Investment Rating - The investment rating for TCL Electronics is maintained as "Buy" [2][28]. Core Views - The report highlights that TCL Electronics has shown revenue and profit improvement in 2023H2, with a robust growth in domestic and international TV revenues. The company achieved a total revenue of HKD 79 billion in 2023, representing an 11% year-on-year increase, and a net profit of HKD 744 million, which is a 66.4% increase. In 2023H2, the revenue reached HKD 44.1 billion, up 17%, and the net profit was HKD 480 million, reflecting a 142% increase [12][28]. Summary by Sections 1. Revenue and Profit Improvement - In 2023, TCL Electronics reported a revenue of HKD 79 billion (+11% YoY) and a net profit of HKD 744 million (+66.4%). For 2023H2, the revenue was HKD 44.1 billion (+17%) and the net profit was HKD 480 million (+142%) [12][28]. 1.1 Revenue Breakdown - Domestic TV revenue in 2023 was HKD 16.016 billion (+5%), while international TV revenue was HKD 32.616 billion (+9%). In 2023H2, domestic TV revenue was HKD 9.12 billion (+3%) and international TV revenue was HKD 18.47 billion (+11%). The internet business revenue for 2023 was HKD 2.763 billion (+20%) and HKD 1.65 billion (+22%) in 2023H2. The solar business revenue surged to HKD 6.299 billion (+1820%) in 2023 and HKD 4.614 billion (+2861%) in 2023H2 [4][14][28]. 2. Profitability Improvement - The gross margin for 2023 was 18.7% (+0.3 percentage points), while for 2023H2 it was 18.7% (-0.7 percentage points). The report indicates that the TV business faced cost pressures, but the internet and full-category marketing segments saw significant gross margin improvements [5][17][21]. 2.1 Profitability Metrics - The report details that the net profit margin for 2023 was 0.9% (+0.3 percentage points) and for 2023H2 it was 1.1% (+0.6 percentage points). The adjusted net profit margin for 2023 was 1.0% and for 2023H2 it was 1.2% [17][21]. 3. Earnings Forecast and Investment Recommendations - The earnings forecast for 2024-2026 predicts net profits of HKD 915 million, HKD 1.114 billion, and HKD 1.309 billion respectively. The report suggests that the current stock price corresponds to a price-to-earnings ratio of 7.7 for 2024, 6.3 for 2025, and 5.4 for 2026, indicating a strong long-term outlook for TCL's smart screen business [28].

Financial Performance - The company's revenue for the year ended December 31, 2023, reached HKD 78,986 million, representing a year-on-year increase of 10.7%[3] - Gross profit increased by 12.5% to HKD 14,756 million, with an overall gross margin improvement of 0.3 percentage points to 18.7%[6] - Net profit attributable to shareholders rose by 66.4% to HKD 744 million, while adjusted net profit increased by 14.0% to HKD 803 million[3][7] - Total revenue increased by 10.7% from HKD 71.35 billion in 2022 to HKD 78.99 billion in 2023[31] - The adjusted net profit for 2023 was HKD 802.70 million, compared to HKD 704.39 million in 2022[30] - The gross profit for 2023 was HKD 14.755 billion, up from HKD 13.11 billion in 2022[30] - The profit attributable to shareholders was HKD 743,633,000 for the year ended December 31, 2023, compared to HKD 446,975,000 in 2022[51] - The company reported a net profit of HKD 826,809 for the year, an increase of 49.2% from HKD 553,834 in 2022[60] Revenue Breakdown - Internet business revenue grew by 20.2% to HKD 2,763 million, with a gross margin of 55.1%[9] - The company's innovative business revenue surged by 78.5% to HKD 18,640 million, driven by significant growth in the photovoltaic sector, which saw a revenue increase of 1,820.3% to HKD 6,299 million[9] - The small and medium-sized display business generated revenue of HKD 7.053 billion, a year-on-year decline of 40.2%, but improved gross margin by 6.3 percentage points to 22.2%[18] - The internet business achieved global revenue of HKD 2.763 billion, a year-on-year increase of 20.2%, with a gross margin improvement of 4.6 percentage points to 55.1%[20] - The revenue from the smart screen segment in the international market for 2023 was HKD 32,615,812, compared to HKD 29,999,916 in 2022, marking an increase of 8.6%[79] - The revenue from the smart screen segment in the Chinese market for 2023 was HKD 16,016,765, up from HKD 15,194,117 in 2022, representing a growth of 5.4%[79] Smart Screen Business - TCL's smart screen shipments increased by 6.2% to 25.26 million units, with a market share rise to 12.5% in global shipments[8] - The global market share of TCL smart screens increased from 5.6% in 2015 to 12.5% in 2023, with a year-on-year increase of 0.8 percentage points in shipment volume market share[12] - In 2023, TCL's global shipment of 65-inch and larger smart screens grew by 35.3%, with the average screen size increasing from 48.4 inches to 51.1 inches[13] - TCL Mini LED smart screen shipments surged by 180.1% year-on-year, while quantum dot smart screen shipments rose by 116.1%[13] - The retail market share of TCL smart screens in China increased by 3.5 percentage points to 18.1%, maintaining a top position