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Q3 2015 Results Presentation
Hong Kong, 20 October 2015
TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (2618.HK)
BUSINESS REVIEW & OUTLOOK FINANCIAL HIGHLIGHTS Q & A
2
AGENDA
BUSINESS REVIEW & OUTLOOK
• Continuous revenue growth: Revenue growth continued despite challenging macroeconomic conditions and other foreign currency depreciation against US dollar
• Healthy gross margin: Gross margin remained at a healthy level of over 19%
• Outperforming global smartphone market: Recorded 19.8% YoY smartphone volume growth outpacing the market trend in Q2 2015 (Source: Gartner & Company Data)
• Outpacing global tablet market: Ranked No. 6 global tablet player with the fastest YoY volume growth in Q2 2015 (Source: Gartner & Company Data)
• Sustainable growth in internet applications and service business:
In the first three quarters of 2015, cumulative number of activated users of mobile Internet application platform grew by almost 3 times YoY to 18.1 million; while the settlement amount of third party payment increased almost 2 times YoY to HK$2.6 billion
• Sales Volume: 55.4 million units, up 14% YoY (including 31.1 million units of smart devices, up 20% YoY)
• Revenue: HK$20.3 billion, up 1% YoY
• Q1-Q3 Net Profit: HK$772 million, up 4% YoY
• Q3 Net Profit: HK$319 million, up 6% YoY
• Basic EPS: Increased to 61.76 HK cents from 61.11 HK cents YoY
Q1-Q3 2015 RESULTS
BUSINESS OVERVIEW
Q1-Q3 2015 OVERVIEW
4
RANK COMPANY Q2 15 SHIPMENTS (MILLION UNITS)
Q2 15 MARKET SHARE (%)
QoQ GROWTH RATE (%)
YoY GROWTH RATE (%)
1 Samsung 88.7 19.9 -9.4 -8.9
2 Apple 48.1 10.8 -20.1 +36.0
3 Microsoft-Nokia 27.7 6.2 -16.1 -36.8
4 Huawei 26.1 5.9 +40.5 +43.4
5 TCL-ALCATEL 18.0 4.0 +19.6 +12.3
6 LG 17.6 3.9 -10.3 -3.8
7 Lenovo-Motorola 16.6 3.7 -13.8 -13.7
8 Xiaomi 16.1 3.6 +9.0 +28.1
9 ZTE 14.6 3.3 +15.6 +15.3
10 Micromax 9.9 2.2 +21.2 +15.2
Others 162.4 36.5 +0.8 +0.2
TOTAL 445.8 100.0 -3.2 +0.4
TOP 10 MOBILE PHONE BRANDS IN Q2 15 (Source: Gartner and Company Data)
+ COMPANY DATA
INDUSTRY RANKING - TOTAL PHONES NO.5 GLOBAL HANDSET BRAND
5
RANK COMPANY Q2 15 SHIPMENTS (MILLION UNITS)
Q2 15 MARKET SHARE (%)
QoQ GROWTH RATE (%)
YoY GROWTH RATE (%)
1 Samsung 72.1 21.9 -11.2 -5.3
2 Apple 48.1 14.6 -20.1 +36.0
3 Huawei 25.8 7.8 +42.7 +46.3
4 Lenovo-Motorola 16.4 5.0 -13.1 -14.0
5 Xiaomi 16.1 4.9 +9.0 +28.1
6 LG 14.5 4.4 -6.3 +4.5
7 ZTE 11.9 3.6 +21.7 +16.6
8 TCL-ALCATEL 10.1 3.1 +12.4 +19.8
9 Microsoft-Nokia 8.4 2.5 -2.0 -0.3
10 OPPO 8.2 2.5 +24.1 +90.1
Others 98.1 29.7 +4.8 +16.3
TOTAL 329.7 100.0 -1.9 +13.5
TOP 10 SMARTPHONE BRANDS IN Q2 15 (Source: Gartner and Company Data)
+ COMPANY DATA
INDUSTRY RANKING SMARTPHONES NO.8 GLOBAL SMARTPHONE BRAND GROWTH OUTPACING OVERALL MARKET
6
RANK COMPANY Q2 15 SHIPMENTS (MILLION UNITS)
Q2 15 MARKET SHARE (%)
QoQ GROWTH RATE (%)
YoY GROWTH RATE (%)
1 Apple 11.2 25.1 -18.3 -18.8
2 Samsung 7.0 15.7 -7.2 -10.4
3 Lenovo 2.4 5.4 -2.4 +3.4
4 Huawei 1.8 4.0 +72.8 --
5 ASUS 1.3 2.9 -23.2 -43.2
6 TCL-ALCATEL 1.0 2.2 +37.3 +241.3
7 Microsoft 0.8 1.8 +5.6 +101.9
8 Acer 0.4 0.9 -38.4 -56.4
9 Amazon 0.4 0.9 -34.3 -65.2
10 Dell 0.3 0.7 -4.4 -31.6
Others 18.0 40.4 -14.5 -8.4
TOTAL 44.6 100.0 -11.8 -9.1
TOP 10 TABLET BRANDS IN Q2 15 (Source: Gartner and Company Data)
INDUSTRY RANKING - TABLETS NO.6 GLOBAL TABLET BRAND YEAR-ON-YEAR FASTEST GROWING TABLET BRAND
7
