JP Morgan said TCL Communication Technology's (02618) 3Q earnings came in at HK$294mn, in line with its estimate of HK$291mn. 3Q revenue grew 43% Y/Y or 16% Q/Q to HK$7,779mn (vs JPMe of HK$7,677mn), thanks to strong smartphone sales (10.9mn units vs. 8.7mn in 2Q14 and 5.2mn oya).
With more carrier wins (Sprint in 2H14/ Verizon in 2015) and increasing EM country penetration, JP Morgan believes TCL-C is likely to achieve 40%~50% smartphone shipment Y/Y growth in 2015, thus driving up total volume, ASP and bottom-line earnings (JPMe of 30%+ y/y growth).
The house believes market concerns over competition are overblown and TCL-C's smartphone growth momentum in non-China EM remains intact. The recent correction offers a good entry point for investors. It expects strong EPS growth in 4Q14/ 2015 to revitalize the stock price.
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