in the market[15] - In the international market, TCL smart screen shipments rose by 10.0% year-on-year, with shipments of 65-inch and larger screens increasing by 60.3%[16] Research and Development - In 2023, the company's R&D expenses amounted to HKD 2.327 billion, focusing on smart terminal investments, including Mini LED technology, which supports the sales volume and revenue of Mini LED smart screens, maintaining the top position in the domestic market and second globally[10] - Research and development expenses for 2023 were HKD 2,326,980 thousand, a decrease from HKD 2,531,283 thousand in 2022, reflecting a reduction of 8.1%[85] - The company is committed to research and development, particularly in quantum dot technology and interactive display panels[119] Market Expansion and Strategy - The company is actively exploring new growth areas such as photovoltaic energy, all-category marketing, and AR/XR smart glasses to diversify revenue sources[5] - The company aims to enhance brand image and product quality while focusing on mid-to-high-end strategies and expanding global market share[28] - The company is focusing on expanding its internet business, which includes membership cards, video on demand, and advertising[78] - The company is currently evaluating the impact of new accounting standards on its financial reporting, with no significant effects anticipated[76] Financial Position and Debt - The capital debt ratio stood at 37.2% as of December 31, 2023, indicating a stable financial position[7] - The financing cost increased by 32.4% year-on-year to HKD 0.885 billion in 2023, attributed to rising U.S. federal funds rates[45] - The group held bank loans and other borrowings of approximately HKD 5,811,654,000 as of December 31, 2023, with fixed interest rates ranging from 0.60% to 6.64%[55] - The group's cash and cash equivalents amounted to approximately HKD 10,736,877,000 as of December 31, 2023, representing a year-on-year increase of 14.3%[55] Dividends and Shareholder Returns - The company proposed a final dividend of HKD 0.16 per share, representing a payout ratio of 50.0% of adjusted net profit[7] - The company plans to distribute a final dividend of HKD 0.16 per ordinary share for 2023, up from HKD 0.127 per share in 2022, which is an increase of 25.8%[88] Corporate Governance and Compliance - The audit committee reviewed the annual performance for the year ending December 31, 2023, including the accounting principles adopted by the group [113] - The company confirmed compliance with the non-competition agreement for the period from January 1, 2023, to December 31, 2023 [115] - The group has established and will continue to optimize risk management and internal control systems [110]

Share Option and Award Schemes - The company proposes to adopt the 2023 Share Option Scheme and terminate the 2016 Share Option Scheme following the amendments to the listing rules effective from January 1, 2023[1]. - The 2023 Share Award Scheme is suggested to replace the 2008 Share Award Scheme, which expired on February 5, 2023, allowing the board to grant awards in the form of new and/or existing shares[2]. - The purpose of the 2023 Share Option Scheme is to recognize and incentivize participants for their contributions to the group's growth and development, aligning their interests with those of shareholders[3]. - Participants in the 2023 Share Option Scheme will include employee participants, connected entity participants, and service providers, with the potential inclusion of other contributors recognized by the board[4]. - A special general meeting is scheduled for November 3, 2023, to consider the adoption of the 2023 Share Option Scheme and the 2023 Share Award Scheme[5]. - The record date for shareholders to attend and vote at the special general meeting is set for October 30, 2023[5]. - The 2023 Share Plan encompasses both the 2023 Share Option Plan and the 2023 Share Award Plan[8]. - The company aims to terminate the 2016 Share Option Plan and adopt the new plans during the special general meeting[8]. Previous Share Award Plan - Additional information regarding the 2008 Share Award Scheme participants is provided in the 2022 annual report and the 2023 interim report[6]. - The 2008 Share Award Plan includes a wide range of participants, potentially covering employees, consultants, and contractors, among others[7]. - Participants in the 2008 Share Award Plan are categorized as "Others" if they do not fall under specific participant categories defined by the revised listing rules[7]. Governance and Reporting - The company is registered in the Cayman Islands and its shares are listed on the main board of the Hong Kong Stock Exchange[8]. - The board of directors includes both executive and non-executive members, ensuring diverse governance[12]. - The announcement serves as a supplement to the 2022 Annual Report and 2023 Interim Report, which should be read together[9]. - The company emphasizes the importance of contributions from various participants in its share incentive plans[9].

