TCL科技:2019年年度报告摘要(英文版)

                                       Achieve Global Leadership by Innovation and Efficiency




Stock Code : 000100   Stock Name: TCL Tech.                   Announcement No. 2020-026




    TCL 科技集团股份有限公司
    TCL Technology Group Corporation




       ANNUAL REPORT 2019 (SUMMARY)
                         31 March 2020




                                                                                           1
                                                  Achieve Global Leaders hip by Innovation and Efficiency



     Achieve Global Leadership by Innovation and Efficiency
                                   Chairman’s Statement



Dear shareholders, customers and partners,

In 2019, as supply surged and growth of demand slowed down, the global semi-conductor
display industry entered a cold winter with great earning pressure. To survive and also
prepare for the growth of next cycle, became the top priority for every company. Under the
severe and complicated business environment, the Company persues its global leadership
steadily, completed the significant assets spin-off, and continuously improved the efficiency
by organization reformation, so as to promote steady growth in all the businesses.

Business Review for 2019

In 2019, on the reference basis (the consolidation scope after the Restructuring), the
Company recorded revenue of RMB57.27 billion, up by 18.7% year -on-year; and a net
profit of RMB3.56 billion, up by 0.53% yearly, of which the net profit attributable to the listed
company’s shareholders was RMB2.62 billion, down by 17.0% yearly.

The Company completes the significant assets spin-off, optimizes the capital structure and
improves the operating efficiency. The net profit per capita increases to RMB74,000 from
RMB38,600. And the debt/asset ratio decreases to 61.3% from 68.4%, while the net cash
flow generated from operating activities amounted to RMB11.49 billion, both improve the
sustainable potential greatly. The Company keeps on its strategy as global industry leader,
concentrates on the long-term strategic industries which are high-tech and capital intensive.
Enhance the ecological development of the industry, improves the ability of industrial
finance and facilitates the industrial development after the restructuring. The clear
development strategy of the Company will fully release the growth potential and the positive
effect of the restructuring.

The panel price continuously drops to the historic low ebb with industry losses arising and
the market further concentrated to the leading enterprises last year. TCL CSOT keeps the
best efficiency and profitability of the industry by the business process improvement,
ultimate cost reduction and the better product and customer mix. For the year under review,
TCL CSOT recorded revenue of RMB33.99 billion, up by 22.9% year-on-year, and a net
profit of RMB964 million, down by 58.5% year-on-year. The t6 (G11) plant in Shenzhen
reached designed production at the end of the 2019 and the t4 (flexible AMOLED) plant



                                                                                                            2
                                                Achieve Global Leaders hip by Innovation and Efficiency



achieved mass production at the same time. The two plants will support the profit growth of
this year firmly.

TCL CSOT continuously invests in R&D and actively develops the next generation of
display technologies, from materials to manufacturing (including ink-jet printing flexible
OLED). The PCT patent applications of the Company increases 2,752 in the current period
and the acumulated patent applications reaches to 11,261.

The industrial finance business develops steadily and optimizes the capital operating
system, improves the asset efficiency and risk control capability. The supply chain finance
enables the industry development and meet the capital needs. TCL venture capital focuses
on the opportunities of cutting-edge technology; Admiralty Harbour Capital starts its
offshore operates smoothly. For the Reporting Period, the industrial finance, investment
and venture capital recorded a net profit of RMB999 million totally; Earning from the
significant assets spin-off was RMB1.15 billion. The other businesses of the Company were
stable and recorded revenue of RMB22.9 billion and a net profit of RMB320 million.
Earnings from finance and other businesses stabilize the performance of the Company
during the winter of the panel cycle.



2020 business planning

Since the end of last year, the price of the big-size panel has risen as business environment
improved. I think that the global demand-supply relationship of the industry has not
changed fundamentally, but the long-term prospect of the industry is bright with very
large market potential. The human-computer interaction technology creates the new
application scenarios and expand the new market in demand of commercial display; Global
industry reshuffling are accelerated and the industry concentrate to the leading companies.
The environment of the global display industry will be better comparing last year and the
enterprise with edge will have more opportunities.

TCL CSOT focuses on "improving efficiency and profitability", compares with all the
benchmarks thoroughly, finds the root reason, responses quickly, builds up the core
competencies, continues to reduce the cost, improves operation quality as well as actively
expands new markets and customers to achieve business success. The Company will
maintain the max production of the t6 plant, further expand the capacity of t3 plant, reach
mass production of the Phase I of the t4 plant, complete Phase II and Phase III construction
of t4, and start the t7 (G11) operation at the end of the year. Continuously max the existing


                                                                                                          3
                                                Achieve Global Leaders hip by Innovation and Efficiency



capacity and complete full sales. Keep on capacity expansion and support the revenue
growth this year. The Company shall dedicated to the video interaction and commercial
display technology, improve LTPS and flexible AM-OLED technology, further optimize
product and customer structure, continuously strengthen the market position and enhance
earnings. We are confident that TCL CSOT's revenue growth and profitability will exceed
last year.

The industrial finance & investment business will support the semiconductor display from
many aspects, further improve the financial status and asset turnover rate , as well as lower
financial costs. TCL Capital will focus on investment from upstream to downstream of
industrial chain and strategic technology, and support ecological perfection of the
semi-conductor display. The industrial finance & investment business will continuously
contribute to steady growth in earnings and improve the capability to counter the cycle.

The Company will continue to spin off the other business and keep an eye on the M&A
opportunity in the semiconductor. Focus on the semi-conductor display business and
shareholder return.

The Company has an active expectation this year. Although the COVID-19 epidemic
causes greater uncertainty to the global economy, we have confidence to overcome
difficulties and challenges to further expand the market share and achieve a strong revenue
growth.

