2014
TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (02618.HK) Q1 2014 Results Presentation Hong Kong, 24 April, 2014
AGENDA
BUSINESS REVIEW & OUTLOOK
FINANCIAL HIGHLIGHTS
Q & A
2
BUSINESS REVIEW & OUTLOOK
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•Sales volume: 13.6 million units, up 60% YoY (including 6.3 million units of smartphone & other smart devices, up 334% YoY)
•Revenue: HK$ 5.5 billion, up 126% YoY
•Net Profit: HK$ 180 million
•Basic EPS/(LPS): Increased to 15.05 HK cents from -21.82 HK cents YoY
Q1 2014 RESULTS
Q1 2014 OVERVIEW
•Ranked the 5th global handset manufacturer and was No. 1 among Chinese handset players in Q4 2013 (Source: Gartner)
•Keen demand despite traditional slack season in Q1
•Both revenue and profits significantly increased from Q2 2013 driven by strong smart devices sales momentum outperforming the market growth
•Gross margin stood at a healthy level of 19.6%, increased from 16.4% for the same period in 2013
•Product mix continued to improve. Newly launched advanced smart devices were well received in markets
•Selected as a constituent of the following indexes: Hang Seng Global Seng Broad Consumption Index
Seng Composite Index, Hang Seng Composite Industry Index - Information Technology and Hang Seng Composite SmallCap Index
BUSINESS OVERVIEW
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INDUSTRY RANKING NO. 5 GLOBAL HANDSET MANUFACTURER, NO. 1 CHINESE PLAYER
RANK COMPANY Q4 2013 SHIPMENTS (M UNITS)
Q4 2013 MARKET SHARE (%)
QoQ GROWTH RATE (%)
YoY GROWTH RATE (%)
1 Samsung 119.2 24.3 +1.8 +11.5
2 Nokia 63.6 13.0 +0.8 -25.3
3 Apple 50.2 10.2 +65.6 +15.6
4 LG 18.4 3.7 +1.8 +22.6
5 TCL-ALCATEL 17.6 3.6 +32.0 +58.3
6 Huawei 17.3 3.5 +27.7 +26.7
7 ZTE 16.3 3.3 +19.1 +1.0
8 Lenovo 13.6 2.8 +4.2 +63.2
9 Sony 10.4 2.1 +6.4 +30.6
10 Coolpad 8.4 1.7 -4.4 +36.2
Others 155.3 31.8 +0.2 -1.8
TOTAL 490.3 100.0 +7.6 +3.9
TOP-10 CELL PHONE BRANDS IN Q4 OF 2013 (Source: Gartner) (RANKING BY UNIT SHIPMENTS IN MILLIONS)
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•Gartner: TCL Communication has strong relationship with carriers, especially in LATAM; it also had success in EMEA with its launch of new products.