Financial Performance - Revenue for the first half of 2023 reached HKD 34,916 million, representing a year-on-year increase of 3.7% compared to HKD 33,679 million in the same period of 2022[5]. - Net profit attributable to shareholders rose by 5.7% to HKD 264 million, compared to HKD 250 million in the previous year[5][9]. - The company reported a post-tax profit of HKD 316 million, reflecting a 7.8% increase from HKD 293 million year-on-year[5][9]. - The company reported a total revenue of HKD 34,916,442,000 for the six months ended June 30, 2023, an increase from HKD 33,679,256,000 in the same period of 2022[62]. - The profit attributable to equity holders of the parent company increased to HKD 263.7 million, compared to HKD 249.5 million in the previous year, reflecting a growth of approximately 5.5%[64]. - Basic earnings per share for the period was HKD 10.92, up from HKD 10.37 in the prior year, indicating a year-over-year increase of about 5.3%[64]. Profitability and Margins - Gross profit increased by 12.4% to HKD 6,500 million, with an overall gross margin improvement of 1.4 percentage points to 18.6%[5][8]. - The gross margin for the display business improved to 18.8%, up 2.1 percentage points year-on-year, due to a focus on high-end strategies and international operations[37]. - The gross margin for the internet business reached 54.1%, an increase of 1.9 percentage points year-on-year, reflecting a focus on high-margin vertical and innovative businesses[38]. - The gross margin for TCL's smart screens in China remained stable at 22.2%, with a 3.2 percentage point increase in the second quarter compared to the first quarter[14]. Market and Product Performance - In the first half of 2023, TCL's global shipment of smart screens increased by 12.9% year-on-year to 11.46 million units, with a market share rise of 1.3 percentage points to 12.4%[10]. - The innovative business revenue surged by 65.2% year-on-year to HKD 8.688 billion, with the photovoltaic business contributing HKD 1.685 billion, a staggering increase of 878.5%[10]. - The company is actively promoting innovative businesses such as distributed photovoltaic and AR/XR smart glasses, aiming to enhance operational quality[7][9]. - TCL's smart screen retail market share in China increased by 4.2 percentage points to 17.5% in H1 2023, ranking second in the market[15]. - The company launched several new products, including the TCL Q10H flagship Mini LED smart screen, which features advanced specifications for enhanced viewing experiences[13]. Expenses and Investments - Sales and distribution expenses increased by 13.0% from HKD 3.233 billion in the first half of 2022 to HKD 3.653 billion in the first half of 2023, driven by strategic investments in overseas channel development and brand marketing[40]. - R&D expenses increased by 2.3% from HKD 1.070 billion in the first half of 2022 to HKD 1.095 billion in the first half of 2023, due to increased investment in high-end display and smart interactive applications[42]. - The company is investing $50 million in R&D for new technologies aimed at enhancing user experience[180]. Cash Flow and Financial Position - Operating cash inflow for the six months ended June 30, 2023, was HKD 931,258,000, compared to HKD 535,669,000 for the same period in 2022, representing an increase of 73.8%[71]. - Cash outflow from investing activities was HKD 2,883,959,000 in 2023, a decrease of 43.4% from HKD 5,094,496,000 in 2022[72]. - The company's cash and cash equivalents decreased to HKD 6.69 billion from HKD 9.39 billion, a decline of about 28.5%[65]. - The group had bank loans of approximately HKD 5,440,512,000 as of June 30, 2023, with fixed interest rates ranging from 2.40% to 6.77%[54]. Strategic Outlook - The company aims to enhance brand and product competitiveness to capture more market share in the mid-to-high-end segment[27]. - The management provided a cautious outlook for the remainder of 2023, anticipating continued challenges in the global market environment[67]. - The company plans to enhance its market expansion strategies and invest in new product development to drive future growth[67]. - The company is considering strategic acquisitions to enhance its product portfolio, with a budget of $100 million allocated for this purpose[180]. Shareholder Information - As of June 30, 2023, the company had a total of 2,507,568,733 shares issued[150]. - TCL Holdings owns 54.83% of the company's issued shares, totaling 1,374,856,288 shares[152]. - Major shareholders such as Wang Jingbo and Zeng Qiang each hold 348,850,000 shares, representing 13.91% of the issued shares[152]. - The company has not declared any dividends for the six months ended June 30, 2023, consistent with the previous year[99]. Risk Management and Compliance - The company has established and will continue to optimize risk management and internal control systems, ensuring compliance with corporate governance codes[176]. - The audit committee reviewed the interim report and the unaudited condensed consolidated financial statements for the six months ended June 30, 2023[177]. - The company confirmed compliance with the non-competition agreements during the period from January 1, 2023, to June 30, 2023[179].

