TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (02618.HK) 2015 Results Presentation Hong Kong, 23 April 2015
Agenda BUSINESS REVIEW & OUTLOOK FINANCIAL HIGHLIGHTS Q & A 2
BUSINESS REVIEW & OUTLOOK
2015 OVERVIEW 2015 RESULTS Sales Volume: Revenue: Net Profit: Basic EPS: 15.8 million units, up 16% YoY (including 9.7 million units of smart devices, up 54% YoY) HK$6.7 billion, up 21% YoY HK$185 million, up 3% YoY Increased to 15.11 HK cents from 15.05 cents HK YoY BUSINESS OVERVIEW Leading Market Position: In Q4, ranked No. 4 global handset manufacturer and No. 1 Chinese handset player in overseas (Source: Gartner & Company data) Outstanding Financial Performance: Consecutive growth in turnover and net profit for three years; gross margin remained healthy at 19.1% Business Restructuring: Strategy: Overseas market: restructured to 5 sales regions: North America, South America, Europe, The Middle East & Africa, Asia-Pacific China market: Formed Momoda to be the agent for the business in China, streamlined organisational structure, integrated mobile Internet and smart devices brand implementation continued, including: 1) Formed a joint venture with TCL Group and TCL Multimedia, together launched the Smart Home Project to enter into the business of internet of things. 2) Launched the mobile healthcare APP self healthcare services, integrating high-quality mobile healthcare resources 3) Teamed up with TCL Corporation and Cisco for the establishment of an enterprise cloud service platform to provide domestic enterprise and individual users with high-quality video communications services 4
Industry Ranking - Total Phone No.4 Global Handset Manufacturer; No. 1 Chinese Handset Player + Company Data Rank Company Top 10 Mobile Phone Brands in Q4 14 (Source: Gartner and Company Data) Q4 14 Shipments (million units) Q4 14 Market Shares (%) QoQ Growth Rate (%) 1 Samsung 91.5 17.4-2.3-23.3 2 Apple 74.8 14.3 +96.0 +49.0 3 Microsoft-Nokia 71.4 13.6 +0.9 +8.1 4 TCL-ALCATEL 23.8 4.5 +31.0 +25.4 5 LG 21.6 4.1 +1.5 +17.7 6 Huawei 21.4 4.1 +31.0 +23.4 YoY Growth Rate (%) 7 Xiaomi 18.6 3.5 +17.8 +231.9 8 Lenovo 17.1 3.3 +12.8 +26.0 9 ZTE 13.6 2.6-2.0-16.8 10 Micromax 10.6 2.0-3.7 +26.5 Others 160.3 30.6 +8.6 +2.3 TOTAL 524.7 100.0 +13.8 +6.9 5
Industry Ranking - Smartphone Record Shipment Growth, Rapid Expansion Outside China No.7 Global Smartphone Manufacturer + Company Data Rank Company Top 10 Smartphone Brands in Q4 14 (Source: Gartner and Company Data) Q4 14 Shipments (million units) Q4 14 Market Shares (%) QoQ Growth Rate (%) YoY Growth Rate (%) 1 Apple 74.8 20.4 +96.0 +49.0 2 Samsung 73.0 19.9 +0.1-12.3 3 Huawei 21.0 5.7 +32.0 +31.0 4 Xiaomi 18.6 5.1 +17.8 +231.9 5 LG 16.4 4.5 +1.1 +27.9 6 Lenovo 15.5 4.2 +3.3 +20.3 7 TCL-ALCATEL 14.4 3.9 +39.0 +93.6 8 ZTE 11.7 3.2 +12.3 +4.8 9 Microsoft-Nokia 11.0 3.0 +16.5 +34.4 10 Sony 10.5 2.9 +21.3 +2.6 Others 100.6 27.2 +8.7 +54.8 TOTAL 367.5 100.0 +20.3 +29.9 6
Industry Ranking - Tablet The Fastest Growing Tablet Manufacturer + Company Data Rank Company Top 10 Tablet Brands in Q4 14 (Source: Gartner and Company Data) Q4 14 Shipments (million units) Q4 14 Market Shares (%) QoQ Growth Rate (%) YoY Growth Rate (%) 1 Apple 20.3 30.1% +58.5% -14.8% 2 Samsung 9.5 14.0% +8.0% -14.9% 3 Lenovo 3.9 5.8% +21.1% +50.3% 4 Asus 2.8 4.2% +2.2% -16.3% 5 Amazon 1.8 2.7% +26.0% +4.0% 6 Acer 1.6 2.3% +32.6% +67.6% 7 TCL-ALCATEL 1.1 1.6% +114.2% +433.8% 8 HP 0.9 1.3% +108.5% +16.9% 9 Microsoft 0.7 1.0% -0.4% +35.6% 10 Huawei 0.5 0.8% 0.0% 0.0% Others 24.4 36.2% +32.4% +3.4% TOTAL 67.5 100.0% +34.3% -1.7% 7