INDUSTRY RANKING NO.10 GLOBAL SMARTPHONE MANUFACTURER
TOP-10 SMARTPHONE BRANDS IN Q4 OF 2013 (Source: Gartner) (RANKING BY UNIT SHIPMENTS IN MILLIONS)
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RANK COMPANY
Q4 2013 Q4 2013 QoQ YoY
SHIPMENTS MARKET SHARE GROWTH RATE GROWTH RATE
(M UNITS) (%) (%) (%)
1 Samsung 83.3 29.5 +3.7 +29.2
2 Apple 50.2 17.8 +65.6 +15.6
3 Huawei 16.1 5.7 +37.6 +85.3
4 Lenovo 12.9 4.6 +0.1 +63.1
5 LG 12.8 4.5 +6.4 +59.5
6 ZTE 11.2 4.0 +21.9 +34.3
7 Sony 10.3 3.6 +8.6 +45.0
8 Coolpad 8.4 3.0 -1.0 +43.4
9 Nokia 8.2 2.9 -3.9 +15.6
10 TCL-ALCATEL 7.4 2.6 +58.9 +253.8
Others 61.5 21.8 -1.7 +37.7
TOTAL 282.3 100.0 +12.8 +35.9
AMERICAS 56%
EMEA 30%
APAC 10%
CHINA 4%
AMERICAS 59%
EMEA 28%
APAC 7%
CHINA 6%
FEATURE PHONES & OTHER PRODUCTS SMARTPHONES & OTHER SMART DEVICES
GEOGRAPHICAL REVENUE BREAKDOWN
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REGIONAL BUSINESS REVIEW
EUROPE, MIDDLE EAST
1.0 1.6
0.0
0.5
1.0
1.5
2.0
Q1 2013 Q1 2014
+60% Revenue (HK$ Billion)
•Shipments: 3.8 million units, up 28% YoY ; Revenue: HK$1.6 billion, up 60% YoY
•Smartphone & Other Smart Devices Shipments: 1.9 million units, up 174% YoY
•Ranked No. 3 in Eastern European, Middle East and Africa regions, and No. 5 in Russia in terms of sales volume in Q4 2013
•Q2 business plan: Expand the sales network to Nordic countries and launch more tablets & LTE smartphones
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AMERICAS
1.0 3.2
0.0
1.0
2.0
3.0
4.0
Q1 2013 Q1 2014
Revenue (HK$ Billion)
+233% •Shipments: 7.5 million units, up 90% YoY; Revenue: HK$3.2 billion,
up 233% YoY
•Smartphone & Other Smart Devices Shipments: 3.5 million units, up 1,228% YoY
•Migration of the user base from feature phones to smartphones accelerated the expansion
•Ranked No.1 in Central America, Pacific Islands and Caribbean; No. 2 in Mexico; No.4 in LATAM, No. 5 in North America in terms of sales volume in Q4 2013
•Q2 business plan: Consolidate position with the newly set up sales channels. Smartphones & tablets will be the growth driver
REGIONAL BUSINESS REVIEW
ASIA PACIFIC
•Shipments: 1.2 million units, up 151% YoY; Revenue: HK$ 0.4 billion, up 103% YoY
•Smartphone & Other Smart Devices Shipments: 0.5 million units, up 122% YoY
•Became the largest supplier of a tier-one operator in India and the Philippines; and ranked No. 2 in Malaysia in Q4 2013
•Q2 business plan: Widen sales channels in open markets and strengthen existing sales points
CHINA •Shipments: 1.1 million units, up 0.2% YoY; Revenue: HK$ 0.3 billion, up
16% YoY
•Smartphone & Other Smart Devices Shipments: 0.4 million units, up 51% YoY
•Smartphone sales increased area: Chongqing and the provinces of Jiangsu, Yunnan, Sichuan and Anhui
•Strategically partnered with online stores of China Mobile and Suning.com to promote iconic product, TCL S720T
•Q2 business plan: Strengthen sales points with operators &
0.2 0.4
0.0
0.2
0.4
0.6
Q1 2013 Q1 2014
+103%
0.3 0.3
0.0
0.2
0.4
Q1 2013 Q1 2014
Revenue (HK$ Billion)
+16%
Revenue (HK$ Billion)
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- STRATEGY
Advanced Smartphone
Cloud terminals / Smart Connectivity Devices
LTE/Tablet Entry-level Smartphone
EDGE Phone Advanced Feature Phone
Entry-level Feature Phone
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- 650MHz-1.5GHz Dual-core CPU Android 4.0 - 4.1 Windows
- Quad-core CPU 6.45mm Thickness Android 4.2 Firefox Cloud applications Multi-screen Wifi display on TV LTE
- - Tablets
Octa-core CPU Metal casing Wearable devices Android 4.4 4K video
- 500MHz-600MHz Android 2.1 - 2.3 3G
EDGE Qwerty keypad Multi-touch display Entry-level
Multi-touch Panel Technology
GPRS, Ultra-low cost Qwerty key pad
