TCL COMMUNICATION TECHNOLOGY HOLDINGS LIMITED (2618.HK)

Q1 2016 Results Presentation Hong Kong · 20 April 2016

2

BUSINESS REVIEW & OUTLOOK

FINANCIAL HIGHLIGHTS

Q & A

AGENDA

FINANCIAL HIGHLIGHTS

4 FINANCIAL HIGHLIGHTS

Total Sales Vol.

(’000 units)

Incl. Sales Vol. of Smart Devices (’000 units)

Total ASP (US$)

Revenue

Gross Profit Margin (%)

Net Profit

Net Profit Margin (%)

Basic EPS (HK Cents)

Income Statement

(HK$ Million)

Q1 2016 Q1 2015 Change (%)

17,141 15,780 +9%

8,812 9,707 -9%

41.8 54.7 -24%

5,554 6,690 -17%

19.4% 19.1% +0.3%

9 185 -95%

0.2% 2.8% -2.6%

1.12 15.11 -93%

5

1.2

2.5 3.4

5.2 4.3

5.4

6.8

9.6

6.0 5.9 6.2 7.3

4.7 1.2

1.5

2.1

2.3

1.2

1.3

1.0

1.1

0.7 0.6 0.9

1.0

0.9

2.4

4.0

5.5

7.5

5.5

6.7

7.8

10.7

6.7 6.5 7.1

8.3

5.6

0

2

4

6

8

10

12

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Smart Devices Feature Phones and Other Products

Revenue (HK$ Billion)

QUARTERLY REVENUE OF HANDSETS & OTHER PRODUCTS

6

63

289

513

1,099

718

986

1,339 1,315

990

0

350

700

1,050

1,400

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

QUARTERLY SALE VOLUME OF TABLETS CONTINUOUS AND STEADY VOLUME GROWTH

Volume (‘000 unit)

7 SMARTPHONE SALES VOLUME PROPORTION & ASP REFINED PRODUCT PORTFOLIO STRATEGY

37.0

41.8

45.4

50.2 52.2 52.4 53.4

55.1 54.7

47.1

42.0 43.3 41.8

17%

27%

34%

40%

46% 53%

58% 62% 62%

56% 53%

55% 51%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

10

20

30

40

50

60

70

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

ASP (US$) Smart Devices Proportion

Smart Devices Proportion （%）

ASP (US$)

8 GROSS MARGIN TREND SUSTAINABLE HEALTHY RANGE

17.4% 19.0% 19.3% 19.1% 19.5%

21.8% 23.4%

19.4%

0.0%

10.0%

20.0%

30.0%

2012 2013 2014Q1

2015Q2

2015Q3

2015Q4

2015Q1

2016

Product Competitiveness

Economies of Scale

Pricing and Currency Strategy

Brand Value and Customer

Relationship

Continuous Cost-Down Effort

GP Margin (%)

9 FINANCIAL POSITION HIGHLIGHTS STATEMENT OF FINANCIAL POSITION

(HK$ Million) 31 March 2016 31 December 2015 Change (%)

Non-current assets 4,440 4,364 +2%

Current assets

Inventories 2,598 2,541 +2%

Trade & factored receivables 5,040 6,095 -17%

Other current assets 1,805 2,013 -10%

Pledged deposits 994 1,028 -3%

Cash and cash equivalents 635 566 +12%

Total current assets 11,072 12,243 -10%

Current liabilities

Interest-bearing bank and

other borrowings (2,705) (3,074) -12%

Other current liabilities (3,846) (4,154) -7%

Trade and notes payables (4,262) (4,790) -11%

Total current liabilities (10,813) (12,018) -10%

Net current assets 259 225 +15%

Total assets less current liabilities 4,699 4,589 +2%

Non-current liabilities (476) (551) -14%

Net assets 4,223 4,038 +5%

10 KEY FINANCIAL RATIOS

31 March 2016 31 December 2015

Gearing Ratio 19% 20%

Current Ratio 1.02 1.02

Trade Receivables Turnover Days* 84 89

Inventories Turnover Days ** 26 26

NAV Per Share HK$ 3.27 HK$ 3.16

* Excluding factored trade receivables

** Only inventories in factory

BUSINESS REVIEW & OUTLOOK

12 Q1 2016 OVERVIEW

RESULTS

BUSINESS OVERVIEW

• Sales Volume: 17.1 million units, up 9% YoY (including 8.8 million units of smart devices, down 9% YoY） Ranked No.5 of the Global Top 10 Handset Brand (Source: 2015 FY Gartner and Company Data)

• Revenue: HK$ 5.6 billion, down 17% YoY

• Net Profit: HK$ 9 million, down 95% YoY

• Basic EPS: Decreased to 1.12 HK cents from 15.11 HK cents

• Healthy gross margin: Implemented a more stringent approach in controlling risks and focused on business with high profitability. Gross margin remained at a healthy level of over 19%.