2015 Geographical Revenue Breakdown Feature Phones & Other Products Smart Devices Europe 18% China APAC 4% 2% MEA 9% North America 43% APAC 2% MEA 11% China 13% North America 23% South America 24% Europe 17% South America 34% 8
Regional Business Review North America (General Manager: Steve CISTULLI ) Sales volume: 3.5 million units, up 87% YoY; Revenue: HK$1.8 billion, up 26% YoY Sales volume of smart devices: 1.9 million units, up 43% YoY sales growth remains strong Increased product mix, established smart ecosystem for the connectivity of smartphones, wearable smart devices and car accessories Q4 sales volume ranking (Source: Gartner & Company data): North Americas: No. 4 (Total phones); No. 5 (Smartphones) Q2 business plan: introduce targeted pricing strategy, strengthen new sales channel Revenue (HK$ billion) 2.0 1.5 1.0 0.5 0.0 1.4 1.8 +26% 2015 South America (General Manager: Christian GATTI ) Revenue (HK$ billion) +18% Sales volume: 5.4 million units, down 6% YoY; Revenue: HK$2.1 billion, up 18% YoY Sales volume of smart devices: 3.4 million units, up 54% YoY Adopted effective and stringent hedging policies to control currency risk 2.4 1.6 Q4 sales volume ranking(source: Gartner & Company data) : LATAM (excl Brazil): No. 1 (Total phones); No. 2 (Smartphones) 0.8 1.8 2.1 Q2 business plan: launch more entry-level smartphones, develop online sales channels 0.0 2015 9
Regional Business Review Europe (Acting General Manager: Nicolas ZIBELL ) Sales volume: 2.9 million units, up 1% YoY; Revenue: HK$1.1 billion, down 16% YoY Sales Volume of smart devices: 1.8 million units, up 18% YoY Q4 sales volume ranking(source: IDC & Company data): Central & Eastern Europe (Excluding Russia): No. 3 (Total phones) Russia: No. 3 (Total phones) Q2 business plan: strengthen sales channels, increase product competitiveness Revenue (HK$ billion) 2.0 1.5 1.0 0.5 1.3-16% 1.1 0.0 2015 The Middle East and Africa (Acting General Manager : Nicolas ZIBELL ) Sales volume: 1.4 million units, up 47% YoY; Revenue: HK$0.7 billion, up 174% YoY Sales volume of smart devices: 0.8 million units, up 133% YoY Q4 sales volume ranking (Source: Gartner & Company data): Middle East and Africa: No. 4 (Total phones); No. 4 (Smartphones) Q4 sales volume ranking (Source: IDC & Company data): Egypt: No. 3 (Total phones); No. 2 (Smartphones) South Africa: No. 3 (Total phones); No. 2 (Smartphones) Q2 business plan: explore new markets such as Nigeria, Pakistan etc. Revenue (HK$ billion) 0.9 0.6 0.3 0.0 0.3 +174% 0.7 2015 10
Regional Business Review APAC (General Manager: Albert Wong) Sales volume: 0.3 million units, down 73% YoY; Revenue: HK$ 200 million, down 67% YoY Sales volume of smart devices: 0.2 million units, down 55% YoY New market for smart devices: Myanmar and Nepal Q2 business plan: focus on entry-level smartphones with price competitiveness, increase penetration rate in operator network Revenue (HK$ billion) 0.5 0.4 0.3 0.2 0.4 0.1 0.2-67% 0.0 2015 CHINA (General Manager: Jiyang Wang) Sales volume: 2.3 million units, up 