TCL (Group) double growth in revenue and net profit in the first half of 2021 Li Dongsheng said that TCL plans to cultivate two fortune 500 companies in the next decade

Economic Observation Network reporter Li Huaqing On the evening of August 9, TCL Technology (000100.SZ) released its 2021 semi-annual report, which shows that in the first half of 2021, TCL Technology achieved revenue of 74.299 billion yuan, an increase of 153.29% year-on-year, and achieved a net profit attributable to the mother of 6.784 billion yuan, an increase of 461.55% year-on-year. So far, the operating report cards of the two major enterprise entities under TCL (Group) in 2021 in the first half of 2021 have all been released.

According to the 2021 semi-annual report released on the official website of TCL Industrial Holdings Co., Ltd. (hereinafter referred to as "TCL Industry"), in the first half of 2021, TCL Industry achieved revenue of 50.794 billion yuan, an increase of 36.4% year-on-year, and achieved a net profit attributable to the mother of 1.811 billion yuan, an increase of 274.2% year-on-year.

If the two major enterprise entities of TCL Technology and TCL Industry are merged and deducted from the offset part of the merger, in the first half of 2021, TCL (Group) achieved revenue of 115.24 billion yuan, an increase of 89% year-on-year, and achieved a net profit of 10.7 billion yuan, an increase of 460% year-on-year, and a record high net profit.

On the morning of August 10, TCL (Group) and the media exchanged views on the operation of the first half of 2021. At the exchange meeting, Li Dongsheng, founder and chairman of TCL, said that this year TCL (Group) is expected to enter the world's top 500 companies, and in the next decade, TCL will cultivate two of the world's top 500 enterprises (TCL Technology and TCL Industry). "That's our goal." Li Dongsheng revealed at the meeting.

Performance growth

This year is the 40th anniversary of the establishment of TCL, 40 years of development, TCL's industry has been quite complete.

From 2017 to April 2019, TCL (Group) sorted out its business structure according to the factors of industrial development and management logic, and reorganized the two major enterprise entities of TCL Technology and TCL Industry, the former focusing on semiconductor display, the latter focusing on intelligent terminals, and in October 2020, TCL Technology successfully delisted Tianjin Zhonghuan Electronic Information Group Co., Ltd. (hereinafter referred to as "Zhonghuan Group"), entering the new track of semiconductor photovoltaic and semiconductor materials. The track has become the third core main business of TCL (Group), coupled with the industrial finance and investment platform of supporting services, the four major sectors of TCL (Group) business are clearly visible.

Behind the four major sectors of business, there are mainly three listed companies - TCL Technology, TCL Electronics (1070.HK, TCL Electronics is a Hong Kong listed company controlled by TCL Industrial), Central Shares (002129.SZ, the controlling shareholder of Central Shares is Central Group, and TCL Technology is 100% owned by Central Group).

At the exchange meeting, Li Dongsheng explained the reasons for the growth of TCL (Group)'s performance in the first half of 2021: on the one hand, after the epidemic, the global economy gradually recovered, and market demand rose; on the other hand, the company's internal competitiveness steadily improved.

From the perspective of sub-fields, from the second half of 2020 to the first half of this year, the demand for semiconductor displays is strong, the panel industry is in a state of relative shortage of supply, and the production of TCL technology panels is in full load. In addition, the growth of TCL Huaxing's revenue is also behind investment and mergers, the increase in the production capacity of existing factories and the expansion of production capacity brought about by the investment and construction of new factories. Li Dongsheng introduced that in 2020, TCL Technology acquired a panel production line of Suzhou Samsung, the T7 production line is climbing, and the output of the original production line T4 is steadily increasing.

TCL Technology's 2021 semi-annual report shows that the semiconductor display business achieved operating income of 40.8 billion yuan, an increase of 93.6% year-on-year in the same caliber, and a net profit of 6.61 billion yuan, an increase of 6.75 billion yuan.

The growth of the semiconductor photovoltaic business has been driven by global green energy. In the first half of 2021, Zhonghuan achieved revenue of 17.64 billion yuan, an increase of 104.1% year-on-year, and the net profit attributable to the mother increased by 174.92% year-on-year.

At the exchange meeting, Li Dongsheng revealed a detail, when writing the chairman's speech in the 2020 annual report of Zhonghuan Shares, he had thought about writing that Zhonghuan should achieve benefit multiplication in 2021, but "multiplying", at least to increase by 100%, and finally did not write hard performance indicators in the speech. "But in reality we set a budget to double it. In the first half of the year, we achieved, and the performance multiplier was not only scale, but also efficiency. Li Dongsheng said.

Future outlook

For TCL's future development goals, Li Dongsheng's idea is quite clear, many times in public with "global leadership" to describe, in the August 10 exchange meeting, Li Dongsheng is even more proposed: "In the next ten years, we want to cultivate two top 500 enterprises, which is our goal." To do this, including our organizational capabilities, product technology, manufacturing and supply chain capabilities, and global brand channel capabilities must be continuously improved to support our global leading goals. ”

Li Dongsheng also estimated that TCL (Group)'s annual revenue budget target for 2021 is 220 billion yuan, and it has achieved revenue of 115.2 billion yuan in the first half of the year, and it is expected to achieve the target for the whole year and cross the threshold of the world's top 500 companies.

Li Dongsheng believes that in the field of semiconductor display, it is unlikely that the supply and demand relationship will be balanced for a long time, and the development of enterprises in the industry is affected by cyclical fluctuations, and the impact of this fluctuation on TCL Huaxing is relatively small compared to its peers, mainly because TCL Huaxing reduces the cyclical impact by orderly growth of production capacity, optimizing the layout of production lines, product structure and customer combination. In the future, with the increase of TCL Huaxing production lines, the cutting size of each production line product can be more effectively configured, and the product optimization of TCL Huaxing is also advancing, and then superimposed on the influence of external factors, such as the adjustment of the global panel pattern, TCL's semiconductor display business is expected to go to a higher level.

TCL Huaxing started from making TV panels, Li Dongsheng revealed that by June 2021, TCL Huaxing's large-size product structure will be further optimized, and the proportion of non-TV screen revenue has reached 22%.

For the field of semiconductor photovoltaics, as early as the beginning of 2021, Li Dongsheng said in the annual report speech of Zhonghuan Shares that although the photovoltaic industry was not prosperous during the acquisition of TCL Technology at the end of 2019, he himself was full of confidence in the development prospects of the industry and the company's team capabilities, and was confident that through strategic adjustment, collaborative empowerment and team efforts, the future company would enter a high-growth and high-performance development track.

Li Dongsheng revealed that after winning the Central Group, TCL Technology will not continue to do large-scale mergers and acquisitions in the short term. In addition to capital investment, it is also necessary to invest management resources for integration.

For the smart terminal business, TCL acquired a controlling stake in Omar Electric (002668.SZ) in May this year, intending to divest its refrigerator assets and is planning to divest the Internet finance business that erodes Omar's profits.