{Economic Daily News, 20th Special Correspondent} TCL Electronics (01070) recently issued a profit warning, expecting net profit for the first three quarters to reach between HK$2.11 billion and HK$2.25 billion, representing a year-on-year increase of 45% to 55%, primarily driven by its globalization and mid-to-high-end strategic initiatives. In the live program "Market Open Good Morning," Ping An Securities Director Wong Wai-kit analyzed that although the overall figures appear impressive, when broken down by quarter, TCL Electronics is expected to post a profit of between HK$470 million and HK$610 million in the third quarter, a significant drop compared to the second quarter's HK$1.64 billion.
This is mainly due to declining prices of large-sized global LCD panels in the third quarter, weak domestic demand, and rising component costs, leading downstream end-users to adopt a more cautious procurement approach. However, the market's current interpretation of this profit warning is generally positive, and the stock price has rebounded accordingly.
Wong Wai-kit believes that despite short-term concerns over sequential profit slowdown, TCL Electronics still holds medium- to long-term value if it falls further. He added that the company is actively transforming from a single-color TV giant into an intelligent terminal manufacturer. The acquisition of the parent company's TCL air conditioning business is expected to complete in the fourth quarter. Since over 70% of the air conditioning business's revenue comes from overseas, it will generate strong synergies with the existing global distribution channels and reduce costs. In addition, the company continues to expand its high-end products such as Mini LED, and has signed a framework agreement with Sony to establish a joint venture to strengthen its position in the mid-to-high-end market; coupled with plans to spin off its photovoltaic business via in-kind distribution for independent listing to unlock value, all of which will benefit the company's focus on developing its core smart home appliance business.
Regarding strategy deployment, Wong Wai-kit pointed out that TCL Electronics has accumulated a substantial gain since the beginning of the year and is currently entering a correction phase from its highs, having already broken below several short-term moving averages. Investors should pay attention to downside pressure, and closely monitor how the market digests the actual impact of the third-quarter profit slowdown. Technically, he currently regards the vicinity of the 100-day moving average (around HK$15.5) as a key support level for the pullback and a reference indicator for buying on dips. (al)
This is mainly due to declining prices of large-sized global LCD panels in the third quarter, weak domestic demand, and rising component costs, leading downstream end-users to adopt a more cautious procurement approach. However, the market's current interpretation of this profit warning is generally positive, and the stock price has rebounded accordingly.
Wong Wai-kit believes that despite short-term concerns over sequential profit slowdown, TCL Electronics still holds medium- to long-term value if it falls further. He added that the company is actively transforming from a single-color TV giant into an intelligent terminal manufacturer. The acquisition of the parent company's TCL air conditioning business is expected to complete in the fourth quarter. Since over 70% of the air conditioning business's revenue comes from overseas, it will generate strong synergies with the existing global distribution channels and reduce costs. In addition, the company continues to expand its high-end products such as Mini LED, and has signed a framework agreement with Sony to establish a joint venture to strengthen its position in the mid-to-high-end market; coupled with plans to spin off its photovoltaic business via in-kind distribution for independent listing to unlock value, all of which will benefit the company's focus on developing its core smart home appliance business.
Regarding strategy deployment, Wong Wai-kit pointed out that TCL Electronics has accumulated a substantial gain since the beginning of the year and is currently entering a correction phase from its highs, having already broken below several short-term moving averages. Investors should pay attention to downside pressure, and closely monitor how the market digests the actual impact of the third-quarter profit slowdown. Technically, he currently regards the vicinity of the 100-day moving average (around HK$15.5) as a key support level for the pullback and a reference indicator for buying on dips. (al)