118% YoY; Revenue: HK$ 800 million, up 161% YoY Sales volume of smart devices: 1.6 million units, increase two fold YoY Sales growth region of smart devices: Shaanxi, Jiangsu, Hunan Formed the Momoda Limited Company, streamlined operational structure, implemented home, smart healthcare and Big Data Q2 business plan: establish online mall (www.mmd.cn), develop e-commerce sales at full speed, enhance product mix and competitiveness Revenue (HK$ billion) 1.2 0.9 0.6 0.3 0.0 0.3 0.8 +161% 2015 11
Step-up Product Strategy - - Octa-core CPU Metal casing Android 4.4 2.8 - Display 7 - Wearable devices Android L Firefox Windows Cloud applications 4G - 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 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 2007-08 2009 2010 2011 2012 2013 Entry-level Feature Phone Advanced Feature Phone EDGE Phone Entry-level Smartphone Advanced Smartphone 12 Smart Connectivity Devices 4G / Tablet / Cloud terminal 2015 2 in 1 / Wearable devices / Multiple OS / IoT
13 Products Selected By Global Mainstream Operators & Distributors North America Europe South America China MEA APAC
14 New Products Quad Core 1.2 GHz CPU Full lamination 13 Mpxl rear camera Battery: 2,000mAh Thickness: 7.5 mm Dual speakers & Hi-Fi Symmetrical design Octa Core 1.5 GHz CPU Full lamination 13 Mpxl rear camera Battery: 2,910mAh Thickness: 7.4 mm Dual speakers & Hi-Fi Symmetrical design
15 New Products Quad Core 1.2 GHz CPU Large Ultra thin: 7.9 mm Ultra light: 406 g Long-lasting battery: 4,600 mah 2 in 1 keyboard and docking Station Voice-call enabled IR blaster
16 New Products Awards Compatible with Android 4.3 or above and ios 7 or above Long battery life: 2-5 days Easy charging: Built-in USB connector IP67 technology: Water and dust resistant Connectivity: Bluetooth 4.0 or above Various styles: Sporty dark red/volcano black, Feminine all-white, Classic chrome/ Dark gray, Elegant metal-white
Brand Building in Overseas The Color Run Sponsorship, the United States Consumer Electronic Show (CES) 2015,the United States CeBIT 2015, Germany Mobile World Congress (MWC) 2015, Spain 17
18 Brand Building in Asia-Pacific & China China Mobile Global Partner Conference, China TCL Momoda 3N Launch, China Promotion event of TCL 2015 Spring Product Announcement, China
19 STRONG MARKET RECOGNITION CORPORATES Best Investor Relations Company 2015 MWC AWARDS Android Authority MWC 2015 Top Pick Android Central MWC 2015 Top Pick Know Your Mobile MWC 2015 Top Pick Mashable MWC 2015 Top Pick PRODUCTS 2015 CES AWARDS Reviewed.com Engadget.com Best of Wearables Finalist Stuff Magazine Wearable Tech Award Tom' s Guide CES 2015 Top Pick GSMARENA Best Smartwatch if Design Award CCID Best 4G Phone of the & Best Mobile Phone if Design Award CCID Best Phone for Youth
20 Outlook Challenges & Opportunities Challenging global economic conditions might lead to short term currency fluctuation Decrease in purchasing power in many countries Demand for affordable smartphones in emerging markets continues to surge Rapid market development for wearable devices such as smart watches Acceleration in 4G network deployments across the world drives demand for 4G smart devices Execution Plans Reinforce credit control and hedging policies to mitigate short term currency fluctuation Invest