TCL Technology Corp (.SZ)_ What’s New from Citi China Tech and Telecom Day – 10bn a Conservative Guidance; Tightness Likely in 2026

Summary of TCL Technology Corp (000100.SZ) Conference Call Company Overview - Company: TCL Technology Corp (000100.SZ) - Date of Conference: January 10, 2025 - Industry: Technology and Telecommunications Key Points Financial Guidance and Performance - 2024 Estimates: TCL revised up CSOT's 2024 net profits to approximately Rmb6 billion, with revenue expected to be Rmb84 billion [2] - 2025 Guidance: The company targets net profits of Rmb8-10 billion and revenue of Rmb100 billion, with a free cash flow (FCF) estimate of Rmb30 billion, up from Rmb25 billion in 2024 [2] - Conservative Outlook: The 2025 profit guidance may be conservative if average selling prices (ASP) increase by 3% year-over-year [2] - Depreciation and Amortization (D&A): D&A is expected to rise by Rmb1-2 billion in 2025 but will decrease by Rmb2 billion annually starting in 2026 [2][3] Operational Insights - Channel Inventory: The company reports healthy channel inventory and does not anticipate brands stocking up due to potential tariff risks [3] - Utilization Rate: The utilization rate (UTR) is projected to increase in 2025 from 83% in 2024, driven by an increase in average TV size [4] - Production Plans: CSOT plans a one-week production suspension during the Chinese New Year [3] Market Trends - Panel Supply: The company expects mainland panel makers' market share to rise to 75% in 2025 from 70% in 2024, with a potential tightness in panel supply anticipated in 2026 [4] - TV Shipments: Global TV shipments are expected to increase in 2025, supported by the Chinese market [4] Risks - Key Risks: Risks to the target price include lower-than-expected panel prices, lower demand, and macroeconomic factors such as economic cycles and consumer demand [8] Valuation - Target Price: The target price is set at Rmb5.50, based on a price-to-book (P/B) ratio of 1.7x for 2025E, aligning with the average P/B from 2022-2023 [7] - Expected Returns: The expected share price return is 15.3%, with a total expected return of 17.6% including a dividend yield of 2.3% [5] Additional Insights - OLED Business: The OLED business is expected to reduce losses by Rmb1-2 billion, contributing positively to profitability [2] - Government Shares Repurchase: The company plans to repurchase shares from the government for T6 and T7 (both Gen10.5) in 2024-2025 [2] This summary encapsulates the essential insights from the conference call, highlighting TCL Technology Corp's financial outlook, operational strategies, market trends, and associated risks.