TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (2618.HK)

2016 Interim Results Presentation Hong Kong · 12 August 2016

2

BUSINESS REVIEW & OUTLOOK

FINANCIAL HIGHLIGHTS

Q & A

AGENDA

FINANCIAL HIGHLIGHTS

4 FINANCIAL HIGHLIGHTS

Total Sales Vol.

(’000 units)

Incl. Sales Vol. of Smart Devices (’000 units)

Total ASP (US$)

Revenue

Gross Profit Margin (%)

Net Profit

Net Profit Margin (%)

Basic EPS (HK Cents)

Income Statement

(HK$ Million)

Q2 2016

Q2 2015

Change (%)

1H 2016

1H 2015

Change (%)

15,960 17,912 -11% 33,101 33,692 -2%

8,601 9,975 -14% 17,413 19,682 -12%

43.5 47.1 -8% 42.6 50.7 -16%

5,378 6,537 -18% 10,932 13,227 -17%

21.4% 19.5% +1.9% 20.4% 19.3% +1.1%

2 269 -99% 11 454 -98%

0.04% 4.1% -4.1% 0.1% 3.4% -3.3%

0.64 21.41 -97% 1.76 36.58 -95%

5

1.2 2.5

3.4

5.2 4.3

5.4

6.8

9.6

6.0 5.9 6.2 7.3

4.7 4.6 1.2

1.5

2.1

2.3

1.2

1.3

1.0

1.1

0.7 0.6 0.9

1.0

0.9 0.8

2.4

4.0

5.5

7.5

5.5

6.7

7.8

10.7

6.7 6.5 7.1

8.3

5.6 5.4

0

3

6

9

12

15

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Smart Devices Feature Phones and Other Products

Revenue (HK$ Billion)

QUARTERLY REVENUE OF HANDSETS & OTHER PRODUCTS

6

63

289

513

1,099

718

986

1,339 1,315

990

863

0

500

1,000

1,500

2,000

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

QUARTERLY SALE VOLUME OF TABLETS CONTINUOUS AND STEADY SALES VOLUME

Volume (‘000 unit)

7 SMARTPHONE SALES VOLUME PROPORTION & ASP REFINED PRODUCT PORTFOLIO STRATEGY

37.0

41.8

45.4

50.2 52.2 52.4 53.4

55.1 54.7

47.1 42.0 43.3

41.8 43.5

17%

27%

34%

40%

46% 53%

58% 62% 62%

56% 53%

55% 51%

54%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

10

20

30

40

50

60

70

80

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

ASP (US$) Smart Devices Proportion

Smart Devices Proportion （%）

ASP (US$)

8 GROSS MARGIN TREND SUSTAINABLE HEALTHY RANGE

17.4%

19.0% 19.3%

21.1%

19.4%

21.4%

0.0%

10.0%

20.0%

30.0%

2012 2013 2014 2015Q1

2016Q2

2016

Product Competitiveness

Economies of Scale

Pricing and Currency Strategy

Brand Value and Customer

Relationship

Continuing Cost-Down Efforts

GP Margin (%)

9 FINANCIAL POSITION HIGHLIGHTS STATEMENT OF FINANCIAL POSITION

(HK$ Million) 30 June 2016 31 December 2015 Change (%)

Non-current assets 4,444 4,364 +2%

Current assets

Inventories 3,386 2,541 +33%

Trade & factored receivables 5,277 6,095 -13%

Other current assets 1,780 2,013 -12%

Pledged deposits 696 1,028 -32%

Cash and cash equivalents 587 566 +4%

Total current assets 11,726 12,243 -4%

Current liabilities

Interest-bearing bank and

other borrowings (2,499) (3,074) -19%

Other current liabilities (4,322) (4,154) +4%

Trade and notes payables (4,820) (4,790) +1%

Total current liabilities (11,641) (12,018) -3%

Net current assets 85 225 -62%

Total assets less current liabilities 4,529 4,589 -1%

Non-current liabilities (478) (551) -13%

Net assets 4,051 4,038 --

10 KEY FINANCIAL RATIOS

30 June 2016 31 December 2015

Gearing Ratio 16% 20%

Current Ratio 1.01 1.02

Trade Receivables Turnover Days* 81 89

Inventory Turnover Days ** 28 26

NAV Per Share HK$3.13 HK$ 3.16

* Excluding factored trade receivables

** Only inventories in factory

BUSINESS REVIEW & OUTLOOK

12 1H 2016 OVERVIEW

RESULTS

BUSINESS OVERVIEW

• Sales Volume: 33.1 million units, down 2% YoY (including 17.4 million units of smart devices, down 12% YoY）

• Revenue: HK$ 10.9 billion, down 17% YoY

• Net Profit: HK$ 11 million, down 98% YoY

• Basic EPS: Decreased to 1.76 HK cents from 36.58 HK cents

• Healthy gross margin: Implemented a more stringent approach to controlling risk and focused on business with high profitability in view of the gloomy economic conditions, intensified competition and continued currency fluctuation. Gross margin remained at a healthy level of over 19%.

