TCL Electronics (1070 HK):申博sunbet1H18 earnings clean beat ,

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  机构:东英金融

  评级:买入

  目标价:5.8港元

  1H18 earnings clean beat 

  TCLE reported solid 1H18 results with revenue/net profits up 24%/279% yoy to HK$21bn/HK$572mn and flat GPM of 15.3%. 

  We revised up our FY18/19E earnings estimate by 28.9%/3.6% to HK$1,074mn/HK$1,174mn. 

  Reiterate BUY with TP HK$5.80 .fine tuned from HK$5.60 based on same 12x FY19E PE. 

  1H18 results up on earnings. TCL Electronics (TCLE) announced 1H18 results with revenue up 23.7% yoy to HK$21,050mn mainly driven by 37% growth in shipments and ASP improvement of self-branded products. Sales mix for self-branded products in domestic market continues to upgrade with penetration of smart/4K TV increased to 81.5%/53.2% from 75.1%/40.6% in 1H17 while GPM remains flattish (15.3% vs 15.4% in 1H17), which we believe is due to higher shipments contribution from ODM business (OP est. 40% in 1H18 vs est. 33% in 1H17). Expenses ratio droPPed by 1.1ppts to 12.6%, the lowest level since 2003 thanks to economies of scale and efficiency enhancement. 1H18 net earnings surged 279% yoy to HK$572mn, or 176% yoy to HK$417mn if excluding 155mn one-off gain from asset transfer, beating both street and OP expectations. Looking forward, the company maintained its full-year guidance of 13% growth in revenue and 10% growth in shipments. The mgmt proposed an interim dividend of HK$9.80 cents, implying 40% payout ratio. 

  We revise up our FY18/19E earnings by 28.9%/3.6% to HK$1,074mn/HK$1,174mn. We fine tune our FY18/19E revenue by -0.9%/-3.7% to reflect latest ASP. Our FY18/19E GPM is edged down by 0.4ppts/0.5ppts to 15.3%/15.2% as we factor in higher contribution from ODM business. We also included HK$155mn one-off gain from asset transfer in 1H18. As a result, our FY18/19E diluted EPS is revised up by 28.7%/3.4% to HK$0.443/HK$0.484 respectively. 

  Reiterate BUY. We reiterate our BUY rating with TP HK$5.80 fine-tuned from HK$5.60 based on same 12x FY19E PE given (1) asset injections plan kicked off by parent company and promising further asset injection at an attractive valuation which is likely value accretion for existing shareholders, (2) robust growth in both domestic and overseas TV markets and (3) strong alliance with Internet giants (Tencent and JD.com) to support smart TV business. 

  Risks: (1) ASP erosion may be faster than expected (2) exchange rate and execution risks in overseas expansion (3) growth of smart TV platform business may be below expectations.  

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