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Financial Performance - Revenue for the six months ended June 30, 2023, reached HKD 34,916 million, a year-on-year increase of 3.7%[3] - Gross profit increased by 12.4% to HKD 6,500 million, with an overall gross margin improvement of 1.4 percentage points to 18.6%[5] - Net profit attributable to shareholders rose by 5.7% to HKD 264 million, while adjusted net profit was HKD 262 million, up 1.0%[3] - The company's revenue increased by 3.7% from HKD 33.68 billion in H1 2022 to HKD 34.92 billion in H1 2023, with a 10.9% growth in RMB terms after excluding currency effects[26] - The gross profit for the same period was HKD 6,500,045, compared to HKD 5,781,562 in 2022, reflecting a gross margin increase from 17.2% to 18.6%[52] - The net profit for the period was HKD 316,052, an increase from HKD 293,258 in 2022, marking a growth of 7.74%[54] Smart Screen Business - TCL smart screen shipments increased by 12.9% to 11.46 million units, with a global market share rise of 1.3 percentage points to 12.4%[6] - TCL smart screen global shipment volume rose by 12.9% year-on-year to 11.46 million units, with revenue increasing by 7.0% to HKD 21.042 billion[8] - In the Chinese market, TCL smart screen shipments grew by 12.8% year-on-year, with revenue increasing by 9.2% to HKD 6.898 billion[10] - The average size of TCL smart screens increased to 49.9 inches, up 3.6 inches year-on-year, with shipments of 65-inch and larger screens rising by 45.6%[10] - Internationally, TCL smart screen shipments increased by 12.9%, with revenue growing by 6.0% to HKD 14.144 billion[12] - TCL's Mini LED smart screen shipments surged by 114.5% year-on-year, reflecting strong demand for high-end products[8] - TCL's retail market share in China increased by 4.2 percentage points to 17.5%, ranking among the top two brands[11] - In North America, TCL's smart screen shipment volume increased by 18.6% year-on-year, outperforming the industry average growth of 13.2% in the TV market[13] - In emerging markets, TCL's smart screen shipment volume grew by 17.6% year-on-year, significantly exceeding the industry average, with leading positions in several countries[13] - In Europe, TCL's smart screen shipment volume decreased by 10.0% year-on-year, while the overall TV market declined by 9.7%[13] Internet Business - Internet business revenue grew by 18.1% to HKD 1,113 million, with a gross margin increase of 1.9 percentage points to 54.1%[6] - The revenue from TCL's Internet business reached HKD 1.113 billion, an increase of 18.1% year-on-year, with a gross margin of 54.1%[16] - In the domestic market, TCL's Internet business revenue was HKD 0.887 billion, growing by 8.9% year-on-year, driven by expanded vertical and innovative business segments[17] - In the international market, TCL's Internet business revenue reached HKD 0.226 billion, a significant increase of 77.1% year-on-year[18] Innovative Business - Innovative business revenue surged by 65.2% to HKD 8,688 million, with solar business revenue reaching HKD 1,685 million, up 878.5%[6] - The photovoltaic business achieved over 8 times revenue growth in the first half of 2023, reaching HKD 1.685 billion, with over 35 new signed projects and more than 350 new distributors[19] Research and Development - R&D expenses increased by 2.3% year-on-year to HKD 1.095 billion, with an R&D expense ratio of 3.1%[7] - Research and development expenses increased by 2.3% to HKD 1.10 billion, reflecting continued investment in high-end display and smart interaction technologies[37] Financial Health - The company's capital debt ratio improved to 36.7%, a decrease of 8.0 percentage points year-on-year[5] - Inventory turnover days improved by 16 days to 70 days, while cash turnover days improved by 15 days to 38 days[5] - As of June 30, 2023, cash and cash equivalents totaled approximately HKD 6.69 billion, a decrease of 28.7% compared to December 31, 2022[47] - Bank loans amounted to approximately HKD 5.44 billion as of June 30, 2023, with fixed interest rates ranging from 2.40% to 6.77%[47] - The capital-to-debt ratio was 0% as of June 30, 2023, indicating that cash and cash equivalents exceeded interest-bearing bank loans and lease liabilities[47] - The company has no significant investments or acquisitions during the six months ended June 30, 2023[46] - The company is involved in a tax assessment dispute in Brazil, which is expected to last 3 to 5 years, with no provisions made as legal counsel believes the company can effectively defend against the claims[49] Market Strategy - The company continues to focus on high-end market demand and strategic marketing investments to drive long-term growth[5] - The company aims to solidify its global leading position by enhancing brand and product strength, targeting high-end and large-screen market segments[23] - The company plans to leverage its core display business and technology to achieve high-quality growth through a dual-brand strategy and optimized channel layout[24] - The company will focus on new growth opportunities in photovoltaic and smart eyewear sectors, enhancing its smart IoT ecosystem[24] - The company aims to capitalize on favorable market conditions and accelerate its layout in the smart terminal industry and new sectors[24] Corporate Governance - The company has complied with the Corporate Governance Code during the reporting period[86]