2007-08
SOUTH AMERICA
NORTH AMERICA
PRODUCTS SELECTED BY GLOBAL MAINSTREAM OPERATORS & DISTRIBUTORS
EMEA CHINA APAC
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NEW PRODUCTS
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Quad Core 1.2 GHz CPU display
Full lamination 8 Mpxl rear camera
LTE Cat4. NFC 2150mAh battery
7.4 mm thickness
Quad Core 1.2 GHz CPU 4.5 display Full lamination 8 Mpxl rear camera LTE Cat4. NFC 2000mAh battery 8.5 mm thickness
NEW PRODUCTS
Quad Core 1.5 GHz CPU with Dual SIM Mpxl Camera
Heavy Duty Battery: 3400 mAh Wireless Connection to TV with Wi-Fi Display
Bluetooth Enabled Phone Slim Capacitive Stylus and LED Magic Flip
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Color: Champagne Gold / Slate Quad Core 1.2 GHz CPU
13.1 Mpxl rear Camera Ultra Thin Body: 7.5 mm Wireless Connection to TV with Wi-Fi Display Aluminum Metal Frame Translucent upper and lower deco with LED lighting
NEW PRODUCTS
Quad Core 1.3 GHz CPU
Super thin: 7.9 mm Super light 325 g TV Mirror: Two Connectivity Modes:
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Dual Core 1.3 GHz CPU 1024X600 TFT Display
Super thin: 8.9 mm Super light : 285 g
Narrow Border Dedicated accessories
Two Connectivity Mode:
BRAND BUILDING & AWARDS IN EMEA & AMERICAS
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MWC 2014, Barcelona ONETOUCH IDOL X+ won the recognition in CES
Samba Party, Brazil Car Racing Sponsorship, Mexico One Direction Concert Sponsorship, LATAM
BRAND BUILDING IN APAC & CHINA
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4G Smart Device Strategy Press Conference, China
Product Promotion, Malaysia
Outdoor Billboard, Hong Kong
Cooperation with Handy, Hong Kong MTR Advertisement, Hong Kong
Spring Press Conference, China
GOAL & FORECAST
EXECUTION PLANS
CHALLENGES & OPPORTUNITIES
OUTLOOK
•2014 full year revenue growth target: Uplift from 35% to 45% versus 2013
• LTE smartphones and tablets are the main growth drivers in 2014
•65% of 2014 products portfolio supports LTE mode including both TDD-LTE and FDD-LTE
• In order to accommodate market needs, LTE smartphones and tablets includes entry-level and advanced segments
• Increase open market penetration and strengthen direct sales to major retailers and distributors
•Strengthen branding via digital and traditional platforms
•Mobile market is rapidly shifting to a new generation of 4G device. LTE will be a key growth driver
•Operators are warming, in particular, to tablet devices as they shift from traditional communications to personal digital life services providers
•Rapid and efficient execution is crucial to deliver business growth
•Competitive business environment; having brand recognition is the key
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•
devices which are designed as user platforms to connect to other services
•Optimize offline and online sales & marketing system via O2O platform
• Increase marketing efficiency via online sales and product development
FINANCIAL HIGHLIGHTS
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FINANCIAL HIGHLIGHTS
Revenue & Net Profit/(Loss) (HK$ Million)
Revenue (HK$ Million)
Q1 2013 Q1 2014
5,541
2,449
+126%
Q1 2014 Q1 2013 YOY (%)
Sales Volume
13,608 8,486 +60%
Sales Volume of Smartphone & Other Smart Devices
6,316 1,454 +344%
Total ASP (US$)
52.2 37.0 +41%
Revenue 5,541 2,449 +126%
Gross Profit % 19.6% 16.4% +3.2%
Net Profit/(Loss) 180 (247) N/A
Net Profit/(Loss)% 3.2% (10.1%) N/A
Basic Earnings/(Loss) Per Share (HK Cents)
15.05 (21.82) N/A
0.4 0.6 0.6 1.1
1.6 1.9
1.2
2.5
3.4
5.2
4.3
2.1 2.4
2.4 2.6
1.5
1.9 1.5
2.0
1.2
1.5
2.1
2.3
1.2
2.1
2.5 2.8
3.2
2.1
3.0 3.1
3.9
2.4
4.0
5.5
7.5
