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2013 TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (02618.HK)
Q3 Results Presentation
Hong Kong, 24 October 2013
AGENDA
BUSINESS REVIEW & OUTLOOK
FINANCIAL HIGHLIGHTS
Q & A
2
BUSINESS REVIEW & OUTLOOK
Q1-Q3 2013 OVERVIEW
- Our smartphone strategy is right and working
- Completion of transition from feature phones to smartphones, proven in rapid smartphone sales with ramp up. Smartphone sales volume is reaching economies of scale and turnaround in Q1-Q3 with net profit
- Relocation of world-class global manufacturing facility in Q3 2013 with maximum annual capacity of 120 millions units
BUSINESS OVERVIEW
- Continue to invest in R&D and brand building
- Build a brand to differentiate TCL/ALCATEL ONETOUCH among other Chinese players
- Enhance the brand value to secure our position in advanced smartphone segment
CHALLENGES & OPPORTUNITIES
- Sales volume: 36 million units, up 24% YoY (including 9.9 million smartphone units, up 136% YoY)
- Revenue: HK$ 11.9 billion, up 46% YoY
- Q3 Net Profit: HK$ 223 million
- Q1-Q3 Net Profit: HK$ 14 million
RESULT
4
SUBSTAINABLE REVENUE GROWTH QUARTERLY REVENUE OF HANDSETS & OTHER PRODUCTS
HK$ Billion
0.1 0.02 0.1 0.4 0.6 0.6
1.1 1.6
1.9
1.2
2.5
3.4
3.0
2.1
2.4
2.4 2.6
1.5
1.9
1.5
2.0
1.2
1.5
2.1
1.5
2.0 2.2
3.1
2.1
2.5
2.8
3.2
2.1
3.0 3.1
3.9
2.4
4.0
5.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
Q12010
Q22010
Q32010
Q42010
Q1 2011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Q12013
Q22013
Q32013
Smartphone & Other Smart Devices Feature Phone & Other Products
5
TOP-10 CELL PHONE BRANDS IN Q2 OF 2013 (RANKING BY UNIT SHIPMENTS IN MILLIONS)
RANK COMPANY Q2 2013
SHIPMENTS (M UNITS)
Q2 2013 MARKET SHARE
(%)
QoQ GROWTH RATE
(%)
YoY GROWTH RATE
(%)
1 Samsung 100.6 28.3% +0.5% +8.7%
2 Nokia 61.1 17.2% -1.3% -27.0%
3 Apple 31.2 8.8% -16.6% +19.9%
4 LG 17.8 5.0% +9.9% +35.9%
5 ZTE 15.1 4.3% -3.1% -23.2%
6 Huawei 12.9 3.6% +12.4% +19.5%
7 TCL-Alcatel 11.3 3.2% +44.9% +15.3% 8 Lenovo 10.7 3.0% +13.8% +122.9%
9 Sony 9.6 2.7% +18.5% +23.6%
10 Coolpad 7.6 2.1% -10.6% +65.2%
Others 432.5 21.8% +3.2% +24.1%
TOTAL 710.4 100.0% +2.1% +39.7%
INDUSTRY RANKING NO. 7 GLOBAL HANDSET MANUFACTURER
6
Q1-Q3 2013 REVENUE GEOGRAPHICAL BREAKDOWN
FEATURE PHONES & OTHER PRODUCTS SMARTPHONES & OTHER SMART DEVICES
AMERICAS53%EMEA
34%
APAC8%
CHINA5%
AMERICAS32%
EMEA48%
APAC10%
CHINA10%
7
3.4
4.8
Q1-Q3 2012 Q1-Q3 2013
2.8
5.0
Q1-Q3 2012 Q1-Q3 2012
+39%
+77%
Q1-Q3 BUSINESS REVIEW
EUROPE, MIDDLE EAST AND AFRICA (“EMEA”)
AMERICAS Revenue (HK$ Billion)
- Shipments: 13 million units, up 33% YoY
- Revenue: HK$5.0 billion, up 77% YoY
- The most significant growth countries (YoY sales volume growth %): Russia (89%); Italy (96%)
- Q4 business plan: Introduction of LTE smartphones and expansion of distribution network
- Shipments: 17 million units, up 26% YoY
- Revenue: HK$4.8 billion, up 39% YoY
- ALCATEL ONETOUCH FIRE with Firefox OS was introduced to Colombia and Venezuela
- Ranked No.1 in Mexico, Central America and Caribbean in terms of sales volume
- The most significant growth countries (YoY sales volume growth %): Mexico (108%); USA (54%)
- Q4 business plan: Widen distribution channels
8
Revenue (HK$ Billion)
0.5
1.1
Q1-Q3 2012 Q1-Q3 2013
Q1-Q3 BUSINESS REVIEW
ASIA PACIFIC (“APAC”)
CHINA