Financial Performance - Total revenue for 2022 reached HKD 71.351 billion, a decrease of 4.7% from HKD 74.847 billion in 2021[22]. - Gross profit increased by 4.6% to HKD 13.112 billion, with a gross margin improvement of 1.7 percentage points to 18.4%[22][27]. - Net profit attributable to shareholders was HKD 447 million, down 62.2% from HKD 1.184 billion in 2021[22]. - Adjusted net profit attributable to shareholders rose by 102.4% to HKD 704 million[22]. - Proposed final dividend per share is HKD 0.127, a decrease of 24.0% from HKD 0.167 in 2021[22]. - The gross profit for 2022 was HKD 13.112 billion, compared to HKD 12.534 billion in 2021, indicating an improvement in profitability[50]. - The adjusted net profit attributable to shareholders for 2022 was HKD 704.422 million, significantly up from HKD 348.059 million in 2021[50]. - Profit before tax decreased by 42.3% year-on-year from HKD 1.448 billion in 2021 to HKD 0.836 billion in 2022, impacted by a one-time gain from the sale of equity in 2021[65]. - Net profit attributable to shareholders fell by 62.2% year-on-year from HKD 1.184 billion in 2021 to HKD 0.447 billion in 2022, largely due to the absence of one-time gains from the previous year[67]. Business Segments - Revenue from innovative businesses grew by 22.2% to HKD 10.444 billion, while internet business revenue increased by 24.3% to HKD 2.298 billion[27]. - The display business revenue reached HKD 57.907 billion, with a gross margin increase of 2.1 percentage points to 18.2% year-on-year[33]. - The revenue from innovative businesses grew significantly by 22.2% year-on-year to HKD 10.444 billion, with the full-category marketing business expanding by 29.4% to HKD 8.243 billion[33]. - Internet business revenue grew by 24.3% year-on-year from HKD 1.849 billion in 2021 to HKD 2.298 billion in 2022, with international internet business revenue increasing significantly by 39.6%[55]. - The company expanded its photovoltaic business, adding over 150 new distributors and signing more than 120 commercial projects, covering 9 provinces in China by the end of 2022[30]. Market Position and Strategy - Global shipments of TCL smart screens rose to 23.78 million units, achieving a market share ranking of second globally, with a year-on-year increase of 21.3% in China[28]. - The company is focusing on high-end market breakthroughs and international operations to enhance operational quality and profitability[27]. - The company plans to enhance its global supply chain layout and optimize product structure to improve international market competitiveness[28]. - The company aims to leverage emerging market opportunities and continue its globalization and technological development strategies in 2023[31]. - TCL's smart screen shipment market share ranked second in the US, fourth in Mexico, and fifth in Canada as of December 31, 2022, with a year-on-year growth of 10.4% in emerging markets like the Philippines, Turkey, and Indonesia[39]. Research and Development - R&D expenses increased by 2.0% year-on-year to HKD 2.531 billion, with an R&D expense ratio of 3.5%, up by 0.2 percentage points from the previous year[32]. - Continued investment in R&D will focus on next-generation display technologies and smart interactive fields, including AI and 5G[48]. - The company is investing heavily in R&D, with a budget allocation of 5 billion RMB for new product development, focusing on AI and IoT technologies[87]. - TCL is committed to high R&D investment, focusing on product innovation and developing advanced display technologies such as Mini LED, QLED, and 8K[181]. Corporate Governance - The board of directors consists of 9 members, including 3 independent non-executive directors, ensuring a diverse and experienced leadership team[98]. - The company has adhered to corporate governance codes throughout 2022, with a commitment to transparency and accountability[92]. - The board regularly reviews financial and operational performance, discussing future development plans to ensure strategic alignment[96]. - The company has established a governance framework to monitor compliance with legal and regulatory requirements[140]. - The board confirmed the responsibility for preparing accounts that fairly reflect the group's financial position and performance for each financial period[141]. Social Responsibility and Community Engagement - TCL Foundation spent approximately RMB 52,013,000 on public welfare initiatives in 2022[164]. - The TCL Foundation has supported over 1,200 students through its educational programs, investing around RMB 80 million in education over the past 16 years[165]. - The company is committed to social responsibility, actively participating in educational support, public charity, and school-enterprise cooperation[162]. - In 2022, TCL donated RMB 200,000 to support sports facilities and activities for the Yucai Education Group[167]. - The company built five mother-baby rooms in Shenzhen and organized various donation activities, benefiting over 500 individuals in impoverished mountainous areas[167]. Employee Engagement and Development - As of December 31, 2022, TCL Electronics had a total of 24,694 employees, with total employee costs amounting to approximately HKD 5,568,229,000[75]. - The company has granted stock options to employees, with a total of 39,121,343 shares available for subscription as of December 31, 2022[75]. - The company aims to enhance its talent development programs, focusing on high-potential and specialized talent to meet business needs[161]. - The group recruited approximately 1,500 talents through campus recruitment and summer internship programs in 2022, providing career development opportunities for outstanding graduates[168]. - The company implemented a long-term incentive plan for senior management and key employees to strengthen shared responsibility and benefits, focusing on retaining and motivating core talent[160]. Environmental Sustainability - The group has committed to environmental sustainability and adheres to local environmental regulations in its operations[169]. - The group has implemented strict controls on toxic and harmful substances throughout the production process, ensuring employee and consumer safety[169]. - The group is committed to sustainability, with plans to reduce carbon emissions by 30% by 2025 through energy-efficient product designs[92]. - The group has prioritized the selection of suppliers that meet EU REACH and ROHS standards, ensuring responsible sourcing of materials[177].

