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TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (02618.HK)
Q1 2011 Results Presentation
3 May 2011
The information contained herein should not be utilized for any legal purposes in regards to any investor's
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
Holdings Limited (the "Company"). The Company hereby expressly disclaims any liability for any loss or damage
resulting from or in connection with any reliance by any investor on the information contained herein.
Disclaimer
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 forward-looking statements involve risks and uncertainties, the Company‟s actual results could differ
materially from these statements.
2
Agenda
3
• Business Review & Outlook • Financial Highlights • Q&A Session • Appendix: Company Overview
4
Sustainable Growth in Q1 2011
• Continuing Geographic Expansion
• “Step-up” Product Strategy
• Brand Building in Open Market
• Complementary ODM Strategy
Successful Expansion in Mid- to High-End Market with Strong R&D and Design Capabilities
• In February 2011, TCL Ningbo R&D Center established to
enhance in-house R&D capabilities and accelerate high-end
smartphones development
• Launching new models of 3G and 2.75G Android
smartphones such as TCL A906 and ONE TOUCH 890
• In March 2011, ONE TOUCH 818 and ONE TOUCH 355
PLAY won Red Dot Design Awards in Germany
Four Growth
Drivers Leading to
Growth
Momentum
Q1 2011 Highlights
• Sales Volume: 8.7 million units, up 51% YoY,
on track of sustainable growth
• Revenue: HK$2.1 billion, up 44% YoY
• Net Profit : HK$180 million, up 161%YoY
• Basic EPS increased to 16.38 HK cents from 6.54 HK cents YoY
5
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011
2,276 2,782
4,240
6,825
5,789
8,439
9,504
12,491
8,715
Stable Growth in Sales Volume
Quarterly Sales Volume of Handsets and Accessories
„000 units
6
Business Review
Europe, Middle East and Africa (“EMEA”)
• Shipment in Q1 2011 totaled 3.3 million units, surged 62% YoY
• Broadened customer base and distribution channels in Russia and South
Africa
• Expanded into new high potential markets such as Ethiopia
• Positive sales trend in Western European countries with diversified product
portfolio
• Ranked No.4 in Russia in terms of shipments
Americas
• Shipment in Q1 2011 totaled 4.4 million units, significantly up 60% YoY
• Strengthened sales in existing markets such as USA and Brazil
• Successful expansion in open market and distribution channels in Argentina
and Chile
• Enhanced product mix featuring mid- to high- end handsets
7
Q1 2010 Q1 2011
2.1m units
3.3m units +62%
4.4m units
2.8m units
Q1 2010 Q1 2011
+60%
Asia Pacific
• Shipment in Q1 2011 totaled 0.6 million units, up 5% YoY
• Further enhanced its presence in existing markets such as the Philippines,
Vietnam, Singapore and India
• Expansion into new markets such as Bangladesh
• Diversified product mix to strengthen brand image
The PRC
• Shipment in Q1 2011 totaled 0.4 million units, remained stable YoY
• Lined up with 3 operators in the PRC: China Unicom, China Mobile and
China Telecom and launched customized products with popular local content
features and attractive price
• Expanded sales network nationwide and promotion activities launched
during New Year and Chinese Lunar New Year
• Strengthened ALCATEL Flagship Store place in handset category in TaoBao
Mall (“淘寶商城”) and 360Buy (“京東商城”)
• Successfully launched Sina Twitter (“新浪微博”) Phone in January 2011 with
positive feedback
Business Review
8
Q1 2010 Q1 2011
0.5m units
0.6m units
+5%
0.4m units 0.4m units
Q1 2010 Q1 2011
Entry-level camera phones
Competitiveness
Low-end products in emerging markets
Quality
Android OS Smartphones
Mobile internet features Innovation
Mobile music experience Design
Y2007 Y2008 Y2009 Y2010 Y2011
Tablets
“Step-up” Product Strategy
9
Smart design Smart experience For Smart users
Powerful & Intuitive
Capacitive touch, gesture control, proximity & light sensor
5.0 Mpxl
3G+
Wi-Fi
3.5”
display
32GB
Capacitive
Touch
G-sensor
AGPS
10
Opera
mini
3G
Resistive
Touch
2.0 Mpxl
32GB Bluetooth
Java
Sweet spot. Android brought to the masses
Compact mainstream design
Android 2.2 - Pre-embedded apps
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Best value Android concept
Innovative Edge & Wi-Fi combination
Android 2.1 - Android market - Pre-embedded apps
Wi-Fi
Resistive
Touch
16GB
2.0 Mpxl
2.8”
display
G-sensor
EDGE
AGPS
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Simple shape, compact and portable - Capacitive touch
OMAP 1GHz - Android 2.2 - Dual Camera
WiFi 802.11b/g/n - HDMI playback
AGPS
Wi-Fi
3.0 Mpxl
G-sensor
7”
Display
Android
3G+
Capacitive
Touch
13