+ COMPANY DATA
FEATURE PHONES & OTHER PRODUCTS SMART DEVICES
NORTH AMERICA 33%
LATIN AMERICA 26%
EUROPE 28%
MEA 8%
2%
CHINA 3%
NORTH AMERICA 23%
LATIN AMERICA 31%
EUROPE 24%
MEA 11%
APAC 3%
CHINA 8%
Q1-Q3 2015 GEOGRAPHICAL REVENUE BREAKDOWN
APAC
8
0.0
2.0
4.0
6.0
3.7 4.8
• Sales volume: 10.6 million units, almost doubled YoY; Revenue: HK$4.8 billion, up 30% YoY
• Sales volume of smart devices: 4.6 million units, up 25% YoY
• Q2 2015 sales volume ranking (Source: IDC & Company data):
North America: No. 4 (Total phones); No. 6 (Smartphones)
• Consolidated operator channels and expanded open market, enhanced tablet sales growth
• Q4 business plan: Strengthen promotion on entry to mid-level 4G products, further enhance
user experience
Q1-Q3 2014
Q1-Q3 2015
NORTH AMERICA
LATIN AMERICA • Sales volume: 17.6 million units, down 10% YoY; Revenue: HK$6.0 billion, down 9% YoY
• Sales volume of smart devices: 10.7 million units, up 17% YoY
• Q2 2015 sales volume ranking (Source: IDC & Company data):
LATAM: No. 2 (Total phones); No. 3 (Smartphones)
Chile: No. 2 (Total phones); No. 2 (Smartphones)
Mexico: No. 2 (Total phones); No.4 (Smartphones)
• Continued to monitor exchange rate movements and reinforced collaboration with operators
and distributors to stabilise sales
• Q4 business plan: Implement stringent cost and credit control policies, focus on entry to mid-
level products in response to market changes
Revenue (HK$ Billion)
0.0
3.0
6.0
9.0
6.6 6.0
Revenue (HK$ Billion)
Q1-Q3 2014
Q1-Q3 2015
REGIONAL BUSINESS REVIEW
9
+30%
-9%
Q1-Q3 2014
Q1-Q3 2015
0.0
2.0
4.0
6.0
4.9 5.0
• Sales volume: 13.5 million units, up 31% YoY; Revenue: HK$5.0 billion, up 2% YoY
• Sales volume of smart devices: 7.5 million units, up 31% YoY
• Q2 2015 sales volume ranking (Source: IDC & Company data):
Europe: No. 4 (Total phones); No. 6 (Smartphones); No.5 (Tablets)
Eastern Europe (excl. Russia): No. 3 (Total phones); No. 7 (Smartphones); No. 4 (Tablets)
• Secured mid-range market share with IDOL 3 sales
• Q4 business plan: Introduce a range of cost-effective 4G products to broaden open market
EUROPE
THE MIDDLE EAST AND AFRICA
• Sales volume: 7.2 million units, up 17% YoY; Revenue: HK$2.2 billion, up 13% YoY
• Sales volume of smart devices: 4.4 million units, up 35% YoY
• Q2 2015 sales volume ranking (Source: Gartner & Company data):
Middle East and Africa: No. 6 (Total phones); No. 4 (Smartphones); No. 3 (Tablets)
• 2015 Q2 sales volume ranking (Source: IDC & Company data):
South Africa: No. 4 (Total phones); No. 3 (Smartphones); No. 1 (Tablets)
• New markets: Saudi Arabia and Nigeria
• Q4 business plan: Continue to develop new markets, refine entry-level product strategy
Q1-Q3 2014
Q1-Q3 2015
Revenue (HK$ Billion)
Revenue (HK$ Billion)
10
+2%
0.0
1.0
2.0
3.0
2.0 2.2
+13%
REGIONAL BUSINESS REVIEW
0.0
0.5
1.0
1.5
2.0
1.2
0.7
• Sales volume: 4.9 million units, up 5% YoY; Revenue: HK$ 1.6 billion, down 6% YoY
• Sales volume of smart devices: 2.8 million units, up 8% YoY
• Continued growth in 4G smartphones sales volume, particularly in Guizhou, Zhejiang
and Jiangsu
• -
level market share
• Sales volume: 1.6 million units, down 37% YoY; Revenue: HK$ 700 million, down 44% YoY
• Sales volume of smart devices: 1.1 million units, down 29% YoY
• Embarked on various measures to streamline operations
• Q4 business plan: Focus on e-commerce and operator channels, reinforce digital marketing
