CMSC: Maintains Strong Recommendation on TCL ELECTRONICS (01070) with 26H1 Performance Exceeding Expectations

CMSC released a research report stating that it maintains a "Strong Buy" investment rating for TCL Electronics (01070), and has raised the company's performance for 2026-2027 to 3-4 billion Hong Kong dollars. The current stock price valuation is at 13/9 times PE. The company's strategic cooperation with Sony has catalyzed a revaluation of its value, coupled with better-than-expected growth in 2025 and the continuous leadership in AI innovation business by Thunderbird. The company's long-term global high-end TV market share continues to rise, with integrated panel and global production capacity layout forming core barriers. Key points from CMSC: TCL Electronics released a forecast for the 2026 mid-year performance, exceeding market expectations. The company's adjusted net profit attributable to shareholders for the first half of 2026 is estimated to be between approximately 1.48 billion and 1.65 billion Hong Kong dollars, representing a growth of about 40% to 56% compared to the same period in 2025. Referring to the first quarter forecast, calculated at the midpoint, the first quarter performance was 380 million Hong Kong dollars, a 138% increase, and the second quarter performance was 1.185 billion Hong Kong dollars, a 32% year-on-year increase. The main reasons for the performance growth are the company's effective execution of its "globalization" and "high-end" strategies, leading to a significant improvement in gross profit margin; the continuous optimization of the core TV business product structure, enhanced revenue capability of high-margin internet business, improved profitability of small and medium-sized displays, all driving steady overall profit growth. Continued progress in globalization and high-end strategies. The company continues to advance its globalization and high-end strategies, achieving quality growth in global business, significant improvement in gross profit margin, and steady enhancement of overall profitability. The TV business maintains a leading position globally and continuously improves its product structure, while the revenue capability of high-margin internet business is further enhanced and profitability of small and medium-sized display business has improved. On the product side, the company continues to consolidate its leading position in Mini-LED technology; through the introduction of products featuring SQD-MiniLED, AI picture quality chips and other cutting-edge technologies, it has successfully shaped the brand image of a leader in the Mini-LED category; product structure upgrades to larger sizes and higher-end, effectively increasing product average price and gross profit margin, successfully offsetting the impact of upstream panel cost fluctuations. On the channel side, the company has made breakthroughs in the expansion of high-end channels in key overseas markets such as North America. Strategic cooperation with Sony is a major focus. The strategic cooperation with Sony is a major focus for the company's future development. In March, TCL and Sony established a joint venture, with the bank predicting that after its operation in 2027, the combined market share may surpass Samsung Electronics to become the world's number one. Sony's TV shipments in 2025 were only 4.1 million units, and the high-end circles in Europe and America still have strong appeal, with its picture quality calibration and audio technology complementing TCL's shortcomings in high-end pricing. Expansion of production by tens of millions of units to support high-endization. Expansion of production by tens of millions of units to support high-endization. TCL's flagship smart TV increased its capital and expanded production project has officially signed and settled in Huizhou Zhongkai High-tech Zone. Once the new factory is completed and put into production, it will add production capacity of 10 million units of smart TVs to TCL's flagship brand. The project is expected to be fully completed and put into operation by early 2028. Risks: Release of new products falls short of expectations, escalation of overseas trade friction, significant increase in panel prices.