Medium-and-long term strategic outlook

China is the world's largest exporter. And the manufacture is the root of China's economic
competitiveness, but the high-end manufacturing ability is insufficient with low value added.
China need to upgrade its manufacturer, enhance their high-end manufacturing and
technology ability. The long-term strategy of the company is centralizing the resource
and building up global leadership in strategic industries of technology-intensive and
capital-intensive. On the other hand, the Company enhances the industrial financial
capacity, develops the industrial finance business creatively, facilitates industrial
development, establishes the efficient industrial financial business system and
increases the investment income also.

The semi-conductor display technology and material is one of the most important core and
basic industries with great market prospects of which China has a global advantage.

I think there is an opportunity for China's display industry to become the global leader in
big-size products, but in medium and small size will face the challenges from Korean


                                                                                                          4
                                                  Achieve Global Leaders hip by Innovation and Efficiency



companies. China and Korea will become the final leading forces of global display industry.
As the competition of the display industry will be heated, the business volatility will be lower
finally. The leading player's advantages will be significant and the return will increase
gradually. The Company will increase the scale and efficiency of the industry by interior and
exterior development, increase R&D investment, establish the technical barrier, break
through the next generation of display technology, deploy the global industrial chain layout
actively and serve global customers, establish the ecological system of the industry,
improve efficiency and become a global leader in the display industry.

With the advantages from technology, management and capital, the Company is looking for
opportunity to create a new field in the capital-intensive and technology-intensive strategic
industries to support long-term sustainable growth of the enterprise. The potential target will
be the leading enterprise of the industry, which has consistent business logic and has
synergy to increase earnings.

The Company always values shareholder returns and stabilizes the cash dividends. The
Board of Directors proposes the dividend of RMB0.1 per share for the year under review.
The Company has distributed cash dividends for 9 consecutive years since 2012 and
cumulative dividends will exceed RMB8.1 billion. The Group will continuously execute the
existing dividend policy and actively pay back the shareholders. In 2019, the Company
cumulatively repurchased 565 million shares with total RMB1.934 billion of repurchase to
enhance shareholder return.

I have personally increased my shares in the Company by a total of 175 million shares
since Dec. 2018 and I have confidence in the long-term value of the Company.

Finally, on behalf of the Board of Directors, I’d like to take this opportunity to express my
gratitude for the trusts of all our shareholders, for the support from all our partners and
users, as well as for the hard work of management team and staff!




                                                                                      Li Dongsheng

                                                                                     31 March 2020




                                                                                                            5
                                                           Achieve Global Leaders hip by Innovation and Efficiency



Part I Important Notes


This Summary is based on the full text of the 2019 Annual Report of TCL Technology
Group Corporation (together with its consolidated subsidiaries, the “Group” or “Company”,
except where the context otherwise requires). In order for a full understanding of the
Company’s operating results, financial position and future development plans, investors
should carefully read the aforesaid full text on the media designated by the China Securities
Regulatory Commission (the “CSRC”).


Independent auditor’s modified opinion:
□ Applicable √ Not applicable
Board-approved final cash and/or stock dividend plan for ordinary shareholders:
√ Applicable □ Not applicable
Bonus issue from capital reserves:
□ Yes √ No
The Board has approved a final dividend plan for the ordinary shareholders as follows:
based on the share capital of 13,000,372,307 shares on 27 March 2020 that are eligible for
profit distribution (the total share capital of 13,528,438,719 shares minus the 528,066,412
shares in the Company’s special securities account for repurchase that are not eligible for
profit distribution), a cash dividend of RMB1 (tax inclusive) per 10 shares is to be distributed
to   the     shareholders,         totaling      RMB1,300,037,230.70.       The      retained     earnings       of
RMB6,819,795,641.3 will carry forward for future distribution. Meanwhile, there will be no
bonus issue from either profit or capital reserves for the year under review.
This Report and its summary have been prepared in both Chinese and English. Should
there be any discrepancies or misunderstandings between the two versions, the Chinese
versions shall prevail.

Part II Key Corporate Information

1. Stock Profile

Stock name                           TCL Tech.                 Stock code             000100
Previous stock name                  TCL Corp.
Stock exchange for stock listing     Shenzhen Stock Exchange
Contact information                  Board Secretary



                                                                                                                     6
                                                       Achieve Global Leaders hip by Innovation and Efficiency



Name                          Liao Qian
                              19/F, Tower B, TCL Building, Gaoxin South First Road, Shenzhen High -Tech
Address
                              Industrial Park, Shenzhen, Guangdong Province, China
Fax                           0755-3331 3819
Tel.                          0755-3331 1666
Email address                 ir@tcl.com


2. Principal Activities or Products in the Reporting Period


During the Reporting Period, the Company primarily consists of the following three
business segments: the semi-conductor display and materials business, the industrial
finance & investment business and the other businesses.

                                               TCL CSOT            China Ray
                         Semi-conductor
                       display & materials     Wuhan CSOT              Juhua



                       Industrial finance &
       TCL Tech.           investment          TCL Financial       TCL Capital




                              Other
                                                  Highly              Open Edutainment

Upholding the whole new development strategy of becoming a global leading intelligent
technology      company,   the     Company      will       continue      to    strengthen   manufacturing
competitiveness, focus on developing high-tech strategic businesses, and establish global
cutting edges in related businesses. The industrial finance business will facilitate the
development of the Company’s manufacturing business and increase returns on
investments. Capitalizing on the industrial superiority, the Company will invest in
enterprises from the ecological industry chain for better comprehensive advantage. In the
future, under the principle of concentrating on the core business and maximizing
shareholder value, the Company will continue to promote M&As in the other businesses, so
as to achieve higher returns on assets.