Brand Building
14
2011 Barcelona Mobile World Congress
Milano Smiling Design Week 2011 Milan Design Week
Outlook Year of Growth in 2011
Target sales volume for full year 2011 at 50 million units, up 39% versus 2010 sales volume
Upgrade infrastructure including construction of new production plant to further increase annual production capacity up to 130 million units for future sustainable developments
Japan earthquake and nuclear tragic events are under management‟s monitoring. The impact on our business is limited
Breakthrough in the PRC Market
Several new models (including smartphones) have been selected by China Unicom, China Mobile and China Telecom
3G Android Products to Launch
3G Android products such as ONE TOUCH 990, ONE TOUCH 908 and ONE TOUCH 913 are selected by operators and will be launched in the coming quarters
Brand Building - Le Tour de France
Become one of the official sponsorships for Le Tour de France 2011 to enhance ALCATEL ONE TOUCH brand image
15
16
17
Q1 2011 YoY Q1 2010
2,124 44% 1,474
31.2 4% 32.6
33 3% 34
22.3% 2.5% 19.8%
180 161% 69
8.5% 3.8% 4.7%
Sales Volume
(„000 Units)
Total ASP (US$)
Net Profit
Revenue & Profit
(HK$ Million)
Revenue
GP%
Financial Highlights
Own Brand ASP (US$)
Net Profit%
5,789
8,715
14.4%
17.0%
17.9%
21.8%22.4% 22.3%
10%
15%
20%
25%
Y2006 Y2007 Y2008 Y2009 Y2010 Q1 2011
Wi-Fi
3G Android
Touch & Qwerty EDGE Social Networking
Entry Multimedia Touch
ULC Full Keyboard SMS Phone
VGA Phone GPRS Messaging Side Slider
Stable Gross Margin
Gross Margin
18
Brand Value & Customer Relationship
Product Competitiveness
Operational Efficiency
Financial & Pricing Strategy
Economies of Scale
Strong Profitability
Net Profit
(HK$ Million)
19
Income Statement Highlights
Income Statement
Highlights
(HK$ Million) Q1 2011 Q1 2010 Change Y2010 Y2009 Change
Sales Volume („000 Units) 8,715 5,789 +51% 36,223 16,123 +125%
Revenue 2,124 1,474 +44% 8,701 4,361 +100%
Gross profit 473 292 +62% 1,948 949 +105%
Gross profit margin (%) 22.3% 19.8% +2.5% 22.4% 21.8% +0.6%
Net profit 180 69 +161% 702 23 +2,952%
EBITDA 188 85 +121% 785 163 +382%
EPS (HK Cents) 16.38 6.54 +150% 64.69 2.51 +2,477%
20
(HK$ Million)
31 March 2011
31 December 2010
Change
Non-current assets 710 635 +12%
Current assets 11,570 11,619 -
-Inventories 1,109 780 +42%
-Cash and cash equivalents 769 1,345 -43%
-Trade receivables 1,976 2,535 -22%
-Pledged deposits 6,774 6,201 +9%
-Other current assets 942 758 +24%
Current liabilities (9,844) (10,014) -2%
-Interest bearing bank and other borrowings (6,527) (6,488) +1%
-Trade and notes payables (1,625) (1,843) -12%
-Other current liabilities (1,692) (1,683) +1%
Net current assets 1,726 1,605 +8%
Total assets less current liabilities 2,436 2,240 +9%
Non-current liabilities (18) (18) -
Net assets 2,418 2,222 +9%
Financial Position Highlights
Financial Position
Highlights
21
Gearing Ratio * 2% 8%
Current Ratio * * 1.48 1.40
AR Turnover Days 73 69
Inventory Turnover Days 57 36
EPS (Q1 2011/Q1 2010) 16.38 HK cents 6.54 HK cents
Key Financial Ratios
* Calculated based on the Group‟s total interest-bearing borrowings over total assets, excluding
RMB foreign exchange program
** Excluding RMB foreign exchange program
31 March 2011 31 December 2010
22
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Principal
Business
• Research & Development, manufacturing and global sales of mobile phones and
accessories of two key brands: - “TCL” (in China)
- “ALCATEL ONE TOUCH” (in Europe, Middle East, Africa, Americas, Asia-Pacific and China)
Background
• A member of TCL Corporation (stock code: 000100.SZ)
• Listed on the Hong Kong Stock Exchange in Sep 2004 (stock code: 02618.HK)
TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED
(02618.HK)
Public Shareholders
50.0%
TCL Corporation
47.2%
Huizhou City
Investment Holdings
TCL Employee
Committee Public Shareholders Mr. LI Dongsheng
Directors
2.8%
* As at 21 April 2011
Company Overview
25
• A globallly-oriented China-based provider of mobile and internet products
• A multi-cultural workforce over 8,500 employees
• Two strong brands: ALCATEL ONE TOUCH internationally and TCL in China
• Seven Product Lines: GSM/WCDMA, CDMA, TD-SCDMA, CMD, Accessory,
Brand Design Lab and MID
ODM
business
One Company Multiple Businesses
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Production
Facilities,
R&D Centers,
Sales Offices
• Headquartered in Shenzhen, China
• Global research facilities located in Shenzhen, Shanghai, Chengdu, Ningbo and Huizhou
• Global factory located in Huizhou, China
• Global presence across over 120 countries and regions
• 115 repair centers, over 50 offices, over 8,500 employees around the world
Shenzhen:
- Headquarter
- R&D Center
Huizhou:
- Global factory
- R&D Center
Shanghai:
- R&D Center Paris:
- Sales Center
Mexico City:
- Sales Center
Ningbo:
- R&D Center
California:
- Sales Center
Chengdu:
- R&D Center
Global Presence
27
• More than 2,000 highly skilled and experienced
research engineers distributed in Shanghai, Shenzhen,
Chengdu, Ningbo and Huizhou
• Ownership of GSM core technological patents obtained
through acquisition of ALCATEL mobile phone business
• One of the few companies who own 2G, 2.5G, 2.75G,
3G patents in the world, excellent tradition of research
and development
• Able to provide solutions to GSM, GPRS, EDGE,
CDMA, WCDMA, TD-SCDMA independently
• Continue efforts in the development of 3G products,
OMS-based handsets, data cards and multifunctional
phones
• Focus on innovation as well as the high quality of the
products
Strong R&D capability
28
Durable Flip Testing Abrasion Testing
Electrostatic Testing Durable Press Testing
• Production capacity of approximately 60 million
units annually
• World-class SMT production lines and supporting
facilities
• Experience of efficient global logistics
• Strict tests by key telecommunication operators in
the world
• ISO9001 and ISO14001 qualified
• Testing & manufacturing capability for platform TI,
MTK , QUALCOMM & BROADCOM
SMT production line Testing centre Main building
Manufacture center in Huizhou, China
Highly Efficient Production Facilities
29
Engaged in
teaching and
research in
Electrical
Engineering for
many years
Honorary Chair
Professor of
National Tsing
Hua University in
Hsinchu, Taiwan
Mr. LI Dongsheng
Chairman and
Executive Director
Founder of the Company
“Business Leader of the
Decade” by CCTV in 2009
About 30 years in various
aspects of electronics
industry Mr. GUO Aiping
CEO and
Executive Director
Extensive experience in overall
management of multinational
company, strategic planning
and development
Graduated from Stanford
University with Doctor‟s degree
in Management Science
Mr. BO Lianming
Non-executive
Director
Over 10 years of
experience in
consumer
electronics
products industry
With Doctor‟s
degree in
Business
Administration
Mr. HUANG Xubin
Non-executive
Director
Rich
experience in
finance area
With Master‟s
degree in
Economics
and EMBA
degree
Ms. XU Fang
Non-executive
Director
Vice President
and Human
Resource
Director of TCL
Corporation
Distinguished
professor at
Shantou
University
Mr. LAU Siu Ki
Independent
Non-executive
Director
Fellow
member of
both HKICPA
and ACCA
With profound
financial and
accounting
expertise
Mr. SHI Cuiming
Independent
Non-executive
Director
Extensive
experiences in
telecommunication
industry
Served in Ministry of
Posts and
Telecommunications
for many years
Mr. LOOK Andrew
Independent
Non-executive
Director
Over 20 years'
experience in
equity
investment
analysis
Best Hong
Kong Strategist
and Best
Analyst by
Asiamoney
Magazine
Mr. LIU Chung Laung
Independent
Non-executive
Director
Board of Directors
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Mr. GUO Aiping, George
CEO & Executive Director
• Extensive experience in overall management of multinational company, strategic planning and development
• Graduated from Stanford University with a Doctor‟s degree in Management Science
Mr. WONG Kwok Chung, Albert
Executive Vice President & General Manager of APAC
• 13 years of experience in computers and electronics industry in Hong Kong, Canada and the PRC
• With Bachelor‟s degree in Science and Master‟s degree in Electrical and Electronics Engineering
Mr. Nicolas ZIBELL
Senior Vice President & General Manager of Americas
• Over 20 years of experience in sales, marketing, product strategy and management in automotive and telecommunications industries in Europe and the Americas
• Graduated from École Superieure de Commerce de Lyon and ESADE Business School with MBA degree
Mr. LIU Yuk Tung, Thomas
Senior Vice President of Business Strategy & CFO
• About 25 years of experience in areas of audit, international finance and trading business
• A CPA of HKICPA, Charted Accountant of ICAEW and fellow member of ACCA
• With Bachelor‟s degree major in Economics, MBA and Master‟s degree in Accounting
Mr. WANG Jiyang
Senior Vice President of R&D & General Manager of GSM/WCDMA Production Line
•Over 19 years experience of research, development and management in electronics industry
•With PhD major in Electrocircuit & System and MBA degree
Mr. Yves MOREL
Senior Vice President & General Manager of EMEA
•26 years experience of sales and marketing mainly in telecommunication industries
•Contributed to develop sales area such as Russia, Central Europe, Middle East, Africa and Western Europe
Executive Committee
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