Financial Performance - For the six months ended June 30, 2022, TCL reported revenue of HKD 33.679 billion, a decrease of 3.6% compared to HKD 34.934 billion in the same period of 2021[11]. - Gross profit increased by 3.9% to HKD 5.782 billion, with an overall gross margin improvement of 1.3 percentage points to 17.2%[15]. - Net profit attributable to shareholders decreased by 76.1% to HKD 249 million, primarily due to a one-time gain of HKD 741 million from the sale of a stake in a semiconductor company in 2021[12]. - The adjusted net profit attributable to shareholders increased by 4.9% to HKD 257 million, reflecting a strong operational performance despite market challenges[11]. - The company's revenue decreased by 3.6% from HKD 34.93 billion in H1 2021 to HKD 33.68 billion in H1 2022[36]. - Gross profit increased by 3.9% from HKD 5.57 billion in H1 2021 to HKD 5.78 billion in H1 2022, with a gross margin of 17.2%, up 1.3 percentage points year-on-year[42]. - The net profit for the period was HKD 292,728,000, significantly down from HKD 1,078,353,000 in the previous year, indicating a decline of about 72.9%[68]. - Pre-tax profit decreased by 56.4% from HKD 1.150 billion in the first half of 2021 to HKD 502 million in the first half of 2022, primarily due to a one-time gain from the sale of equity in a subsidiary in the previous year[53]. - Profit for the period fell by 72.8% from HKD 1.078 billion in the first half of 2021 to HKD 293 million in the first half of 2022, with attributable net profit declining by 76.1% to HKD 249 million[55]. Revenue Segments - Revenue from innovative businesses reached HKD 5.259 billion, a significant increase of 21.1% year-on-year, with solar business contributing HKD 172 million in Q2 2022[16]. - Internet business revenue surged by 30.7% to HKD 942 million, enhancing profitability contributions[16]. - Revenue from the display business fell by 7.9% year-on-year to HKD 26.97 billion, accounting for 80.1% of total revenue[38]. - Revenue from innovative businesses grew by 21.1% year-on-year to HKD 5.26 billion, representing 15.6% of total revenue[40]. - The smart connection and smart home business generated revenue of HKD 839 million, with smart home revenue increasing by 25.8% to HKD 287 million[28]. - The global internet business revenue reached HKD 942 million, reflecting a year-on-year increase of 30.7%[29]. - The domestic internet business revenue amounted to HKD 814 million, a significant year-on-year growth of 35.7%, with ARPU reaching HKD 39.3, up 25.3%[30]. - The international internet business revenue was HKD 128 million, marking a year-on-year increase of 5.7%[31]. Market Performance - TCL's smart screen business maintained a global market share ranking of third, with significant growth in small and medium-sized display segments, increasing by 16.4%[16]. - In the first half of 2022, TCL's global sales of smart screens reached 10.15 million units, with sales of 65-inch and larger smart screens increasing by 36.9% year-on-year to 1.53 million units, accounting for 15.1% of total sales[18]. - International sales revenue of TCL smart screens decreased by 19.9% year-on-year to HKD 13.34 billion, but the sales of 65-inch and larger smart screens grew by 13.0%, leading to a gross margin increase of 2.6 percentage points to 17.0%[19]. - In the Chinese market, TCL smart screen sales increased by 1.1% year-on-year, with a market share rise of 0.7 percentage points to 13.9%, while sales of 65-inch and larger smart screens surged by 58.8%[22]. - During the 618 shopping festival, TCL smart screens achieved the highest online sales and market share for 65-inch and larger TVs, as well as for TCL Mini LED smart screens[23]. - The revenue from TCL's small and medium-sized display business reached HKD 7.06 billion, representing a year-on-year growth of 16.4%, with North America showing over 50% revenue growth[24]. - TCL Mini LED smart screen sales in China grew by 31.2% year-on-year, with TCL Mini LED and quantum dot smart screens ranking first in retail volume in the domestic market[22]. Research and Development - R&D expenses rose by 4.0% to HKD 1.07 billion, with an R&D expense ratio of 3.2%, up 0.3 percentage points from the previous year[15]. - The company aims to enhance its core technology competitiveness by investing in high-end display technologies such as Mini LED and 8K[33]. - The company continues to invest in cutting-edge technology and product development, launching multiple award-winning smart products, including Mini LED displays and AR/XR glasses[17]. - R&D expenses increased by 4.0% from HKD 1.029 billion in the first half of 2021 to HKD 1.070 billion in the first half of 2022, driven by investments in advanced display technologies and cloud services[47]. Strategic Initiatives - The company is focusing on high-end market penetration and international operations to improve operational quality and profitability[14]. - TCL's overall business strategy emphasizes brand leadership and cost advantages, aiming for growth in mid-to-high-end markets and new business avenues[14]. - The company plans to expand its global internet business and strengthen partnerships with overseas internet partners[33]. - The company is focusing on the development of new businesses such as