+ 111%
1.3
1.0
Q1-Q3 2012 Q1-Q3 2013
Revenue (HK$ Billion)
-28%
- Shipments: 2.7 million units, up 55% YoY
- Revenue: HK$1.1 billion, up 111% YoY
- The most significant growth countries (YoY sales volume growth %): Malaysia ( New entered country) ; India (171%)
- In terms of smartphone shipment, ranked No.2 in Malaysia, in terms of total shipment, ranked No.4 in the Philippines
- Q4 business plan: Presence expansion in Thailand and Vietnam
9
- Shipments: 3.7 million units, down 17% YoY
- Revenue: HK$1.0 billion, down 28% YoY
- Enhanced sales channels in Q3: Sichuan, Hunan, Zhejiang and Shanxi provinces
- Strategically partnered with the biggest B2C e-commerce company in China, 360 Buy, to promote flagship product, TCL S950
Revenue (HK$ Billion)
“STEP-UP” PRODUCT STRATEGY
10
PRODUCTS SELECTED BY GLOBAL MAINSTREAM OPERATORS & DISTRIBUTORS
EMEA
CHINA
APAC
LATAM
USA
11
NEW PRODUCTS
12
Quad Core 1.5 GHz CPU
13 Mpxl Camera with 2 Mpxl Front Camera
Heavy Duty Battery: 3400 mAh
Wifi Display
Sidekick Bluetooth companion
Slim Capacitive Stylus and LED MagicFlip
Dual SIM Dual Strandby
Aluminum Metal Frame
Translucent Edges with LED lighting
Quad Core: 1.2 GHz CPU
13 Megapixel Camera
Thin Body: 7.5mm thin
Wifi Display
NEW PRODUCTS
13
4G LTE connection
Slim body design: 7.45mm thin
Dual Core 1.2 GHz CPU
4.7” HD IPS Display:
8 Mpxl Camera with Camera Stabilizer
Quad Core 1.5 GHz CPU
Ultra Compact Body Design: 6.9mm thin
xtremely wide viewing angles: Colors stay true even
above 170-degrees wide
13.1 Mpxl Camera
Dual SIM Dual Standby
NEW PRODUCTS
14
Fashionable design Easy to carry around
Compact and slim
Dual Core 1.3 GHz CPU
Full Lamination: Zero gap between touch screen and display
Dual SIM Dual Standby
NEW PRODUCTION FACILITY OPENING CEREMONY
15
NEW PRODUCTION FACILITY
Located in Huizhou, China
30 SMT lines, 29 assembly lines, 46 customization/packing lines
Capacity: 100-120 Mu per year
World-class SMT production lines and supporting facilities
Experience of efficient global logistics
Strict tests by key telecommunication global operators
ISO 9001, ISO 14001 and TL9000 qualified
Testing and manufacturing capability for platforms: MTK & QUALCOMM
BRAND BUILDING IN EMEA & AMERICAS
Golf Match-Mexico
IFA 2013 Germany 7K Running Event-USA
16
Shop Visit- Netherland
BRAND BUILDING IN APAC & CHINA
17
Product Promotion Event, The Philippines
Product Roadshow, Hong Kong Product Promotion, Malaysia Marketing Event, China
OUTLOOK
Efficient product design process and product development cycle : From ideas to
product launch takes no more than 4-5 months
Supply chain management: Early adoption of advanced technology in development
stage
Guaranteed quality and production lead time by in-house production
Responsive global distribution network
Deliver our product with appealing design and good quality at a very affordable price
BUSINESS STRATEGIES
Possible shortage in some key components, such as memory and display which we
have secured our supply for the peak season
The launch of mid-to-low range smartphone models from first tier players intensified
-
CHALLENGES & OPPORTUNITIES
Uplift 2013 full year revenue growth target: 40% above versus 2012
GOAL & FORECAST
18
FINANCIAL HIGHLIGHTS
Q3
2013
Q3
2012 YoY
Q1-Q3
2013
Q1-Q3
2012 YoY
15,395 10,555 +46% 36,028 29,169 +24%
45.4 37.1 +22% 42.2 35.8 +18%