• Continuous growth in tablet sales volume:

Quarterly tablet sales volume has increased steadily over the past 2 years. In 1H 2016, tablet sales volume increased 9% YoY to almost 1.9 million units.

• Sustainable growth in internet applications and service business:

In 1H 2016, the cumulative number of activated users of mobile Internet application platforms increased almost 2 times YoY to 34.5 million; while the settlement amount of third party payment increased for more than 3 times YoY to HK$7.3 billion.

• Virtual Reality (VR) device debut:

Unveiled its first VR-supporting flagship smartphone, Alcatel IDOL 4S, alongside VR-in-the-Box, which officially announced its entry into the VR market.

13 INDUSTRY RANKING - TOTAL PHONES NO. 6 GLOBAL HANDSET BRAND

+ COMPANY DATA

Rank Company Q1 16

Shipments (Million units)

Q1 16 Market Share

(%)

QoQ Growth Rate

(%)

YoY Growth Rate

(%)

1 Samsung 95.5 21.3 -4.5 -2.6

2 Apple 51.6 11.5 -27.8 -14.2

3 Huawei 29.0 6.5 -10.2 +56.0

4 Microsoft 16.7 3.7 -38.1 -49.3

5 OPPO 16.3 3.6 +22.5 +136.5

6 TCL-Alcatel 16.2 3.6 -33.8 +7.3

7 Xiaomi 15.0 3.4 -17.4 +2.1

8 LG 14.3 3.2 -21.8 -27.4

9 BBK 14.1 3.2 +23.7 +125.4

10 ZTE 13.7 3.1 -19.9 +2.3

Others 165.0 36.9 -15.6 -5.9

TOTAL 447.4 100.0 -15.4 -3.0

TOP 10 MOBILE PHONE BRANDS IN Q1 16 (Source: Gartner and Company Data)

No.6

14 INDUSTRY RANKING – SMARTPHONES NO. 10 GLOBAL SMARTPHONE BRAND

+ COMPANY DATA

TOP 10 SMARTPHONE BRANDS IN Q1 16 (Source: Gartner and Company Data)

No.10

Rank Company Q1 16

Shipments (Million units)

Q1 16 Market Share

(%)

QoQ Growth Rate

(%)

YoY Growth Rate

(%)

1 Samsung 81.2 23.2 -2.7 +0.1

2 Apple 51.6 14.8 -27.8 -14.2

3 Huawei 28.9 8.3 -10.1 +59.4

4 OPPO 16.1 4.6 +24.3 +144.7

5 Xiaomi 15.0 4.3 -17.4 +2.1

6 BBK 14.0 4.0 +23.3 +131.4

7 Lenovo 12.7 3.6 -36.8 -33.0

8 LG 12.6 3.6 -18.5 -18.6

9 ZTE 11.1 3.2 -24.8 +10.7

10 TCL-Alcatel 7.9 2.3 -40.8 -13.2

Others 98.2 28.1 -10.6 +2.2

TOTAL 349.3 100.0 -13.4 -3.9

15 INDUSTRY RANKING – TABLETS NO. 7 GLOBAL TABLET BRAND

+ COMPANY DATA

TOP 10 TABLET BRANDS IN Q1 16 (Source: Gartner and Company Data)

No.7

Rank Company Q1 16

Shipments (Million units)

Q1 16 Market Share

(%)

QoQ Growth Rate

(%)

YoY Growth Rate

(%)