3. Key Financial Information

(1) Key Financial Information of the Past Three Years


Indicate by tick mark whether there is any retrospectively restated datum in the table below.



                                                                                                                 7
                                                                Achieve Global Leaders hip by Innovation and Efficiency




□ Yes √ No
                                                                                                                Unit: RMB
                                                                                     2019-over-2018
             Item                            2019                    2018                                   2017
                                                                                       change (%)
                            Note
Operating revenue (RMB)                       74,933,085,688    113,360,075,545              -33.90   111,577,362,348

EBITDA                                        14,224,327,742     14,096,523,261                0.91    13,395,054,317

Net profit (RMB)                               3,657,735,320      4,065,194,164              -10.02     3,544,702,884
Net profit attributable to the
listed               company’s                2,617,766,571      3,468,207,407              -24.52     2,664,396,006
shareholders (RMB)
Net profit attributable to the
listed               company’s
shareholders             before                 235,119,321       1,587,391,372              -85.19     1,190,649,328
non-recurring      gains    and
losses (RMB)
Basic earnings per share
                                                      0.1986             0.2566              -22.60             0.2178
(RMB/share)
Diluted earnings per share
                                                      0.1935             0.2562              -24.47             0.2178
(RMB/share)
Weighted average return on
                                                         9.09               11.98             -2.89                10.86
equity (%)
Net        cash       generated
from/used       in    operating               11,490,096,405     10,486,580,443                9.57     9,209,615,123
activities (RMB)
Net cash per share generated
from/used       in    operating                       0.8493             0.7739                9.74             0.6814
activities (RMB/share)
                                                                                      Change of 31
                                                                                       December
                                                                 31 December                           31 December
                                        31 December 2019                              2019 over 31
                                                                     2018                                  2017
                                                                                       December
                                                                                        2018 (%)
Total assets (RMB)                           164,844,884,926    192,763,941,739              -14.48   160,293,985,835

Total owners’ equity (R MB)                  63,883,145,340     60,871,672,647                4.95    54,142,938,886
Owners’ equity attributable to
the     listed      company’s                30,111,946,237     30,494,364,951               -1.25    29,747,067,178
shareholders (RMB)
Share capital (share)                         13,528,438,719     13,549,648,507               -0.16    13,514,972,063
Equity per share attributable
to the listed company’s                              2.2258             2.2506                -1.1             2.2010
shareholders (RMB/share)

Note: In April 2019, the Company completed the handover of major assets in a restructuring. Therefore, the operating
revenue data of 2019 and 2018 are not comparable as the former only includes the January-March 2019 operating
revenue generated by the said assets, while the latter comprises the January-December 2018 such revenue. Adopting the
same reference basis, operating revenue would be up by 18.72% in 2019 compared to 2018.
The key financial information of 2019 and 2018 exclusive of the effects of the businesses of the restructuring (reference
data presented based on the consolidation scope after the restructuring) is as follows:
                                                                                                      2019-over-2018
              Item                             2019                              2018
                                                                                                        change (%)
Operating revenue (RMB)                             57,270,940,685                  48,240,376,808              18.72

Net profit (RMB)                                     3,564,025,084                   3,545,237,938                 0.53
Net profit attributable to the listed
                                                     2,617,778,635                   3,153,044,155             -16.98
company’s shareholders (RMB)
Basic     earnings     per    share
                                                           0.1986                          0.2333              -14.87
(RMB/share)




                                                                                                                            8
                                                                     Achieve Global Leaders hip by Innovation and Efficiency



Diluted earnings per share
                                                         0.1935                          0.2329                -16.92
(RMB/share)
Weighted average return on
                                                            9.09                            9.74                 -0.65
equity (%)
Note: The data of 2019 and 2018 in the table above exclude the results of the businesses of the restructuring.


(2) Key Financial Information by Quarter

                                                                                                                               Unit: RMB
                                               Q1                      Q2                       Q3                          Q4
Operating revenue                           29,600,956,875         14,180,656,860            15,036,052,357           16,115,419,596
Net profit                                  1,006,077,530           1,730,985,146              750,351,631                 170,321,013
Net profit attributable to the
                                              779,088,389           1,313,260,303              484,981,289                    40,436,590
listed company’s shareholders
Net profit attributable to the
listed company’s shareholders
                                              560,950,806            -310,483,676              252,929,177                 -268,276,986
before non-recurring gains and
losses
Net cash generated from/used in
                                             2,243,903,241          3,906,918,581             1,458,452,367               3,880,822,216
operating activities

Indicate by tick mark whether any of the quarterly financial data in the table above or their
summations differs materially from what have been disclosed in the Company’s quarterly or
interim reports.
□ Yes √ No

4. Share Capital and Shareholder Information at the Period-End


(1) Numbers of Ordinary Shareholders and Preferred Shareholders with Resumed
Voting Rights as well as Holdings of Top 10 Shareholders

                                                                                                                              Unit: share
                                                                                                         Number          of
                               Number          of                 Number            of                   preferred
                               ordinary                           preferred                              shareholders with
Number        of
                               shareholders at                    shareholders with                      resumed voting
ordinary               433,940 the                        546,906 resumed                              - rights                          -
                                      month-end                                 voting                             at   the
shareholders at
the period-end                 prior    to    the                 rights    at     the                   month-end prior
                               disclosure of this                 period-end (if any)                    to the disclosure
                               Report                             (see note 8)                           of this Report (if
                                                                                                         any) (see note 8)
                                        5% or greater shareholders or top 10 shareholders
                                    Share                                                                Shares in pledge or frozen
                                                            Increase/dec
    Name of          Nature of      holdin Total shares
                                                             rease in the Restricted Unrestricted
   shareholder      shareholder        g    held at the
                                                              Reporting shares held shares held             Status            Shares
                                   percen period-end            Period
                                     tage