resources to develop user-centric technology, product and business model Implement targeted marketing strategy to increase market share Carry out measures to control cost, improve efficiency and streamline structure Goal & Forecast 2015 full year revenue growth: maintain 30% versus 4G smartphones and tablets will be the main growth drivers in 2015 Focus on seven innovative projects which based on mobile internet application and service To achieve the long-term goal as a leading global smart device, Internet application and services enterprise
FINANCIAL HIGHLIGHTS
22 Financial Highlights Revenue (HK$ million) Income Statement (HK$ million) +21% Total Sales Vol. 2015 Change (%) 15,780 13,608 +16% 6,690 Incl. Sales Vol. of Smart Devices units) Total ASP (US$) 9,707 6,316 +54% 54.7 52.2 +5% 5,541 Revenue Gross Profit Margin (%) Net Profit Net Profit Margin(%) 6,690 5,541 +21% 19.1% 19.6% -0.5% 185 180 +3% 2.8% 3.2% -0.4% 2015 Basic EPS (HK Cents) 15.11 15.05 +0.4%
23 Sustainable Revenue Growth Quarterly Revenue of Handsets & Other Products Revenue (HK$ billion) 12 Smart devices Handsets and other products 10.7 10 +59% 1.1 8 6 4 2 0 2.1 1.5 0.6 2012 3.0 1.9 1.1 Q2 2012 2012 3.1 1.5 2.0 1.6 1.9 Q3 2012 +61% 3.9 Q4 2012 2.4 1.2 1.2 2013 4.0 1.5 2.5 Q2 2013 2013 5.5 2.1 3.4 Q3 2013 7.5 2.3 5.2 Q4 2013 5.5 1.2 4.3 6.7 1.3 5.4 Q2 7.8 1.0 6.8 Q3 9.6 Q4 6.7 0.7 6.0 2015
24 Better Sales Product Mix & Upward ASP Trend Smartphone Sales Volume Proportion & ASP Growth ASP (USD) 55 50 平均銷售單價 ASP Smart devices % 50.2 52.2 52.4 53.4 58% Sales Proportion of Smart Devices (%) 55.1 54.7 70% 62% 62% 60% 45 41.8 45.4 40% 46% 53% 50% 40% 40 35 30 34.6 10% 35.6 14% 37.1 37.1 37.0 19% 17% 17% 27% 34% 30% 20% 10% 25 2012 Q2 2012 Q3 2012 Q4 2012 2013 Q2 2013 Q3 201 Q4 2013 Q2 Q3 Q4 2015 0%
25 Gross Margin Trend Sustainable Healthy Range 25.0% 20.0% 19.0% 19.6% 19.4% 19.0% 19.2% 19.1% 17.4% 15.0% Brand Value and Customer Relationship Continuous Cost-Down Effort 10.0% Pricing and Currency Strategy Economies of scale 5.0% Product competitiveness 0.0% 2012 2013 Q2 Q3 Q4 2015
Financial Position Highlights Statement Of Financial Position (HK$ Million) 31 March 2015 31 December Change (%) Non-current assets 3,803 3,691 +3% Current assets Inventories 2,664 3,293-19% Trade & factored receivables 6,839 8,244-17% Other current assets 2,467 2,081 +19% Pledged deposits 1,782 1,914-7% Cash and cash equivalents 845 473 +79% Total current assets 14,597 16,005-9% Current liabilities Interest-bearing bank and other borrowings (3,516) (4,312) -18% Other current liabilities (5,378) (5,929) -9% Trade and notes payables (5,020) (5,167) -3% Total current liabilities (13,914) (15,408) -10% Net current assets 683 597 +14% Total assets less current liabilities 4,486 4,288 +5% Non-current liabilities (108) (109) -1% Net assets 4,378 4,179 +5% 26
27 Key Financial Ratios 31 March 2015 31 December Gearing Ratio* 15% 17% Current Ratio** 1.04 1.04 Trade Receivables Turnover Days*** 72 72 Inventories Turnover Days **** 35 37 NAV per share HK$ 3.50 HK$ 3.43 * Calculated -bearing borrowings over total assets, excluding RMB foreign exchange program ** Excluding RMB foreign exchange program *** Excluding factored trade receivables **** Only inventories in factory
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. 29