capability
Revenue (HK$ Billion)
Q1-Q3 2014
Q1-Q3 2015
APAC
CHINA
0.0
0.5
1.0
1.5
2.0
1.6 1.6
Revenue (HK$ Billion)
Q1-Q3 2014
Q1-Q3 2015
11
-44%
-6%
REGIONAL BUSINESS REVIEW
2007-08 2009 2010 2011 2012 2013 2014
GPRS, Ultra-low cost Qwerty key pad
Entry-level Multi-touch Panel Technology
EDGE Qwerty keypad Multi-touch display
- 500MHz-600MHz Android 2.1 - 2.3 3G
- 4.5 650MHz-1.5GHz Dual-core CPU Android 4.0 - 4.1 Windows
- Quad-core CPU 6.45mm Thickness Android 4.2 Firefox Multi-screen Wifi display on TV
- -
Octa-core CPU Metal casing Android 4.4
2015 Entry-level Feature Phone
Advanced Feature Phone
EDGE Phone Entry-level Smartphone
Advanced Smartphone
Smart Connectivity Device
4G / Tablet / Cloud Terminal
2.8 - Display 7 - Wearable devices Android L Firefox Windows Cloud applications 4G
2 in 1 / Wearable Device / Multiple OS / IoT
STEP-UP PRODUCT STRATEGY
12
MEA
EME
A
NORTH AMERICA
CHINA
APAC
EUROPE
LATIN AMERICA
PRODUCTS SELECTED BY GLOBAL MAINSTREAM OPERATORS & DISTRIBUTORS
13
(6)
14
NEW PRODUCTS
Compatible with Android 4.3 or above & iOS 7 or above Long Battery Life: 2-5 days Robust design: Water-Dust-Shockproof IP 67 Technology Emotion Pulse Sharing to Social Network Connectivity: Bluetooth 4.0 or above Changeable Front Casings & Wrist Bands
Octa Core 1.5 GHz CPU
FHD IPS Display
Slim Body: 9.1 mm
Stainless Steel Handle & Stand
3-Watt JBL Stereo Dual Speakers
Hands-free Gesture Control
Quad Core 1.2 GHz CPU Display
8 Mpxl Rear Camera (Underwater Photos & Videos) Long-lasting Battery: 500 hours Standby Time Robust design: Water-Dust-Shockproof IP 67 Technology 8 Colours with Matchable Headsets
(6)
15
Octa Core 1.4 GHz CPU 5 HD IPS Display Full Lamination 13 Mpxl Rear Camera with F2.0 aperture Dual SIM Dual Standby Premium Design: Metal Frame & Glass Hard Key
Awards
Quad Core 1 GHz CPU IPS Display
Full Lamination 8 Mpxl Rear Camera with EIS
Dual SIM Dual Standby Numerous Colourful Covers
NEW PRODUCTS
BRAND BUILDING ACTIVITIES
16
LA Galaxy Sponsorship The United States
IFA Berlin 2015 Germany
First Digital Product Launch - Flash Plus Smartphone The Philippines
2015 Tianyi (E-surfing) Terminal Expo & Summit Forum China
2015 Eletrolar Show Brazil
TCL 2015 Autumn New Product Presentation China
CHALLENGES
EXECUTION PLANS
GOALS & FORECAST
OUTLOOK
17
A challenging macroeconomic environment with soft consumer spending Currency fluctuations pose a continued headwind for sales growth Acceleration of competitive pricing pressures and average selling price erosion
Continue to implement stringent credit control and hedging policies to mitigate currency fluctuation impact Increase sales focus on user-centric and cost-competitive mid-high end products Streamline the portfolio with the completion of mass-market smartphones to sustain smartphone volume growth Remain as the market leader in feature phone market Allocate resources to projects with high-growth opportunities Focus on balancing growth and profitability amid stiff global competition
4G smartphones and tablets will continue to be the main growth drivers in Q4 2015 2015 full-year revenue growth: Maintain the target of 10% YoY
FINANCIAL HIGHLIGHTS
Incl. Sales Vol. of Smart Devices units)
Revenue
Gross Profit Margin (%)
Net Profit
Net Profit Margin (%)
Basic EPS (HK Cents)
19,996
20,283
Q1-Q3 2014
Q1-Q3 2015
Revenue (HK$ Million)
Total Sales Vol.