                    Domestic                                                                           Put in pledge by
Li Dongsheng and                                                                                                           541,620,000
                    natural                                                                             Li Dongsheng
his
                    person/gener     9.03 1,221,748,009 174,574,800 609,636,366 612,111,643 Put in pledge by
acting-in-concert
                    al legal                                                                     Jiutian                   408,899,521
party
                    person                                                                    Liancheng
Huizhou Investment State-owned
                                     6.48     878,419,747                                878,419,747
Holding Co., Ltd.  legal person




                                                                                                                                             9
                                                                     Achieve Global Leaders hip by Innovation and Efficiency



Tibet Tianfeng
                    Domestic
Enterprise                            3.89   526,095,642 526,095,642                   526,095,642
                    general legal
Management Co.,     person
Ltd.
China Securities    Domestic
Finance             general legal     2.76   373,231,553                               373,231,553
Corporation Limited person
Hong Kong
                    Foreign legal
Securities Clearing                   2.61   353,489,854                               353,489,854
                    person
Company Ltd.
Central Huijin Asset
                     State-owned
Management Co., legal person          1.53   206,456,500                               206,456,500
Ltd.
Xiaomi              Domestic
Communications      general legal     1.00   134,949,437                               134,949,437
Co., Ltd.           person
Xinjiang Dongxing
Huarui Equity       Domestic
Investment
                    general legal     0.86   115,726,278                               115,726,278
Partnership
                    person
(Limited
Partnership)
TCL Corporation- Domestic
The First Employee general legal      0.73     99,148,115                               99,148,115
Stock Ow nership   person
Plan
Star Century        Foreign legal
                                      0.67     90,532,347                               90,532,347
Enterprises Limited person
                                    Hubei Changjiang Hezhi Hanyi Equity Investment Fund Partnership (Limited Partnership) has als o
                                    become a top-10 shareholder in a share offering of the Company, w ith its shareholdings locked up
Strategic investor or general legal from 25 December 2017 to 25 December 2018. For further information, see the Implementation
person becoming a top-10 Report on TCL Corporation’s Asset Purchase via Share Offering and the Related-Party Transaction
ordinary shareholder in a rights & the New Share Listing Announcement. Changjiang Hanyi w as de-regis tered as a legal person in
issue (if any) (see note 3)         November 2019 and the indirect equity-holding of the original partner has become direct
                                    equity-holding. Therefore, Tibet Tianfeng Enterprise Management Co., Ltd. has become a top-10
                                    shareholder of the Company.
Related   or   acting-in-concert Being acting-in-concert parties upon the signing of the Agreement on Acting in Concert, Mr. Li
parties among the shareholders Dongsheng and Xinjiang Jiutian Liancheng Equity Investment Partnership (Limited Partnership) are
above                            the biggest shareholder of the Company w ith a total of 1,221,748,000 s hares.


(2) Number of Preferred Shareholders and Shareholdings of Top 10 of Them


□ Applicable √ Not applicable
No preferred shareholders during the Reporting Period.

(3) Ownership and Control Relations between the Actual Controller and the Company


□ Applicable √ Not applicable



5. Corporate Bonds

(1) Bond Profile

                                                                                              Balance
    Bond name                 Abbr.              Bond code               Maturity                                  Coupon rate
                                                                                            (RMB’0,000)




                                                                                                                                   10
                                         Achieve Global Leaders hip by Innovation and Efficiency



TCL Corporation’s
Corporate Bonds
Publicly Offered in
2016 to Qualified 16TCL02     112353   16 March 2021                 150,000              3.56%
Investors
(Tranche1) (Type
2)
TCL Corporation’s
Corporate Bonds
Publicly Offered in
2016 to Qualified 16TCL03     112409   7 July 2021                   200,000              3.50%
Investors (Tranche
2)
TCL Corporation’s
Corporate Bonds
Publicly Offered in
2017 to Qualified 17TCL01     112518   19 April 2022                 100,000              4.80%
Investors (Tranche
1)
TCL Corporation’s
Corporate Bonds
Publicly Offered in
                    17TCL02   112542   7 July 2022                   300,000              4.93%
2017 to Qualified
Investors (Tranche
2)
TCL Corporation’s
Corporate Bonds
Publicly Offered in
                    18TCL01   112717   6 June 2023                   100,000              5.48%
2018 to Qualified
Investors (Tranche
1)
TCL Corporation’s
Corporate Bonds
Publicly Offered in
2018 to Qualified 18TCL02     112747   20 August 2023                200,000              5.30%
Investors (Tranche
2)
TCL Corporation’s
Corporate Bonds
Publicly Offered in
2019 to Qualified 19TCL01     112905   20 May 2024                   100,000              4.33%
Investors (Tranche
1)
TCL Corporation’s
Corporate Bonds
Publicly Offered in
2019 to Qualified 19TCL02     112938   23 July 2024                  100,000              4.30%
Investors (Tranche
2)
TCL Corporation’s
Corporate Bonds
Publicly Offered in
                    19TCL03   112983   21 October 2024               200,000              4.20%
2019 to Qualified
Investors (Tranche
3)




                                                                                               11
                                                              Achieve Global Leaders hip by Innovation and Efficiency



                           1. The principal of “16TCL01” was repaid with interest on 18 March 2019.
                           2. The interest for the period from 16 March 2018 to 15 March 2019 on “16TCL02” was
                           paid on 18 March 2019.
                           3. The interest for the period from 19 April 2018 to 18 April 2019 on “17TCL01” was paid
                           on 19 April 2019.
Interest    payment   and 4. The interest for the period from 6 June 2018 to 5 June 2019 on “18TCL01” was paid on
principal repayment during 6 June 2019.
Reporting Period           5. The interest for the period from 7 July 2018 to 5 July 2019 on “16TCL03” was paid on 8
                           July 2019.
                           6. The interest for the period from 7 July 2018 to 5 July 2019 on “17TCL02” was paid on 8
                           July 2019.
                           7. The interest for the period from 20 August 2018 to 19 August 2019 on “18TCL02” was
                           paid on 20 August 2019.