1 Apple 10.1 24.9 -33.9 -26.5

2 Samsung 7.1 17.5 -12.6 -5.9

3 Lenovo 2.1 5.2 -32.8 -17.1

4 Huawei 2.0 4.9 -7.1 +89.5

5 Amazon 1.5 3.7 -51.8 +132.6

6 Asus 1.0 2.5 -37.5 -39.2

7 TCL-Alcatel 1.0 2.5 -24.7 +37.9

8 Microsoft 0.9 2.2 +7.4 +16.0

9 Acer 0.6 1.5 -34.4 -12.3

10 LG 0.6 1.5 -38.4 -45.3

Others 13.7 33.6 -17.0 -35.1

TOTAL 40.6 100.0 -24.7 -21.3

16 1H 2016 GEOGRAPHICAL REVENUE BREAKDOWN

NORTH AMERICA

30%

LATIN AMERICA

20%

EUROPE 32%

MEA 8%

APAC 6%

CHINA 4%

FEATURE PHONES & OTHER PRODUCTS SMART DEVICES

NORTH AMERICA

32%

LATIN AMERICA

28%

EUROPE 24%

MEA 8%

APAC 5%

CHINA 3%

17

4.00 2.94

0.0

2.0

4.0

6.0

1H2015

1H2016

3.22 3.43

0.0

1.0

2.0

3.0

4.0

1H2015

1H2016

+6%

-27%

NORTH AMERICA • Sales volume: 7.1 million units, up 4% YoY;

Revenue: HK$3.43 billion, up 6% YoY

• Sales volume of smart devices: 4.3 million units, up 37% YoY

• Q1 2016 sales volume ranking (Source: Gartner & Company data):

North America: No. 4 (Total phones); No. 5 (Smartphones)

• Recorded continuous growth in tablet business by leveraging the close

relationship with major operators

• Q3 business plan: Seize opportunities in VR, increase sales of 4G

products

LATIN AMERICA • Sales volume: 9.9 million units, down 7% YoY;

Revenue: HK$2.94 billion, down 27% YoY

• Sales volume of smart devices: 5.5 million units, down 16% YoY

• Q1 2016 sales volume ranking (Source: Gartner & Company data):

Latin America: No. 3 (Total phones); No. 5 (Smartphones); No. 4 (Tablets)

Mexico: No. 3 (Total phones); No. 4 (Smartphones); No. 4 (Tablets)

Chile: No. 3 (Total phones); No. 4 (Smartphones); No. 4 (Tablets)

• Business was affected by prolonged currency fluctuations and the rise of

local kings

• Q3 business plan: Continue implementing stringent controls on currency

and credit risks, optimise product mix to strengthen leading position in

entry-level smartphone market

Revenue (HK$ Billion)

INTERNATIONAL BUSINESS REVIEW Revenue

(HK$ Billion)

18

3.20 2.77

0.0

1.0

2.0

3.0

4.0

1H2015

1H2016

1.28 0.89

0.0

0.5

1.0

1.5

2.0

1H2015

1H2016

INTERNATIONAL BUSINESS REVIEW

EUROPE

MEA

-13%

-30%

• Sales volume: 8.7 million units, up 14% YoY;

Revenue: HK$2.77 billion, down 13% YoY

• Sales volume of smart devices: 4.2 million units, down 7% YoY

• Q1 2016 sales volume ranking (Source: Gartner & Company data):

Europe: No. 5 (Total phones); No. 7 (Smartphones)

Eastern Europe (excl. Russia):

No. 5 (Total phones); No. 8 (smartphones); No. 3 (Tablets)

• Maintained market share with mid-high end smart devices

• Q3 business plan: Widen open market and online sales channels

Revenue (HK$ Billion)

Revenue (HK$ Billion)

• Sales volume: 3.9 million units, down 1% YoY;

Revenue: HK$890 million, down 30% YoY

• Sales volume of smart devices: 1.9 million units, down 28% YoY

• Q1 2016 sales volume ranking (Source: Gartner & Company data):

MEA: No. 6 (Total phones); No. 6 (Smartphones); No. 3 (Tablets)

South Africa: No. 3 (Total phones); No. 2 (Smartphones); No. 1 (Tablets)

• Increasing number of domestic brands intensified market competition

• Q3 business plan: Focus on entry-level products to secure its existing

market share

19

1.16

0.36

0.0

0.5

1.0

1.5

1H2015

1H2016

0.37 0.54

0.0

0.2

0.4

0.6

0.8

1H2015

1H2016

INTERNATIONAL BUSINESS REVIEW

APAC

CHINA

+48%

-69%

Revenue (HK$ Billion)

Revenue (HK$ Billion)

• Sales volume: 1.7 million units, up 83% YoY;

Revenue: HK$540 million, up 48% YoY

• Sales volume of smart devices: 0.9 million units, up 46% YoY

• Continued monitoring the impact of currency devaluation,

enforced stringent controls on exchange rate risk

• Q3 business plan: Further broaden online sales channels

• Sales volume: 1.8 million units, down 52% YoY;

