2013 TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (02618.HK) Q3 Results Presentation Hong Kong, 24 October 2013 6.45mm
AGENDA BUSINESS REVIEW & OUTLOOK FINANCIAL HIGHLIGHTS Q & A 2
BUSINESS REVIEW & OUTLOOK
Q1-Q3 2013 OVERVIEW RESULT BUSINESS OVERVIEW - Sales volume: 36 million units, up 24% YoY (including 9.9 million smartphone units, up 136% YoY) - Revenue: HK$ 11.9 billion, up 46% YoY - Q3 Net Profit: HK$ 223 million - Q1-Q3 Net Profit: HK$ 14 million - Our smartphone strategy is right and working - Completion of transition from feature phones to smartphones, proven in rapid smartphone sales with ramp up. Smartphone sales volume is reaching economies of scale and turnaround in Q1-Q3 with net profit - Relocation of world-class global manufacturing facility in Q3 2013 with maximum annual capacity of 120 millions units CHALLENGES & OPPORTUNITIES - Continue to invest in R&D and brand building - Build a brand to differentiate TCL/ALCATEL ONETOUCH among other Chinese players - Enhance the brand value to secure our position in advanced smartphone segment 4
SUBSTAINABLE REVENUE GROWTH QUARTERLY REVENUE OF HANDSETS & OTHER PRODUCTS HK$ Billion 5.5 Smartphone & Other Smart Devices Feature Phone & Other Products 5.5 5.0 4.5 4.0 3.9 4.0 2.1 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1.5 Q1 2010 2.0 Q2 2010 2.2 Q3 2010 3.1 3.0 2.1 2.1 2.5 2.4 2.8 2.4 3.2 2.6 2.1 1.5 0.1 0.02 0.1 0.4 0.6 0.6 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 3.0 1.9 1.1 Q2 2012 3.1 1.5 1.6 Q3 2012 2.0 1.9 Q4 2012 2.4 1.2 1.2 Q1 2013 1.5 2.5 Q2 2013 3.4 Q3 2013 5
INDUSTRY RANKING NO. 7 GLOBAL HANDSET MANUFACTURER RANK TOP-10 CELL PHONE BRANDS IN Q2 OF 2013 (RANKING BY UNIT SHIPMENTS IN MILLIONS) COMPANY Q2 2013 SHIPMENTS (M UNITS) Q2 2013 MARKET SHARE (%) QoQ GROWTH RATE (%) YoY GROWTH RATE (%) 1 Samsung 100.6 28.3% +0.5% +8.7% 2 Nokia 61.1 17.2% -1.3% -27.0% 3 Apple 31.2 8.8% -16.6% +19.9% 4 LG 17.8 5.0% +9.9% +35.9% 5 ZTE 15.1 4.3% -3.1% -23.2% 6 Huawei 12.9 3.6% +12.4% +19.5% 7 TCL-Alcatel 11.3 3.2% +44.9% +15.3% 8 Lenovo 10.7 3.0% +13.8% +122.9% 9 Sony 9.6 2.7% +18.5% +23.6% 10 Coolpad 7.6 2.1% -10.6% +65.2% Others 432.5 21.8% +3.2% +24.1% TOTAL 710.4 100.0% +2.1% +39.7% 6
Q1-Q3 2013 REVENUE GEOGRAPHICAL BREAKDOWN FEATURE PHONES & OTHER PRODUCTS SMARTPHONES & OTHER SMART DEVICES APAC 8% CHINA 5% APAC 10% CHINA 10% AMERICAS 32% EMEA 34% AMERICAS 53% EMEA 48% 7
Q1-Q3 BUSINESS REVIEW EUROPE, MIDDLE EAST AND AFRICA ( EMEA ) - Shipments: 13 million units, up 33% YoY - Revenue: HK$5.0 billion, up 77% YoY - The most significant growth countries (YoY sales volume growth %): Russia (89%); Italy (96%) - Q4 business plan: Introduction of LTE smartphones and expansion of distribution network +77% 2.8 Revenue (HK$ Billion) 5.0 Q1-Q3 2012 Q1-Q3 2013 AMERICAS - Shipments: 17 million units, up 26% YoY - Revenue: HK$4.8 billion, up 39% YoY - ALCATEL ONETOUCH FIRE with Firefox OS was introduced to Colombia and Venezuela - Ranked No.1 in Mexico, Central America and Caribbean in terms of sales volume - The most significant growth countries (YoY sales volume growth %): Mexico (108%); USA (54%) - Q4 business plan: Widen distribution channels 8 +39% 3.4 Revenue (HK$ Billion) 4.8 Q1-Q3 2012 Q1-Q3 2013
