TCL Multimedia's net profit jumped 19% YoY to HKD196m

Here's how it'll benefit from weakening Japanese TV brands.

According to Maybank Kim Eng, core net profit rose 19% YoY to HKD196m, if we exclude the one-off gain of HKD144m in 1Q12. This represents 22% of our pre-revised full-year net profit estimates. Faster-than-expected revenue growth (up 24% YoY) and 1.6ppt YoY improvement in its SG&A ratio are the key positives. 

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However, an operating loss of HKD53m in overseas markets and a 1.8ppt YoY contraction  in gross margin disappointed us slightly. While management believes that 1Q12 gross margin was abnormally high, TCLM is launching a new series of high-end TV products in 2Q13 that should improve the product mix.

As a result, we expect gross margin to rebound QoQ and strong sales momentum to continue. Thus, we raise our FY13F/14F estimates by 13%/14% respectively. 

TCLM’s 1Q13 LCD TV shipments amounted to 3.9m units (up 22% YoY), laying a solid foundation for achieving its target shipments of 18m units (up 16% YoY) in 2013. According to DisplaySearch, TCLM climbed to the no.4 globally in 2012 with a market share of 5.8%.

We believe the continuous weakness of Japanese TV brands is a good opportunity for TCLM to gain market share globally and outpace the growth of the overall TV market. 

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