TCL International Holdings Limitedmultimedia.tcl.com/UserFiles/File/IR/Presentation/2002/20020207...
Transcript of TCL International Holdings Limitedmultimedia.tcl.com/UserFiles/File/IR/Presentation/2002/20020207...
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Business Overview
Mr. Bruce RENChief Technology Officer of TCL
TCL International Holdings Limited
Presentation for China Tour 2002 - Nikko Salomon Smith Barney
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Company Background
Review
Outlook
Corporate Strategy
Agenda
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Company Background
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Established in 1981
Listed on Hong Kong Stock Exchange in Nov 1999
(Ticker symbol: 1070)
IPO price: HK$1.75
Shares Outstanding: 2.5 billion shares
Major shareholder: TCL Industries Ltd. (55%)
TCL - Company Background (1)
Key Facts
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TCL - Company Background (2)
Colour Television
White Goods
Home Appliances
Personal Computer
Remote Education
Internet VA Services
Information Appliances
Network Equipment
IT Business
TCL International Holdings Ltd.
Overseas Business
India Philippines Vietnam Others
Audio-Visual products
Business Structure
Handset Business
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西藏
青海
甘肃
内蒙
四川
云南
广西
贵州
陕西
山西
广东
黑龙江
吉林
辽宁
山东
台湾
河北
湖北
湖南福建
浙江
江西
安徽
江苏
上海
香港
天津
北京
海南
河南
新疆
34 Branches
>20,000 Dealers & Retailers
200 Sales Offices
Distribution Network for Home Appliances
TCL - Company Background (3)
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7 Market Regions
> 900 Distributors
27 Representative Offices
Harbin
ChangchunShenyang
Dalian
Beijing
Jinan
ChengzhouXian
Wuhan
Chengdu
Kunming Guangzhou
Shenzhen
Fuzhou
Changshi
Hangzhou
ShanghaiNanjing
Lanzhou
Urumqi Shijiazhuang Tianjin
Nanchang
Chongqing
QuiyangNanning
Taiyuan
Hefei
Distribution Network – Personal Computer
TCL - Company Background (4)
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ReviewFinancial Review
Operation Review
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(in HK$ millions) Jan-Sept 2001
Jan-Sept 2000 Change
Turnover 6,954 6,065
1,118
18%
316
5%
+15%
Gross Profit 1,133 +1%
Gross Margin 16% -2%
Net Profit 213 -33%
Net Margin 3% -2%
Financial Review (1)
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Jan-Sept 2001
Jan-Sept 2000 Change
TV 17% 18% -1%
White Goods 23% 23%
20%
PC* 9% 13% -4%
0%
AV 13% -7%
Gross Profit Margin
* PC only has 7 months contribution in Jan-Sept 2001
Financial Review (2)
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Revenue Mix
Jan-Sept2000
TV78%
WG15%
AV4%
Others3%
Jan-Sept2001
TV72%
WG11%
AV3%
Others5%PC*
9%
* PC only has 7 months contribution in Jan-Sept 2001
Financial Review (3)
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Unit (‘000) PRCYoY%
ExportYoY%
Total
+8%
-27%
-36%
-4%
-37%
PC 200 -23% 0 n.a. 200 -23%
740
+477%
0
6,230
178
396
160
715
0
0
89
1,247
YoY%
TV* 5,490
0
+7%
Refrigerator 178
+6%
n.a.
n.a.
n.a.
+118%
-27%
Washing Machine 396 -36%
Air Conditioner 160 -4%
AV 626 -31%
n.a.Mobile Phone 1,247 +477%
Unit Sales of 2001 (pre-audited figures)
* Figures included TM-Henan
Operation Review (1)
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Strengthened market position in the first 9 months of 2001Ranked 1st in PRC TV market in terms of units sold Increased market share to 20%
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15
20
25
TCL Changhong Konka
2000 1-3Q2001
Source: China’s Ministry of Information Industry
Mark
et
Sh
are
(%
)
Operation Review – TV (1)
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Swift introduction of new concepts and high-end modelsOver 50 new models has been launched over the year
The best performer in the industry in terms of profitability (based on latest results announcement)
Competition in PRC TV market has become less severePrice adjustments were categorized to a small number of geographic locations and modelsMargin remained relatively stable
TCL : ProfitHisense : ProfitChanghong : LossKonka : LossSkyworth : Loss
Operation Review – TV (2)
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Overall sales performance was unsatisfactory
Competition intensified:
Market supply increased as more players entered the market and created pressure on pricing
We are still in the infancy stage and failed to react to the market promptly
New products were not well received due to over-optimistic price strategy
Delay in rolling out product also affected sales
Operation Review – WGs (1)
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Overall PC shipments were below expectation
Slowdown of home PC market in the PRCThe Internet boom last year led to a high expectation for the demand this yearDelayed consumption due to continuous price cuts
INTEL CPU P4 1.5G price cut by 70% in 1H
Upgrade ERP system and internal operation restructuring
Margin squeezed Production failed to reach economies of scaleIncreasing expenses for R&D, after-sale services and ERP system
Operation Review – PC (1)
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Robust volume growth throughout the year
Market demand was strong due to low penetration rate
Swift introduction of new concepts and high-end models
8 new models has been launched over the year
Target: to launch new model every month in year 2002 (over 12 GSM models and 6 CDMA models)
Profit margins have been improving
Newly launched high-end models have been well received
Announced to increase the Mobile’s equity interest from 20% to 30%