• Continuous growth in tablet sales volume:

Quarterly tablet sales volume has increased steadily over the past 2 years. In Q1 2016, tablet sales volume increased 38% YoY to 1.0 million units.

• Sustainable growth in internet applications and service business:

In Q1 2016, the cumulative number of activated users of mobile Internet application platforms increased almost 2 times YoY to 29.4 million; while the settlement amount of third party payment increased for more than 2 times YoY to HK$2.4 billion.

13 INDUSTRY RANKING - TOTAL PHONES NO. 5 GLOBAL HANDSET BRAND

+ COMPANY DATA

Rank Company

2015 2014 YoY Growth Rate

(%) Shipments

(Million units) Market Share

(%) Shipments

(Million units) Market Share

(%)

1 Samsung 388.8 20.3 392.5 20.9 -1.0

2 Apple 225.9 11.8 191.4 10.2 +18.0

3 Microsoft-Nokia 118.0 6.2 185.7 9.9 -36.5

4 Huawei 105.3 5.5 70.5 3.8 +49.3

5 TCL-alcatel 79.2 4.1 71.5 3.8 +10.7

6 LG 73.7 3.8 76.1 4.1 -3.1

7 Lenovo-Motorola 73.7 3.8 84.0 4.5 -12.3

8 Xiaomi 65.6 3.4 56.5 3.0 +16.1

9 ZTE 61.0 3.2 53.9 2.9 +13.2

10 OPPO 40.8 2.1 20.8 1.1 +96.2

Others 685.3 35.8 675.9 35.8 +1.4

TOTAL 1,917.3 100.0 1,878.8 100.0 +2.0

TOP 10 MOBILE PHONE BRANDS IN FY 15 (Source: Gartner and Company Data)

No.5

14 INDUSTRY RANKING - SMARTPHONES NO. 8 GLOBAL SMARTPHONE BRAND

+ COMPANY DATA

Rank Company

2015 2014 YoY Growth Rate

(%) Shipments

(Million units) Market Share

(%) Shipments

(Million units) Market Share

(%)

1 Samsung 320.2 22.5 307.6 24.7 +4.1

2 Apple 225.9 15.9 191.4 15.4 +18.0

3 Huawei 104.1 7.3 68.1 5.5 +52.9

4 Lenovo-Motorola 72.7 5.1 81.4 6.5 -10.6

5 Xiaomi 65.6 4.6 56.5 4.5 +16.1

6 LG 60.3 4.2 57.7 4.6 +4.7

7 ZTE 50.0 3.5 41.1 3.3 +21.7

8 TCL-alcatel 43.6 3.1 39.5 3.2 +10.5

9 OPPO 39.5 2.8 20.5 1.6 +92.6

10 BBK 35.3 2.5 20.4 1.6 +72.9

Others 406.7 28.5 360.5 29.1 +12.8

TOTAL 1,423.9 100.0 1,244.7 100.0 +14.4

TOP 10 SMARTPHONE BRANDS IN FY 15 (Source: Gartner and Company Data)

No.8

15 INDUSTRY RANKING - TABLETS NO. 7 GLOBAL TABLET BRAND

+ COMPANY DATA

Rank Company

2015 2014 YoY Growth Rate

(%) Shipments

(Million units) Market Share

(%) Shipments

(Million units) Market Share

(%)

1 Apple 50.6 25.9 64.4 28.6 -21.4

2 Samsung 30.7 15.7 37.1 16.5 -17.2

3 Lenovo 11.0 5.6 11.2 5.0 -2.2

4 Huawei 6.9 3.5 3.0 1.3 +130.1

5 Asus 6.1 3.1 10.1 4.5 -39.6

6 Amazon 4.6 2.4 5.2 2.3 -11.5

7 TCL-alcatel 4.4 2.2 2.0 0.9 +122.0

8 LG 4.2 2.1 2.6 1.2 +60.7

9 Microsoft 3.4 1.8 2.3 1.0 +46.3

10 Acer 2.6 1.3 4.5 2.0 -43.0

Others 70.6 36.4 82.8 36.7 -17.1

TOTAL 195.1 100.0 225.2 100.0 -13.4

TOP 10 TABLET BRANDS IN FY 15 (Source: Gartner and Company Data)