(2) Latest Rating and Rating Change

According to the Follow-up Rating Report (2019) on TCL Corporation’s Corporate Bonds
Publicly Offered in 2016 to Qualified Investors (Tranches 1 and 2) issued by China
Chengxin Securities Rating Co., Ltd. on 9 May 2019, the AAA credit status of TCL
Corporation and the said bonds was affirmed with a “Stable” outlook.
According to the Follow-up Rating Report (2019) on TCL Corporation’s Corporate Bonds
Publicly Offered in 2017 to Qualified Investors (Tranches 1 and 2) and on TCL
Corporation’s Corporate Bonds Publicly Offered in 2018 to Qualified Investors (Tranches 1
and 2) issued by China Chengxin Securities Rating Co., Ltd. on 9 May 2019, the AAA credit
status of TCL Corporation and the said bonds was affirmed with a “Stable” outlook.
According to the Credit Rating Report on TCL Corporation’s Corporate Bonds Publicly
Offered in 2019 to Qualified Investors (Tranche 1) issued by China Chengxin Securities
Rating Co., Ltd. on 9 May 2019, TCL Corporation was rated AAA with a “Stable” outlook,
and the said bonds were also rated AAA.
According to the Credit Rating Report on TCL Corporation’s Corporate Bonds Publicly
Offered in 2019 to Qualified Investors (Tranche 2) issued by China Chengxin Securities
Rating Co., Ltd. on 9 September 2019, TCL Corporation was rated AAA with a “Stable”
outlook, and the said bonds were also rated AAA.
According to the Credit Rating Report on TCL Corporation’s Corporate Bonds Publicly
Offered in 2019 to Qualified Investors (Tranche 3) issued by China Chengxin Securities
Rating Co., Ltd. on 9 October 2019, TCL Corporation was rated AAA with a “Stable” outlook,
and the said bonds were also rated AAA.




                                                                                                                    12
                                                   Achieve Global Leaders hip by Innovation and Efficiency



(3) Selected Financial Information of the Company for the Past Two Years

                Item               2019                     2018                        Change
EBITD A (R MB’0,000)                 1,422,433                    1,409,652                        0.91%
Current ratio                               1.12                        1.02                        9.97%
Debt/asset ratio (%)                       61.25                       68.42                          -7.17
Quick ratio                                 0.85                        0.67                       17.97%
Debt/EBITDA ratio                         14.09%                     10.69%                         3.40%
Interest cover (times)                      2.16                        2.40                      -10.00%
Cash-to-interest cover (times)              5.32                        5.46                        -2.56%
EBITDA-to-interest cover (times)            5.17                        5.53                        -6.51%
Loan repayment ratio (%)                  100.00                      100.00                          0.00
Interest coverage ratio (%)               100.00                      100.00                          0.00


Part III Management Discussion and Analysis


1. Business Overview of the Reporting Period

I Overview
In the Reporting Period, as supply surged and growth in demand slowed down, the global
semi-conductor display industry entered a cold winter with tremendous pressure on
earnings. In face of the tough internal and external challenges, the Company completed the
Major Asset Restructuring, deepened reform and transformation, spun off the intelligent
terminal and supporting business and shifted from diverse operations to specialized
operations. Focusing on the core business of semi-conductor display and materials
and other strategic industries which are high-tech, capital intensive and of a long
cycle, the Company aims to become a global leading intelligent technology group.
In 2019, on the reference basis (the consolidation scope after the Restructuring), the
Company recorded revenue of RMB57.27 billion, up by 18.7% year-on-year; and a profit of
RMB3.56 billion, up by 0.53% year-on-year, of which the net profit attributable to the listed
company’s shareholders was RMB2.62 billion, down by 17.0% year-on-year. Under the
complicated operating environment, the Company adhered to the strategy of being globally
leading, deepened reform, and improved quality and efficiency, so as to steady growth in all
the businesses. Prices of the major products have stabilized and begin to rebound at the
end of the Reporting Period. As the supply and demand situation improves in the industry,
the Company expects a strong earning.




                                                                                                         13
                                                 Achieve Global Leaders hip by Innovation and Efficiency



The Company takes management ability and efficiency as the operation foundation,
deepens organization reform, restructures business process, and improves
operation quality, with the capital structure and operation efficiency improved
constantly. By optimizing process and management, the expense ratio has decreased to
12.5% from 16.8%. Per capita net profit of the Company is improved from RMB38,600 to
RMB74,000, the debt/assets ratio has dropped from 68.4% to 61.3%, and the net cash flow
generated from operating activities is RMB11.49 billion. At the bottom of industry cycle, the
risk resistance and sustainable development ability of the Company is further enhanced.
The Company takes technological innovation as the main driving force, constantly
optimizes products and technologies, and actively deploys next generation display
technology and new materials. In LCD field, the Company focuses on developing 4K/8K
and Touch products. The Company launched the first Mini-LED BLU on Glass in the world,
which will establish its competition advantage in high end market of household large screen
and commercial display field. In the field of AMOLED, the Company developed the
laminated technology which allows a switch between dual fold forms of outer and inner fold,
such new technologies as multi-fold, curling, etc., have made prospective progress, and
foldable screens of t4 production line have been put into mass production for delivery. In the
field of next generation of display and materials, subordinated Guangdong Juhua of the
Company, as the only national-level printing display R&D center of the industry, has
coordinated the global industry chain resources, accelerated to promote the application of
printing display technology; OLED material which is developed independently by the
Company has started its mass production, with the efficiency and life of QLED material
taking a leading position in the industry.
During the Reporting Period, there were 6,155 R&D technical staffs in the Company, with
the R&D as RMB5.46 billion; the Company submitted 2,752 PCT international application,
with cumulative applications of 11,261 and with the public patent of quantum dot ranking 2 nd
in the world; the Company held the first open conference of technological cooperation,
employed 29 authoritative personnel of the industry as technological consultants, and
published 13 frontier technology cooperation projects world-widely, and accelerated the
breakthrough of core and basic technology and the conversion of major technological
achievements through innovation of “self-research + cooperation”.
The Company keeps on improving its industrial ability, enhances scale advantages
based on technology upgrading, and constantly enriches product portfo lio. During
the reporting period, t6 G11 production line reached the designed output in advance; t7 G11