Valuation: 10x 2001 PE (Guarantee Profit for 2001: Rmb 300 m)
The deal is expected to be completed at the end of March 2002
Operation Review – Handset (1)
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OutlookPRC Economic Outlook
Market Outlook
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PRC Economic Outlook
Expect continuous robust economic growth
GDP expect to grow 7% in next few years
Growing Foreign Direct Investment
⇒ Growing employment
⇒ Improving disposal income & personal wealth
Expect strong domestic demand
Improving consumer confidence
Expect consumers will spend more on high-end consumer products
High-end TV
Personal Computer
Handset
Impact of WTO accession on Chinese economy
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Increasing Market DemandPenetration Rates
Urban Area: currently over 110%Rural Area : currently over 40%
Demand drivers in the coming few yearsUrban Area
Marriage market: increase in the number of householdsReplacement needs ⇒ Mainly focus on hi-end TV
Housing reform ⇒ Cash subsidies from government to promote ownership of private apartmentsExpect continuous improvement of disposal income
2nd TV demandImproved living standard
Rural Area1st TV demand remains strong due to low penetration rate
Market Outlook – TV (1)
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Market Outlook – TV (2)Improving market conditions
Market consolidationPRC market is mostly dominated by the top 3 players
Market share of top 3 players
Full year 1997: 46%
Jan-Sep 2001 : 54%(Source: Ministry of Information Industry)
Rationalization of market players’ behaviour
Trend towards more profit-oriented operation
Margin is as important as the market share
Product differentiation & technology upgrading
the main themes of the competition
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Long term industry trend
Digital information display devices: leading to a new generation of home appliances
It plays a key role in future households, where traditional homeappliances become 3C convergent Infortainment Devices
It has great market potential as the more sophisticated household devices require better display
Major IT players in China are moving into the Infortainment Devices and Digital Display business
Market Outlook – TV (3)
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Low penetration rate in China, 4% in 2001 (Source: Euromonitor)
China is forecasted to sustain growth rates averaging 25% p.a. (source: IDC) - the fastest growing country in the world
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10
15
20
25
Mill
ion
units
1996 1997 1998 1999 2000 2001F 2002F 2003F 2004F 2005F
China PC unit shipments
Averag
e grow
th rate
:25% p
.a.
Source:IDC
Market Outlook – PC (1)
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PRC will replace Japan to become the biggest desktop PC market in Asia and the 2nd largest market in the world in 2003
IDC forecast
Desktop PC will grow at 21% in 2002
Sales of desktop PC in the PRC can reach 13.2 mil units in 2003
Consumption power is increasing
P4 & Window XP are expected to become the mainstream products in the PRC
Expect P4 will take at least 60-70% of total market share in coming years
Market Outlook – PC (2)
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Demand for handset in China has been very strong since 1998
No. of handset users amounted to 120.6 mil as of July 2001 (exceeding that of the United States - 120.1 mil)
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40
60
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100
120
140
Mill
ion
units
1998 1999 2000 2001E 2002E 2003E 2004E
Source:IDC
China handset unit shipments
Market Outlook – Handset (1)
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Penetration rate of handset in the PRC in 2000 at 6-7% was lag those in developed countries:
United States 40%United Kingdom 72%Japan 53%Hong Kong 71%
Source: International Telecommunication Union, 2001
Gartner, Inc expects penetration rate of handset in the PRC to experience an exponential growth in the coming years to reach 20% (no. of users will reach 350 mil)
Source of Demand (forecast)New subscribers: 40-50 mil units per annumReplacement: Tremendous growth in the coming years
Market Outlook – Handset (2)
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Expected limited challenges from foreign players
Consumer electronics and PC industries have been competing fiercely with foreign rivals over the past decade
Domestic players have proved their competitiveness and dominated the markets for years
Opportunities
Reductions in import tariffs on components may improve profitability
Expansion in overseas markets with lower export barriers
Acceleration of the ongoing industry consolidation
Market Outlook – Impact of WTOCreate more opportunities than challenges
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Corporate Strategy
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Our vision: Infortainment Devices will play an important role in the China market
Infortainment Devices
Consumer Electronics
ComputerCommunication
3 C Convergence
TCL – Corporate Strategy
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Develop overseas market in parallel to the domestic market
Searching for a strategic partner which can bring considerable benefits to the Group
Single brand strategy: TCL is the only brand used across all product lines (TV, AV, WG, PC & handset)
Allocate more resources on R & D (application-focused)
TCL – Corporate Strategy