Revenue: HK$360 million, down 69% YoY

• Sales volume of smart devices: 0.6 million units, down 71% YoY

• Completed strategic adjustment and business reorganisation,

implemented premium products strategy

• Q3 business plan: Develop operators, open markets and e-commerce

channels in parallel, establish strategic partnership in pre-installation,

promotion and joint marketing

20 STEP-UP PRODUCT STRATEGY

2007-2010

FEATURE PHONE

EDGE PHONE

2011-2012

2013-2014

2015-2016

GPRS, Ultra-low cost Qwerty key pad Entry-level

Multi-touch panel technology

EDGE Qwerty keypad Multi-touch display

2.8’’- 3.5’’ display 500MHz-600MHz Android 2.1 - 2.3 3G

SMARTPHONE

SMART CONNECTIVITY

4G/ TABLET/ CLOUD TERMINAL

2 in 1 / WEARABLE DEVICE/

MULTIPLE OS/ IoT

VIRTUAL REALITY DEVICE/ BIGPAD

2.8’’- 4.5’’ display 650MHz-1.5GHz Dual-core CPU Android 4.0 - 4.1 Windows

5‛-6‛ Display 6‛-10‛ Tablets Octa-core CPU Metal casing Android 4.4

4.5‛-6‛ display Quad-core CPU 6.45mm thickness Android 4.2 Firefox Multi-screen Wi-Fi display on TV

2.8‛-6‛ display 6‛-10.1‛ Tablets 16.3‛ BigPad Wearable devices Android L Windows OS Cloud applications 4G 3.5‛-6‛ display

16.3‛ BigPad Wearable device for kids Android M Windows 10 Mobile Full metal body VR devices

21

PRODUCTS SELECTED BY GLOBAL MAINSTREAM OPERATORS & DISTRIBUTORS

NORTH AMERICA

LATIN AMERICA

EUROPE CHINA

APAC

MEA

·

22

IDOL 4 Series received 14 recognitions at MWC 2016

NEW PRODUCTS

Octa Core CPU 5.2'‘ FHD IPS Display Slim Body: 7.1 mm 13 Mpxl Rear Camera, Dual-tone LED Flash Augmented Multimedia Experience with Boom Key

Octa Core CPU 5.5‛ QHD AMOLED Display

Ultra Slim Body: 6.99 mm 16 Mpxl Rear Camera, Dual-tone LED Flash

Augmented Multimedia Experience with Boom Key VR–in-the-Box

23

Quad Core CPU 10.1‛ HD IPS Display Windows 10 Home Long-lasting Battery: 8,410 mAh (with LTE Keyboard) Detachable LTE Keyboard (Wi-Fi Hotspot for up to 15 Devices)

PLUS 10 received 3 recognitions at MWC 2016

NEW PRODUCTS

Compatible with Android 4.3 & iOS 7 or Above Long Standby Time: 4 days IP65 certified: Water & Dust Resistant 2-way Call & Voice Message GPS Locator

Octa Core CPU 5.2'‘ FHD LTPS Display Ultra Slim Body: 6.95mm 16 Mpxl Rear Camera Dual-tone LED Flash Fingerprint Recognition Full Netcom

24 BRAND-BUILDING ACTIVITIES

01. The 4th China Information Technology Expo 2016 China 02. TCL 750 Product Launch China 03. IDOL 4S Product Launch

Philippines 04. The 10th La Rochelle

Beach Cup Sponsorship

France

01 02

03 04

25 OUTLOOK

CHALLENGES

EXECUTION PLANS

GOALS & FORECAST

Strong headwinds in global economic environment persist, which increase operation and credit risks

Persistently strong US dollar further weakens purchasing power in emerging markets

Active overseas expansion of Chinese handset manufacturers intensifies market competition

Threats from local kings in various regions are mounting

4G smartphones and tablets will continue to be the main growth drivers in 2016

Continue to promote ‚Double +‛ business transformation strategy, enhance intelligence and

internet application service ability, seize the opportunity to develop new strategic business

Continue to implement stringent credit control and hedging policies to maintain

a healthy and stable financial position

Optimise management capability, improve internal communication and

collaboration efficiency

Invest resources into developing cost-competitive mid-high end products and

VR devices to seize market share

Strengthen new brand image and realign marketing strategy to strengthen

dominant position in overseas markets

Q & A

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.