                                                                                                       14
                                                 Achieve Global Leaders hip by Innovation and Efficiency



production line was constructed smoothly; t3 G6 LTPS production line expanded its
designed output and increased to 50K/month, and became the largest LTPS single plant in
the world; t4 G6 flexible OLED had Phase I mass production and the foldable screen was
delivered; Phase I of Huizhou module integration project reached the designed output; by
2023, five-year CAGR of shipping area of TCL CSOT will reach 10% and the market share
will further increase. With two G8.5 production lines, two G11 production line and two G6
production lines, TCL CSOT has formed the plant layout for large, medium and small
productions, which meet the needs of major products in the market. In 2019, market share
of TV panel was improved to the 3 rd in the world, and market share of LTPS mobile phone
panel was improved to the 2 nd in the world.
As a pioneer of international layout, the Company cooperates with upstream an d
downstream enterprises to construct global industry ecology integrating localized
production, sales and service, completes the layout of global manufacturing and
supply chain of TCL CSOT, and accelerates the globalization process of domestic
semi-conductor display industry. On September 26th, 2019, the construction of the panel
and module integrated intelligent manufacturing park in India under the cooperation of TCL
CSOT and TCL Electronics officially kicked off. According to the plan, the Phase I projec t
will produce 8 million pieces of 26-55 inch large-sized and 30 million pieces of 3.5-8 inch
small- and medium-sized modules annually, and mass production is expected to be
delivered in the first half of 2020, to meet the growing local market needs.
The industrial finance & investment bushiness of TCL maintain a good momentum of
development, and continue to contribute strategic synergy and earnings to the
Group. Finance business of the Company optimizes capital operating system, guarantees
the liquidity of the Company, and improves asset efficiency and risk control ability. The
supply chain finance gives empowerment for industry development, and the financial
investment business conducts investment to obtain stable profits by relying on its
professional advantages.      TCL   venture    capital business         focuses      on investment
opportunities in frontier technological field; Admiralty Harbour Capital operates successfully,
and bond issuing and underwriting, financial consulting, and asset management business
develops quickly. During the Reporting Period, the industrial finance, investment and
venture capital businesses recorded a profit of RMB999 million.
The other businesses develop stably, with revenue of RMB22.9 billion and a profit of
RMB320 million for the year under review. The profit of TCL industrial finance and other



                                                                                                       15
                                                Achieve Global Leaders hip by Innovation and Efficiency



businesses improve the performance of the Company when the main business is low
season.
Earnings from the Asset Restructuring are RMB1.15 billion in the year under review. The
principle of the Company is to focus on the owner and maximize shareholders’ value. It will
keep on promoting M&As and improving return on assets. The growth potential of the
Company will be thoroughly released through the Restructuring, which will lay a foundation
for the long term development of the Company; the positive effect of the Restructuring will
be further reflected in the future.
39-year development of the Company is an epitome of numerous Chinese enterprises. The
Company establishes its market position, brand, channel and influence of global supply
chain of intelligent terminal products in major countries and regions of the world with its
efficiency, speed and cost advantages, starts to fight upward and focuses on strategic point
in global technological map, and strives to the peak of the industry ecology.
After 10 years of catching up, the Company has established scale and efficiency
advantages in semi-conductor, new display technology and material has created
opportunities for Chinese enterprises to catch up and surpass. Although the COVID-19
epidemic at the beginning of 2020 affected the operating performance of Q1 of the
Company and brought uncertainty for global economic growth, the Company will adhere to
the strategic goal of global leadership, make its utmost efforts, overcome difficulties and
challenges, and further expand its market share to achieve the objective of a strong growth
in full-year revenue. TCL CSOT will expand from application innovation to key technology
breakthrough on the basis of leading efficiency, then to leading original technology and
ecological layout of core industry chain, break through active Mini -LED backlight and
direct-viewing product technology, and lead the development of printing OLED/QLED. The
Group will improve scale and efficiency through internal and external extension
development; enhance R&D, and establish technological barrier; accelerate to complete
layout of global industry chain, and adapt to i nternational competition; become the leading
enterprise of global display industry; expand display industry advantage to other relevant
industry chain, and improve competitiveness and operation efficiency.
The Company will take The Strategy to wards Global Leadership as enterprise development
outline, be led by strategy, be guaranteed by organization and culture, reform and break
through, improve quality and efficiency, and stride toward a technological industry
group with global leadership. The Company changed its name from “TCL Corporation” to



                                                                                                      16
                                                     Achieve Global Leaders hip by Innovation and Efficiency



“TCL Technology Group Corporation” on February 7th , 2020, and entered its brand new
development stage.