photovoltaic and AR/XR smart glasses to drive long-term growth[33]. - For the full year of 2022, TCL aims to maintain its global market share leadership while improving product structure to counter market demand pressures[32]. Financial Position - As of June 30, 2022, the company had cash and cash equivalents totaling approximately HKD 6.973 billion, with 40.3% in USD and 42.8% in RMB[58]. - The company's capital-to-debt ratio was 0.3% as of June 30, 2022, with net borrowings of approximately HKD 47.739 million[59]. - The total non-current assets as of June 30, 2022, amounted to HKD 11,709,484,000, slightly up from HKD 11,682,651,000 at the end of 2021[72]. - Current assets totaled HKD 47,261,112,000, a decrease from HKD 47,851,686,000 at the end of 2021, representing a decline of about 1.2%[72]. - The company reported a significant foreign exchange loss of HKD 798,594,000 for the period, compared to a gain of HKD 245,859,000 in the previous year[68]. - The company's net current assets decreased to HKD 7,615,907 thousand from HKD 7,910,662 thousand, indicating a decline of about 3.73% year-over-year[73]. - The total liabilities of the company as of June 30, 2022, were HKD 41,422,445 thousand, compared to HKD 41,161,673 thousand at the end of 2021, reflecting an increase of about 0.63%[73]. Cash Flow - For the six months ended June 30, 2022, the net cash inflow from operating activities was HKD 131,786,000, a significant decrease from HKD 1,186,090,000 in the same period of 2021[77]. - The net cash outflow from investing activities was HKD 5,094,496,000 for the first half of 2022, compared to HKD 3,321,412,000 in the same period of 2021[77]. - The cash flow from financing activities showed a net inflow of HKD 180,594,000 in the first half of 2022, a decrease from HKD 1,556,245,000 in the same period of 2021[78]. - The company incurred a loss of HKD 4,087,149,000 from loans to TCL Holdings in the first half of 2022, compared to HKD 3,923,931,000 in the previous year[77]. Shareholder Information - As of June 30, 2022, TCL Holdings owns 1,308,057,288 shares, representing approximately 52.42% of the company's issued shares[156]. - Major shareholders, including Wang Jingbo and Zeng Qiang, each hold 348,850,000 shares, representing approximately 13.98% of the issued shares[156][157]. - The total number of issued shares as of June 30, 2022, is 2,495,495,667 shares[154]. - The company has granted restricted shares to directors and senior management, which have not yet vested as of June 30, 2022[153]. Compliance and Governance - The company adopted revised Hong Kong Financial Reporting Standards effective from January 1, 2022, ensuring consistency with the previous year's annual financial report[80]. - The audit committee reviewed the unaudited interim condensed consolidated financial report for the six months ending June 30, 2022[176]. - All directors confirmed compliance with the standard code of conduct for securities trading during the six months ending June 30, 2022[177]. - Independent non-executive directors reviewed the non-competition agreements and confirmed compliance during the specified period[180].

Financial Performance - TCL's total revenue for 2021 increased by 46.9% year-on-year to HKD 74.85 billion, with display business revenue growing by 43.5% to HKD 63.95 billion and innovative business revenue rising by 86.7% to HKD 8.55 billion[25]. - The gross profit for 2021 was HKD 12.53 billion, representing a 29.7% increase compared to HKD 9.66 billion in 2020[18]. - The net profit attributable to shareholders decreased by 35.9% to HKD 1.18 billion from HKD 1.85 billion in the previous year[18]. - The company achieved a basic earnings per share of HKD 0.4926, with a proposed final dividend of HKD 0.1670 per share, resulting in an annual payout ratio of 35.0%[30]. - Gross profit rose by 29.7% year-on-year to HKD 12.53 billion, although it lagged behind sales revenue growth due to supply chain disruptions[26]. - The group’s revenue from continuing operations reached HKD 74.85 billion, a year-on-year increase of 46.9%[31]. - Gross profit amounted to HKD 12.53 billion, reflecting a year-on-year growth of 29.7%, with a gross margin decrease of 2.3 percentage points to 16.7% due to rising panel and chip prices[31]. - Profit before tax from continuing operations decreased from HKD 2.08 billion in 2020 to HKD 1.45 billion in 2021, a decline of 30.4%[58]. - Net profit from continuing operations fell from HKD 1.89 billion in 2020 to HKD 1.28 billion in 2021, a decrease of 32.4%[59]. Dividends and Shareholder Returns - TCL announced a proposed final dividend of HKD 0.167 per share, which is a 45.2% increase compared to the previous year's final dividend of HKD 0.115[18]. - The board proposed a final dividend of HKD 0.167 per share for the year ended December 31, 2021, an increase from HKD 0.115 per share in 2020[158]. - The dividend policy targets a payout ratio of approximately 30% to 50% of the annual net profit, with the remaining profit allocated for business development and operations[124]. - The board retains the ultimate decision-making authority regarding dividend declarations and payments[124]. Revenue Growth and Business Segments - Internet business revenue increased by 49.9% year-on-year to HKD 1.85 billion, with