No.7

16 Q1 2016 GEOGRAPHICAL REVENUE BREAKDOWN

NORTH AMERICA

29%

LATIN AMERICA

16%

EUROPE 39%

MEA 6%

APAC 4%

CHINA 6%

FEATURE PHONES & OTHER PRODUCTS SMART DEVICES

NORTH AMERICA

34%

LATIN AMERICA

26%

EUROPE 23%

MEA 8%

APAC 4%

CHINA 5%

17

2.11

1.36

0.0

1.0

2.0

3.0

Q12015

Q12016

1.76 1.84

0.0

1.0

2.0

3.0

Q12015

Q12016

+4%

-36%

NORTH AMERICA • Sales volume: 3.9 million units, up 13% YoY;

Revenue: HK$1.84 billion, up 4% YoY

• Sales volume of smart devices: 2.2 million units, up 14% YoY

• Q4 2015 sales volume ranking (Source: Gartner & Company data):

North America: No. 5 (Total phones); No. 6 (Smartphones)

• Expanded tablet sales through major operator channels, recording

continuous growth

• Q2 business plan: Solidify operator channels and widen open market

channels, increase sales of 4G products

LATIN AMERICA • Sales volume: 4.7 million units, down 13% YoY;

Revenue: HK$1.36 billion, down 36% YoY

• Sales volume of smart devices: 2.5 million units, down 25% YoY

• Q4 2015 sales volume ranking (Source: Gartner & Company data):

Latin America: No. 2 (Total phones); No. 3 (Smartphones); No. 4 (Tablets)

Mexico: No. 2 (Total phones); No. 3 (Smartphones); No. 4 (Tablets)

Chile: No. 2 (Total phones); No. 5 (Smartphones); No. 1 (Tablets)

• Implemented stringent controls on currency and credit risks, maintained

a leading position in entry-level smartphone market

• Q2 business plan: Continue to monitor currency risk exposure, enrich

product mix to increase product competitiveness

Revenue (HK$ Billion)

REGIONAL BUSINESS REVIEW Revenue

(HK$ Billion)

18

1.34 1.44

0.0

0.5

1.0

1.5

2.0

Q12015

Q12016

0.49 0.43

0.0

0.2

0.4

0.6

0.8

Q12015

Q12016

REGIONAL BUSINESS REVIEW

EUROPE

MEA

+7%

-10%

• Sales volume: 4.9 million units, up 68% YoY;

Revenue: HK$1.44 billion, up 7% YoY

• Sales volume of smart devices: 2.2 million units, up 26% YoY

• Q4 2015 sales volume ranking (Source: Gartner & Company data):

Europe: No. 4 (Total phones); No. 5 (Smartphones)

Eastern Europe (excl. Russia):

No. 5 (Total phones); No. 8 (smartphones); No. 3 (Tablets)

• Seized market share with mid-high end smart devices

• Q2 business plan: Set up new sales team to broaden sales channels

Revenue (HK$ Billion)

Revenue (HK$ Billion)

• Sales volume: 1.9 million units, up 38% YoY;

Revenue: HK$430 million, down 10% YoY

• Sales volume of smart devices: 1.0 million units, up 16% YoY

• Q4 2015 sales volume ranking (Source: Gartner & Company data):

MEA: No. 4 (Total phones); No. 6 (Smartphones); No. 3 (Tablets)

South Africa: No. 3 (Total phones); No. 2 (Smartphones); No. 1 (Tablets)

• Recorded strong growth in entry-level smartphones, launched robust

tablet portfolio

• Q2 business plan: Continue to explore new markets e.g. The Gulf

Cooperation Council area and Pakistan

19

0.84

0.25 0.0

0.5

1.0

1.5

Q12015

Q12016

0.15 0.23

0.0

0.1

0.2

0.3

0.4

Q12015

Q12016

REGIONAL BUSINESS REVIEW

APAC

CHINA

+58%

-70%

Revenue (HK$ Billion)

Revenue (HK$ Billion)

• Sales volume: 0.7 million units, up 132% YoY;

Revenue: HK$230 million, up 58% YoY

• Sales volume of smart devices: 0.4 million units, up 90% YoY

• Streamlined local operation, reinforced strategic collaboration with

operators

• Q2 business plan: Implement stringent controls on currency risk,

concentrate resources to develop key countries, realign sales

channels

• Sales volume: 1.0 million units, down 55% YoY;