Q1-Q3 BUSINESS REVIEW ASIA PACIFIC ( APAC ) - Shipments: 2.7 million units, up 55% YoY - Revenue: HK$1.1 billion, up 111% YoY - The most significant growth countries (YoY sales volume growth %): Malaysia ( New entered country) ; India (171%) - In terms of smartphone shipment, ranked No.2 in Malaysia, in terms of total shipment, ranked No.4 in the Philippines - Q4 business plan: Presence expansion in Thailand and Vietnam + 111% 0.5 Revenue (HK$ Billion) 1.1 Q1-Q3 2012 Q1-Q3 2013 CHINA - Shipments: 3.7 million units, down 17% YoY - Revenue: HK$1.0 billion, down 28% YoY - Enhanced sales channels in Q3: Sichuan, Hunan, Zhejiang and Shanxi provinces - Strategically partnered with the biggest B2C e-commerce company in China, 360 Buy, to promote flagship product, TCL S950 1.3 Revenue (HK$ Billion) -28% 1.0 9 Q1-Q3 2012 Q1-Q3 2013
STEP-UP PRODUCT STRATEGY 10
PRODUCTS SELECTED BY GLOBAL MAINSTREAM OPERATORS & DISTRIBUTORS USA EMEA CHINA LATAM APAC 11
NEW PRODUCTS Quad Core 1.5 GHz CPU 13 Mpxl Camera with 2 Mpxl Front Camera Heavy Duty Battery: 3400 mah Wifi Display Sidekick Bluetooth companion Slim Capacitive Stylus and LED MagicFlip Dual SIM Dual Strandby Aluminum Metal Frame Translucent Edges with LED lighting Quad Core: 1.2 GHz CPU 13 Megapixel Camera Thin Body: 7.5mm thin Wifi Display 12
NEW PRODUCTS Quad Core 1.5 GHz CPU Ultra Compact Body Design: 6.9mm thin xtremely wide viewing angles: Colors stay true even above 170-degrees wide 13.1 Mpxl Camera Dual SIM Dual Standby 4G LTE connection Slim body design: 7.45mm thin Dual Core 1.2 GHz CPU 4.7 HD IPS Display: 8 Mpxl Camera with Camera Stabilizer 13
NEW PRODUCTS Compact and slim Dual Core 1.3 GHz CPU Full Lamination: Zero gap between touch screen and display Dual SIM Dual Standby Fashionable design Easy to carry around 14
NEW PRODUCTION FACILITY OPENING CEREMONY NEW PRODUCTION FACILITY Located in Huizhou, China 30 SMT lines, 29 assembly lines, 46 customization/packing lines Capacity: 100-120 Mu per year World-class SMT production lines and supporting facilities Experience of efficient global logistics Strict tests by key telecommunication global operators ISO 9001, ISO 14001 and TL9000 qualified Testing and manufacturing capability for platforms: MTK & QUALCOMM 15
BRAND BUILDING IN EMEA & AMERICAS IFA 2013 Germany 7K Running Event-USA Shop Visit- Netherland Golf Match-Mexico 16
BRAND BUILDING IN APAC & CHINA Product Promotion Event, The Philippines Product Roadshow, Hong Kong Marketing Event, China Product Promotion, Malaysia 17
OUTLOOK CHALLENGES & OPPORTUNITIES Possible shortage in some key components, such as memory and display which we have secured our supply for the peak season The launch of mid-to-low range smartphone models from first tier players intensified - BUSINESS STRATEGIES Efficient product design process and product development cycle : From ideas to product launch takes no more than 4-5 months Supply chain management: Early adoption of advanced technology in development stage Guaranteed quality and production lead time by in-house production Responsive global distribution network Deliver our product with appealing design and good quality at a very affordable price GOAL & FORECAST Uplift 2013 full year revenue growth target: 40% above versus 2012 18