Total ASP (US$)
Q3 2015
Q3 2014
YOY (%) Q1-Q3 2015
Q1-Q3 2014
YOY (%)
21,702 18,668 +16% 55,395 48,610 +14%
11,401 10,896 +5% 31,083 25,932 +20%
42.0 53.4 -21% 47.2 52.7 -10%
7,056 7,779 -9% 20,283 19,996 +1%
21.8% 19.0% +2.8% 20.2% 19.3% +0.9%
319 301 +6% 772 741 +4%
4.5% 3.9% +0.6% 3.8% 3.7% +0.1%
25.11 24.30 +3% 61.76 61.11 +1%
Income Statement (HK$ Million)
FINANCIAL HIGHLIGHTS
19
0
2
4
6
8
10
12
0.6 1.1
1.6 1.9 1.2
2.5 3.4
5.2 4.3
5.4
6.8
9.6
6.0 5.9 6.2
1.5
1.9 1.5
2.0
1.2
1.5
2.1
2.3
1.2
1.3
1.0
1.1
0.7 0.6 0.9
2.1
3.0 3.1
3.9
2.4
4.0
5.5
7.5
5.5
6.7
7.8
10.7
6.7 6.5 7.1
Smart devices Handsets and other products
2.1
Revenue (HK$ Billion)
QUARTERLY REVENUE OF HANDSETS & OTHER PRODUCTS SUSTAINABLE REVENUE GROWTH
20
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q2 2015
Q1 2015
Q3 2015
0
250
500
750
1,000
1,250
1,500
63
289
513
1,099
718
986
1,339
21
QUARTERLY SALES VOLUME OF TABLETS ROBUST QUARTERLY VOLUME GROWTH
Volume
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
0
10
20
30
40
50
60
70
34.6 35.6 37.1 37.1 37.0
41.8 45.4
50.2 52.2 52.4 53.4 55.1 54.7
47.1
42.0
ASP
10% 14%
19% 17% 17%
27%
34%
40%
46%
53% 58%
62% 62% 56%
53%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%Smart devices proportion
ASP (USD) Sales Proportion of Smart Devices (%)
SMARTPHONES SALES VOLUME PROPORTION & ASP REFINED PRODUCT PROFORLIO STRATEGY
22
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
17.4%
19.0% 19.6% 19.4% 19.0% 19.2% 19.1% 19.5%
21.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Product competitiveness
Economies of scale
Pricing and Currency Strategy
Brand Value and Customer Relationship
Continuous Cost-Down Effort
SUSTAINABLE HEALTH RANGE
GROSS MARGIN TREND
2013 2012 Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
23
Non-current assets 4,457 3,691 +21%
Current assets
Inventories 3,207 3,293 -3%
Trade & factored receivables 7,189 8,244 -13%
Other current assets 2,637 2,081 +27%
Pledged deposits 1,235 1,914 -35%
Cash and cash equivalents 420 473 -11%
Total current assets 14,688 16,005 -8%
Current liabilities
Interest-bearing bank and other
borrowings (2,939) (4,312) -32%
Other current liabilities (5,206) (5,929) -12%
Trade and notes payables (6,276) (5,167) +21%
Total current liabilities (14,421) (15,408) -6%
Net current assets 267 597 -55%
Total assets less current liabilities 4,724 4,288 +10%
Non-current liabilities (817) (109) +650%
Net assets 3,907 4,179 -7%
(HK$ Million) 30 September 2015 31 December 2014 Change (%)
STATEMENT OF FINANCIAL POSITION
24
FINANCIAL POSITION HIGHLIGHTS
* Calculated -bearing borrowings over total assets,
excluding foreign exchange programme
** Excluding factored trade receivables
*** Only inventories in factory
30 September 2015 31 December 2014
Gearing Ratio * 14% 15%
Current Ratio 1.02 1.04
Trade Receivables Turnover Days** 80 72
Inventories Turnover Days *** 29 37
NAV Per Share HK$ 3.07 HK$ 3.43
Basic Earnings Per Share
(Q1-Q3 2015/ FY 2014) 61.76 HK cents 91.58 HK cents
25
KEY FINANCIAL RATIOS
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
. 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.
27