II. Core Business Analysis

TCL Tech.’s core businesses mainly include the semi-conductor display and material
business, the industrial finance and investment business and other businesses .

                                             TCL CSOT            China Ray
                        Semi-conductor
                      display & materials    Wuhan CSOT            Juhua



                      Industrial finance &
   TCL Tech.              investment         TCL Financial       TCL Capital




                             Other
                                                Highly           Open Edutainment

Adhere to the strategy of becoming a global leading intelligent technology company, TCL
Tech. will gradually quit from other businesses in accordance with the principle of
maximizing shareholders’ value. It will take endogenous development power as the
foundation, powerfully promote leading progress of semiconductor products and material
business in product, technology and ecology in the world. It helps industrial development
through industrial finance, and increases investment profits; invests in ecological
enterprises by relying on industry advantages, and strengthens comprehensive
competitiveness. It utilizes technology, management, and capital advantages to deploy
Chinese enterprise assets which can establish sustainable leading advantages in capital
and technology intensive strategic industries. The selected area will be similar to
management and operation logic of the existing businesses and will be top enterprises in
the respective industries with synergy, enhance income and realize sustainable
development of high quality.



 (I) Semi-conductor Display and Material Business

During the Reporting Period, TCL CSOT achieved shipping area of 22.184 million square
meters, up by 23.8% compared with the same period last year, achieved revenue of
RMB33.99 billion, up by 22.9% compared with the same period last year, achieved net


                                                                                                           17
                                                  Achieve Global Leaders hip by Innovation and Efficiency



profit of RMB964 million, down by 58.5% compared with the same period of last year, and
EBITDA was RMB8.68 billion. The comprehensive performance kept on taking a leading
position in the industry.
The t1 and t2 plants in Shenzhen is operating at full capacity for strong sales, the t6 plant
reached designed output in Q4 in advance, and the yield rate ramp-up was better than
expected. During the reporting period, the total shipment of large-sized panels reached
20.82 million square meters, up by 19.1% compared with the same period last year, and the
total shipment was 41.195 million pieces, up by 5% compared with the same period last
year; market share of TV panel was improved to the 3 rd in the world, the shipment of
55-inch products ranked the 1st in the world while that of 32-inch products ranked the 2nd in
the world, and market occupancy of 86-inch commercial display panel ranked the 2 nd in the
world. However, because the price of main products is lower than the same period last year,
the large size panel business achieved revenue of RMB18.93 billion, down by 12.5%
year-on-year.
T3 plant in Wuhan was operating at full capacity for strong sales, and market share of
LTPS-LCD products ranked at the 2 nd in the world stably. Flexible AMOLED of t4 plant
reached Phase I mass production in Q4, curved and foldable products had mass
production successively. During the Reporting Period, the shipping area of small and
medium size products was 1.365 million square meters, up by 2.12 times compared with
the same period of last year, and the shipment was 113.978 million pieces, up by 1.25 times
compared with the same period last year; the revenue reached RMB15.07 billion, up by 1.5
times compared with the same period last year.
In 2019, semi-conductor display industry ran downward, and the industry loss heavily,
restructure accelerated, Chinese panel companies improved their global competitiveness
and market share with their capital and efficiency advantages. By the end of last year, price
of large size panel rebounded, and industry operating profits improved. The demand of
global display industry has not fundamentally changed; however, long term development
prospect of the industry gets optimistic, and the market potential is still great; the demand of
video interaction technology and commercial display products increases quickly, which
brings market increment; the global industry restructure and integration accelerates, and as
a result industry concerntration is further improved. In 2020, TCL CSOT will keep on
promoting ultimate cost reduction and profit increase, improve efficiency, further optimize
product and customer structure, develop video interaction and commercial product
business, keep on operating at fully capacity for strong sales, and increase sales revenue


                                                                                                        18
                                                 Achieve Global Leaders hip by Innovation and Efficiency



and operation interest; we are confident that revenue growth and profitability in 2020 will
exceed 2019.
Through high efficient production line investment strategy, synergistic advantage of
industry chain and excellent management, TCL CSOT always maintains leading
operation efficiency and profits at low season of industry cycle. Since being put into
production, TCL CSOT take advantage of aggregation effect of Gemini P lant la yo ut , and
improved production output and expanded efficiency through high efficient production line
layout; exerted integration advantages of industry chain and taken ultimate efficiency cost
measures to realize the lowest sales expense ratio and financial expense ratio, overcome
the headwind of the industry, and keep momentum for the next round of industry growth.
As the capacity is stepping into high growth phrase, product mix will be refined
continuously. T1 and t2 G8.5 production line of TCL CSOT operates at full capacity for
strong sales; G6 LTPS production line of t3 is expanded from 45k/month to 50K/month; G11
production line of t6 reached designed output in Q4 and will have production at full capacity
this year; G6 flexible OLED production line of t4 realized Phase I mass production in
December, Phase II and Phase III construction will be completed in this year; G11
production line construction of t7 is progressed as planned and will be put into production at
the end of this year, which lays a foundation for performance growth. While each production
line is put into production successively, by 2023, five-year CAGR of shipping area of large
size panel of TCL CSOT will be 17%, and five -year CAGR of shipping area of small and
medium panel will be 26%. Meanwhile, the proportion of high margin products of TCL
CSOT for commercial display, vehicle display, gaming monitor, etc. will improve
continuously, and strategic cooperation is established with CVTE, HiteVision, BYD, Lenovo,
etc. successively.
Take technological innovation as core drive, improve product competitiveness
continuously. In large size field, TCL CSOT consolidates the application advantages of
HVA technology in LCD high end products, improves the share of such products as 4K/8K,
Touch, etc., launched MLED product based on Mini-LED backlight on Glass for the first time
in the world, to meet the demand growth of high end market of large size LCD. In the small
and medium size field, the yield rate and quality of CSOT LTPS production line has reached
international top, proportion of Incell/COF/blind via product rises continuously, a nd the
Company actively develops under screen/within screen fingerprint technology; flexible
AMOLED focus on under screen shooting, foldable technology and other high end