5,454 3,053 +79% 11,861 8,146 +46%
19.6% 16.7% +2.9% 18.5% 18.3% +0.2%
223 (91) N/A 14 9 +50%
4.1% (3.0%) N/A 0.1% 0.1% -
Revenue & Net Profit/(Loss)
(HK$ Million)
Total ASP (US$)
Net Profit/(Loss)
Revenue
Gross Profit %
Net Profit/(Loss)%
Sales Volume
Revenue
(HK$ Million)
Q1-Q3 2012
Q1-Q3 2013
8,146
11,861
FINANCIAL HIGHLIGHTS
+46%
20
BETTER SALES PRODUCT MIX & UPWARD ASP TREND SALES VOLUME PROPORTION OF SMARTPHONE & OTHER DEVICES & ASP GROWTH
ASP (USD) Smartphone & Other Smart Devices
Sales Volume Proportion (%)
31.3
29.6
33.4
31.2
34.635.6
37.1 37.1 37.0
41.8
45.4
0.3%1.3%
4.4%5.5%
9.5%
13.5%18.8%
17.4% 17.1%
26.7%
33.7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
25
30
35
40
45
50
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q4 2012
Q1 2013
Q22013
Q32013
ASP Smartphone & Other Smart Devices Sales Volume Proportion
21
UPWARD SMARTPHONE SALES TREND QUARTERLY SALES VOLUME & PROPORTION OF SMARTPHONE & OTHER DEVICES
487 720 746 1,458 1,981 2,335 1,454 3,247 5,1920.3%
1.3%
4.4%5.5%
9.5%
13.5%
18.8% 17.4% 17.1%
26.7%
33.7%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
0
1,000
2,000
3,000
4,000
5,000
6,000
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Q12013
Q22013
Q32013
Sales Volume of Smartphone & other Smart Devices Smartphone & Other Smart Devices Sales Volume Proportion
Sales Volume of Smartphone &
Smartphone & Other Smart Devices Sales Volume Proportion* (%)
* The proportion of smartphone & other smart devices is in terms of total shipment volume
22
14.4%
17.0%17.9%
21.8%22.4%
21.9%
17.4%16.4%
18.4%19.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2006 2007 2008 2009 2010 2011 2012 Q12013
Q22013
Q32013
Product Competitiveness
Economies of Scale
Pricing and Currency Strategy
Brand Value and Customer Relationship
Continuous Cost Down Effort
GROSS MARGIN TREND GROSS MARGIN
23
(HK$ Million) 30 September 2013 31 December 2012 Change(%)
Non-current assets 2,478 2,109 +17%
Current assets
-Inventories 2,973 1,263 +135%
-Trade & factored receivables 4,223 3,275 +29%
-Other current assets 1,624 1,483 +10%
-Pledged deposits 1,621 4,221 -62%
-Cash and cash equivalents 1,363 970 +41%
Total current assets 11,804 11,212 +5%
Current liabilities
-Interest-bearing bank and other borrowings (4,202) (6,159) -32%
-Trade and notes payables (4,046) (2,429) +67%
-Other current liabilities (3,199) (2,018) +59%
Total current liabilities (11,447) (10,606) +8%
Net current assets 357 606 -41%
Total assets less current liabilities 2,835 2,715 +4%
Non-current liabilities (350) (392) -11%
Net assets 2,485 2,323 +7%
FINANCIAL POSITION HIGHLIGHTS STATEMENT OF FINANCIAL POSITION
24
* C -bearing borrowings over total assets, excluding RMB foreign exchange program
** Excluding RMB foreign exchange program
*** Excluding factored trade receivables
**** Only inventories in factory
30 September 2013 31 December 2012
Gearing Ratio * 23% 26%
Current Ratio ** 1.03 1.07
Trade Receivables Turnover Days *** 65 68
Inventories Turnover Days **** 41 38
NAV per share HK$ 2.19 HK$ 2.06
Basic earnings/loss per share (Q1-Q3 2013/ Full Year 2012)
1.66 HK cents -18.49 HK cents
KEY FINANCIAL RATIOS
25
Q&A
THANK YOU
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
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-
materially from these statements.
DISCLAIMER