5.5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Q1 2011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Q12013
Q22013
Q32013
Q42013
Q1 2014
Smartphone & Other Smart Devices Feature Phone & Other Products
Revenue HK$ Billion
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SUSTAINABLE REVENUE GROWTH QUARTERLY REVENUE OF HANDSETS & OTHER PRODUCTS
31.3
29.6
33.4
31.2
34.6 35.6
37.1 37.1 37.0
41.8
45.4
50.2
52.2
0.3% 1% 4%
6%
10%
14%
19% 17% 17%
27%
34%
40%
46%
0%
10%
20%
30%
40%
50%
25
30
35
40
45
50
55
Q1 2011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Q12013
Q22013
Q32013
Q42013
Q1 2014
ASP Sales Proportion of Smartphone & Other Smart Devices
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BETTER SALES PRODUCT MIX & UPWARD ASP TREND SMARTPHONE SALES VOLUME PROPORTION & ASP GROWTH
ASP (USD) Sales Proportion of Smartphone & Other Smart Device (%)
GROSS MARGIN TREND GROSS MARGIN
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14.4%
17.0%17.9%
21.8%22.4%
21.9%
17.4%16.4%
18.4%19.6% 19.6% 19.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2006 2007 2008 2009 2010 2011 2012 Q12013
Q22013
Q32013
Q42013
Q12014
Product Competitiveness
Economies of Scale
Pricing and Currency Strategy
Brand Value and Customer Relationship
Continuous Cost Down Effort
FINANCIAL POSITION HIGHLIGHTS STATEMENT OF FINANCIAL POSITION
(HK$ Million) 31 March 2014 31 December 2013 Change (%)
Non-current assets 2,710 2,557 +6%
Current assets
-Inventories 3,026 2,649 +14%
-Trade & factored receivables 5,089 6,036 -16%
-Other current assets 1,309 1,341 -2%
-Pledged deposits 1,482 1,698 -13%
-Cash and cash equivalents 432 142 +204%
Total current assets 11,338 11,866 -4%
Current liabilities
-Interest-bearing bank and other borrowings (3,504) (2,690) +30%
-Other current liabilities (4,191) (4,656) -10%
-Trade and notes payables (3,079) (3,875) -21%
Total current liabilities (10,774) (11,221) -4%
Net current assets 564 645 -13%
Total assets less current liabilities 3,274 3,202 +2%
Non-current liabilities (224) (289) -22%
Net assets 3,050 2,913 +5%
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KEY FINANCIAL RATIOS
* Calculated -bearing borrowings over total assets, excluding RMB foreign exchange program ** Excluding RMB foreign exchange program *** Excluding factored trade receivables **** Only inventories in factory
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31 March 2014 31 December 2013
Gearing Ratio * 19% 17%
Current Ratio ** 1.06 1.06
Trade Receivables Turnover Days*** 65 63
Inventories Turnover Days **** 38 39
NAV per share HK$ 2.59 HK$ 2.55
Q & A
25
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THANK YOU
DISCLAIMER
The information contained herein should not be utilized for any
legal purposes in regards to any investment decision
or results. In particular, this document does not constitute any
recommendation or invitation for subscribing for or sale and
purchase of any securities of TCL Communication Technology
Holdings Limited ( The Company hereby expressly
disclaims any liability for any loss or damage resulting from or in
connection with any reliance by any investor on the information
contained herein.
A number of forward-looking statements may be made during this
presentation. Forward-looking statements are any statements that
are not historical facts. These forward-looking statements are
based on the current expectations of the Company and there can
be no assurance that such expectations will prove to be correct.
Because forward-looking statements involve risks and uncertainties,
the actual results could differ materially from these
statements.
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