Revenue: HK$250 million, down 70% YoY

• Sales volume of smart devices: 0.5 million units, down 68% YoY

• Announced new brand identity, redefined market position,

implemented premium products strategy

• Q2 business plan: Develop operators and open markets in parallel,

establish strategic partnership with major distributors

20 STEP-UP PRODUCT STRATEGY

2007-2010

FEATURE PHONE

EDGE PHONE

2011-2012

2013-2014

2015-2016

GPRS, Ultra-low cost Qwerty key pad Entry-level

Multi-touch panel technology

EDGE Qwerty keypad Multi-touch display

2.8’’- 3.5’’ display 500MHz-600MHz Android 2.1 - 2.3 3G

SMARTPHONE

SMART CONNECTIVITY

4G/ TABLET/ CLOUD TERMINAL

2 in 1 / WEARABLE DEVICE/

MULTIPLE OS/ IoT

VIRTUAL REALITY DEVICE/ BIGPAD

2.8’’- 4.5’’ display 650MHz-1.5GHz Dual-core CPU Android 4.0 - 4.1 Windows

5‛-6‛ Display 6‛-10‛ Tablets Octa-core CPU Metal casing Android 4.4

4.5‛-6‛ display Quad-core CPU 6.45mm thickness Android 4.2 Firefox Multi-screen Wi-Fi display on TV

2.8‛-6‛ display 6‛-10.1‛ Tablets 16.3‛ BigPad Wearable devices Android L Windows OS Cloud applications 4G 3.5‛-6‛ display

16.3‛ BigPad Wearable device for kids Android M Windows 10 Mobile Full metal body VR devices

21

PRODUCTS SELECTED BY GLOBAL MAINSTREAM OPERATORS & DISTRIBUTORS

NORTH AMERICA

LATIN AMERICA

EUROPE CHINA

APAC

MEA

·

22

IDOL 4 Series received 14 recognitions at MWC 2016

NEW PRODUCTS

Octa Core CPU 5.2'‘ FHD IPS Display Slim Body: 7.1 mm 13 Mpxl Rear Camera, Dual-tone LED Flash Augmented Multimedia Experience with Boom Key

Octa Core CPU 5.5‛ QHD AMOLED Display

Ultra Slim Body: 6.99 mm 16 Mpxl Rear Camera, Dual-tone LED Flash

Augmented Multimedia Experience with Boom Key VR–in-the-Box

23

Quad Core CPU 10.1‛ HD IPS Display Windows 10 Operating System Long-lasting Battery: 8,410 mAh (with LTE Keyboard) Detachable LTE Keyboard (Wi-Fi Hotspot for up to 15 Devices)

PLUS 10 received 3 recognitions at MWC 2016

NEW PRODUCTS

Compatible with Android 4.3 & iOS 7 or Above Long Standby Time: 4 days IP65 certified: Water & Dust Resistant 2G 2-way Voice Call & Voice Message GPS Locator

Octa Core CPU 5.5‛ FHD IPS Display Full Lamination 13Mpxl Rear Camera Dual-tone LED Flash Fingerprint Recognition Vast Colourful Covers

24

01 02

03 04

BRAND-BUILDING ACTIVITIES

01. Consumer Electronic Show (CES) 2016 The United States 02. Mobile World Congress (MWC) 2016 Spain 03. 2016 TCL Spring New

Product Launch

China 04. Lancang-Mekong

Cooperation Exhibition

China

25 OUTLOOK

CHALLENGES

EXECUTION PLANS

GOALS & FORECAST

Global economy remains in the doldrums with soft consumer spending

Currency fluctuations pose a continuing headwind for sales growth

Business risks from emerging markets are mounting

Due to the prevailing weak macro economy, the net profit in 1H 2016 may record a

significant year-on-year decline. Nevertheless, if the reception of the newly launched

products goes well as expected, the revenue of 2H 2016 may be improved.

4G smartphones and tablets will continue to be the main growth drivers in 2016

Strive to develop the new ‚Product + Service‛ business model and generate sustainable

service income

Gradually transform into a ‚Global smart mobile devices ecosystem corporation‛ by

anchoring on ‚Smart devices + Cloud-based platform + Internet services‛ foundation

Continue to implement stringent credit control and hedging policies to

mitigate the impact of currency fluctuation

Restructure regional businesses and strengthen the three pillars of growth:

key emerging markets, North America & Europe

Optimise product portfolio by increasing sales focus on user-centric and

cost-competitive mid-high end products

Strengthen new brand image and realign marketing strategy to promote

brand awareness

Maintain a balance between sales growth and sound operation

Q & A

THANK YOU Disclaimer

The information contained herein should not be utilized for any legal purposes in regards to any 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 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.

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 actual results could differ materially from these statements.