significant contributions to profitability[27]. - Revenue from the large-size display business grew by 24.3% year-on-year to HKD 49.27 billion, while the small-size display business revenue increased by 29.5% to HKD 14.38 billion[29]. - The overall revenue from innovative businesses saw a significant increase, with a 70.7% year-on-year growth in distribution revenue across all categories[27]. - The smart commercial display business achieved a total revenue of HKD 310 million in 2021, representing a year-on-year growth of 18.3%[39]. - The smart connection business sold 5.25 million units in 2021, with revenue reaching HKD 1.56 billion, marking a significant year-on-year increase of 34.2%[40]. - The smart home business generated revenue of HKD 610 million in 2021, reflecting a substantial year-on-year growth of 78.9%[41]. - The overall internet business revenue reached HKD 1.85 billion in 2021, showing a year-on-year increase of 49.9%[43]. Product Development and Innovation - The company launched new products including the TCL 4K Mini LED Smart Screen C825 and the first borderless 98-inch IMAX Enhanced giant screen, TCL 98X9C, during 2021[12]. - The company launched several high-tech products, including AR/XR smart glasses and smart locks, contributing to a 34.2% year-on-year growth in smart connectivity revenue[27]. - The company aims to leverage advancements in display technology and artificial intelligence to drive economic growth and industry transformation[25]. - The company plans to enhance its R&D capabilities, focusing on high-end display technologies such as Mini LED, quantum dots, and 8K[47]. - The company is investing heavily in R&D, with a budget allocation of 5 billion HKD for new product development and AI technology advancements[75]. Market Position and Strategy - Global sales of TCL smart screens reached 23.58 million units, maintaining a global market share ranking of third[26]. - The company plans to continue its globalization strategy and increase R&D investment to drive long-term growth and shareholder value[28]. - The company aims to enhance its global supply chain and marketing channels to become the leading TV brand worldwide[48]. - The company aims to expand its global smart IoT ecosystem and strengthen its market position through technological innovation and brand development[47]. - The company is focused on product innovation and expanding into overseas markets to enhance its core technological competitiveness[166]. Corporate Governance and Compliance - The company has adopted a corporate governance code as a guideline for its governance practices, ensuring compliance with applicable standards[81]. - The board of directors consists of 11 members, with independent non-executive directors accounting for over half of the board, ensuring compliance with listing rules[89]. - The company has complied with the corporate governance code during the year ended December 31, 2021, except for deviations related to specific provisions[82]. - The board regularly reviews the group's financial and operational performance and discusses future development plans[86]. - The company has established a formal board appointment letter outlining the key terms and conditions of appointments for all directors[82]. Employee and Social Responsibility - The total employee cost for the year ended December 31, 2021, was HKD 5,989,639,000, reflecting the company's commitment to retaining high-quality talent[66]. - The company aims to build an AI x IoT ecosystem for a smart health lifestyle, driving global business development across all categories[145]. - The company has conducted a series of investor meetings and presentations throughout 2021 to maintain effective communication with shareholders[140]. - TCL's social responsibility initiatives included spending approximately RMB 49,546,000 on charitable projects in 2021[151]. - The TCL Charity Foundation has invested over RMB 38,000,000 in the "TCL Hope Project" since its inception, benefiting over 2,600 rural teachers[150]. Risk Management and Financial Health - The company has adopted a set of risk management and internal control policies to identify, assess, and manage significant risks[130]. - The board confirmed that the Group has sufficient resources to continue its operations for the foreseeable future, adopting the going concern basis for the financial statements[128]. - The company has established credit insurance for trade receivables to manage credit risk associated with customers[174]. - The company relies heavily on panel availability and pricing for its TV products, maintaining strong relationships with suppliers to mitigate risks[167]. Shareholder Structure and Stock Options - As of December 31, 2021, TCL Holdings owned 1,260,358,288 shares, representing 50.82% of the issued shares[187]. - The company has adopted a stock option plan in 2007, which was replaced by a new plan in 2016, allowing for a maximum of 10% of the issued shares to be granted under the new plan[2]. - The company has established a stock option plan to incentivize eligible participants, including employees and consultants, contributing to the group's operational success[2]. - The report highlights the importance of stock options in the company's overall compensation strategy[196].