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS Revenue Revenue & Net Profit/(Loss) (HK$ Million) (HK$ Million) +46% 11,861 Sales Volume Q3 Q3 Q1-Q3 Q1-Q3 YoY YoY 2013 2012 2013 2012 15,395 10,555 +46% 36,028 29,169 +24% 8,146 Total ASP (US$) 45.4 37.1 +22% 42.2 35.8 +18% Revenue 5,454 3,053 +79% 11,861 8,146 +46% Gross Profit % 19.6% 16.7% +2.9% 18.5% 18.3% +0.2% Net Profit/(Loss) 223 (91) N/A 14 9 +50% Q1-Q3 2012 Q1-Q3 2013 Net Profit/(Loss)% 4.1% (3.0%) N/A 0.1% 0.1% - 20
BETTER SALES PRODUCT MIX & UPWARD ASP TREND SALES VOLUME PROPORTION OF SMARTPHONE & OTHER DEVICES & ASP GROWTH ASP (USD) 50 ASP Smartphone & Other Smart Devices Sales Volume Proportion Smartphone & Other Smart Devices Sales Volume Proportion (%) 40% 45.4 35% 45 41.8 33.7% 30% 40 35 30 25 31.3 Q1 2011 29.6 0.3% 1.3% Q2 2011 33.4 Q3 2011 31.2 4.4% 5.5% Q4 2011 34.6 Q1 2012 9.5% 35.6 Q2 2012 37.1 37.1 37.0 18.8% 17.4% 17.1% 13.5% Q3 2012 Q4 2012 Q1 2013 26.7% Q2 2013 Q3 2013 25% 20% 15% 10% 5% 0% 21
UPWARD SMARTPHONE SALES TREND QUARTERLY SALES VOLUME & PROPORTION OF SMARTPHONE & OTHER DEVICES Sales Volume of Smartphone & Smartphone & Other Smart Devices Sales Volume Proportion* (%) 6,000 Sales Volume of Smartphone & other Smart Devices Smartphone & Other Smart Devices Sales Volume Proportion 33.7% 35.0% 5,000 26.7% 30.0% 4,000 25.0% 3,000 13.5% 18.8% 17.4% 17.1% 20.0% 15.0% 2,000 1,000 0 0.3% 1.3% Q1 2011 Q2 2011 4.4% 5.5% 9.5% 487 720 746 1,458 1,981 2,335 1,454 3,247 5,192 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 10.0% 5.0% 0.0% * The proportion of smartphone & other smart devices is in terms of total shipment volume 22
GROSS MARGIN TREND GROSS MARGIN 25.0% 21.8% 22.4% 21.9% 20.0% 17.0% 17.9% 17.4% 16.4% 18.4% 19.6% 15.0% 14.4% Brand Value and Customer Relationship Continuous Cost Down Effort 10.0% Pricing and Currency Strategy 5.0% Economies of Scale Product Competitiveness 0.0% 2006 2007 2008 2009 2010 2011 2012 Q1 2013 Q2 2013 Q3 2013 23
FINANCIAL POSITION HIGHLIGHTS STATEMENT OF FINANCIAL POSITION (HK$ Million) 30 September 2013 31 December 2012 Change(%) Non-current assets 2,478 2,109 +17% Current assets -Inventories 2,973 1,263 +135% -Trade & factored receivables 4,223 3,275 +29% -Other current assets 1,624 1,483 +10% -Pledged deposits 1,621 4,221-62% -Cash and cash equivalents 1,363 970 +41% Total current assets 11,804 11,212 +5% Current liabilities -Interest-bearing bank and other borrowings (4,202) (6,159) -32% -Trade and notes payables (4,046) (2,429) +67% -Other current liabilities (3,199) (2,018) +59% Total current liabilities (11,447) (10,606) +8% Net current assets 357 606-41% Total assets less current liabilities 2,835 2,715 +4% Non-current liabilities (350) (392) -11% Net assets 2,485 2,323 +7% 24
KEY FINANCIAL RATIOS 30 September 2013 31 December 2012 Gearing Ratio * 23% 26% Current Ratio ** 1.03 1.07 Trade Receivables Turnover Days *** 65 68 Inventories Turnover Days **** 41 38 NAV per share HK$ 2.19 HK$ 2.06 Basic earnings/loss per share (Q1-Q3 2013/ Full Year 2012) 1.66 HK cents -18.49 HK cents * C -bearing borrowings over total assets, excluding RMB foreign exchange program ** Excluding RMB foreign exchange program *** Excluding factored trade receivables **** Only inventories in factory 25
Q&A
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DISCLAIMER 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 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 forwardmaterially from these statements.