for overseas expansion, and innovative businesses like photovoltaic operations and full-category marketing are also expected to contribute new growth momentum.

Rapid Growth in Q1 Overseas TV and Small-to-Medium Sized Display Businesses: The company continues to expand its global channel network and deepen key channel development, consistently enhancing its end-retail capabilities and brand influence. In Q1, TCL ELECTRONICS' overseas television revenue grew by 23.2% year-on-year. The results of upgrading its overseas TV product portfolio continued to show, with overseas Mini LED TV shipments accounting for 14.2% in Q1, an increase of 8.2 percentage points year-on-year. Domestic television revenue in Q1 grew by 3.9% year-on-year, returning to steady growth. The small-to-medium sized display business adhered to a strategy prioritizing efficiency and focusing on key markets, deepening its presence in channels with first-tier network operators in Europe and North America, and continuously strengthening strategic relationships with core partners. Q1 revenue for this segment grew by 26.3% year-on-year. Regarding internet services, the company continued to deepen cooperation with leading platforms like Google, Roku, and Netflix, while significantly enhancing the content richness of TCL Channel and its commercial monetization efficiency. Q1 internet service revenue increased by 13.2% year-on-year.

Continued Improvement in Q1 Profitability: TCL ELECTRONICS' gross profit margin in Q1 increased by 1.5 percentage points year-on-year. The main reasons include: 1) The gross margin for the large-size display business in Q1 rose by 3.0 percentage points year-on-year. 2) The increased proportion of higher-margin overseas internet service revenue contributed to a 10.6 percentage point year-on-year increase in the internet services gross margin. The company's net profit margin attributable to shareholders in Q1 improved by 0.6 percentage points year-on-year.

Risk Warnings: Significant increase in panel prices, intensification of industry competition, and risks associated with overseas trade policies.