                                                                                                       19
                                               Achieve Global Leaders hip by Innovation and Efficiency



technologies, with the curved punched screen and flexible foldable screen delivered
already.
Actively promote new display technology, material & core technology development
and ecology construction, and construct core advantages which lead the future.
Guangdong Juhua, as the only “national printing and flexible display innovation center” of
the industry, has launched the manufacturing of 31-inch 4K RGB QLED sample machine for
full quantum dot printing and the first 31-inch rollable flexible sample machine for ink-jet
printing based on printing technology and OLED flexible display technolog y in the world,
with its R&D innovation leading the industry development. China Ray mainly develops new
OLED key materials with independent IP, and has developed more than 700 new materials
currently, including more than 30 products which enter pilot scale experiment; synthesis
mass production site and sublimation plant have been put into production, and part
materials have entered into mass production stage. QLED R&D team has broken thro ugh
key problems such as the life of red and green materials, etc., and the public patent in
quantum dot electroluminescent field ranked 2nd in the world.
Though counter-globalization trend is severe in recent years, global supply chain
restructures, competition advantages of China manufacturing in semi-conductor are
hard to be shaken in short term. TCL CSOT will make its utmost efforts to achieve
technology leadership and ecology leadership by efficiency and product mix, break
through the next generation of new display technology and materials through
horizontal expansion and vertical extension, and lead the global display industry.



(II) Industrial Finance and Investment Business

1. TCL Financial

TCL Financial mainly includes the Group’s finance and the supply chain finance.

Finance business targets at providing capital support and management support for main
businesses and member companies, providing capital guarantee for the Group’s major
investment projects, undertaking the function of improving the Group’s asset operation
efficiency and risk control; supply chain finance business provides various financing and
support supply-chain finance for related companies, establishes ecological circle of small
and medium companies, and reduces cost of supply chain; meanwhile, financial investment
business improves capital efficiency by creating stable profits through financial services,



                                                                                                     20
                                                 Achieve Global Leaders hip by Innovation and Efficiency



and reduces financial expenses of the Company.




2. TCL Capital

TCL Capital consists of TCL Venture Capital, Admiralty Harbour Capital Limited and China
Innovative Capital Management Limited (holding 49% of its equity), seek investment
opportunities in key fields of technological industries, including new display technology,
semi-conductor and their relevant industry chain, as well as high end materials and
technological equipment, etc., which promotes technology and create synergy. At the same
time, investment value was generated.

TCL venture capital business focuses on relevant new technologies, new materials and
new applications of main business by establishing various funds. By the end of this
reporting period, the scale of funds managed by TCL venture capital business reached
RMB8.99 billion, and it invested in 115 projects cumulatively and exited from 33 projects,
including 10 projects which it exited partialy. Currently, it holds stocks of CATL, Dynanonic,
Willsemi, and other listed companies, and the interest in Cambricon, Dkem, Transwarp, and
other companies. Several projects invested by TCL venture capital business have good
synergy with current business of TCL, and play a vital role in completing industry chain,
technology foresight and layout, and lead to technology advance of the Company.

Admiralty Harbour Capital is a licensed financial company which is established in Hong
Kong, with the license of investment bank and assets management, provides
corresponding capital and financial service support for overseas business expansion, as
well as merger and restructure. During the reporting period, Admiralty Harbour Capital
completed the 12 bonds issuing and underwriting projects and 2 bond restructure projects,
financial consultant and assets management business increase quickly, and it realized
profit in the first year.

China Innovative Capital Management Limited mainly engages in equity investment for
listed companies as well as merger and restructure, invested in more than 110 listed
companies cumulatively, with good business operation and stable growing profits. China
Innovative Capital Management Limited also provides professional support for domestic
merger and purchasing as well as busi ness expansion of the Company in China. During the



                                                                                                       21
                                                            Achieve Global Leaders hip by Innovation and Efficiency



reporting period, the Company established Guangdong Rongchuang Lingyue Intelligent
Manufacturing and IT Industry Equity Investment Fund together with China Innovative
Capital Management Limited, Utrust, etc., focusing on investment in smart manufacturing,
IT industry and relevant service upgrading field, etc.

At the end of the Reporting Period, the Company directly invests in a number of listed
companies, including a 19.07% interest in 712 Corp. (603712.SH), a 5.14% interest in Bank
of Shanghai (601229.SH) and a 20.06% interest in Fantasia Holdings (01777.HK). During
the Reporting Period, the Company increased its interest in Bank of Shanghai by 0.15%,
other direct interests in listed companies remained the same during the Reporting Period.

2. Significant Change to Principal Activities in the Reporting Period


□ Yes √ No

3. Product Category Contributing over 10% of Principal Business Revenue or Profit

                                                                                                          Unit: RMB
                                                                       YoY change
                                                                                    YoY change in YoY change in
   Product                                                Gross profit in operating
                   Operating revenue   Operating profit                             operating profit gross profit
   category                                                 margin       revenue
                                                                                         (%)         margin (%)
                                                                           (%)
 Semi-conduct
 or display        33,993,533,865.00    958,502,226.28      10.34%       22.87%          -63.08%           -8.42%
 devices
 Distribution of
 electronic        20,835,617,478.00    308,374,951.76        3.59%      25.77%            5.62%           -0.37%
 products


4. Business Seasonality to which Special Attention should Be Paid


□ Yes √ No

5. Significant YoY Changes in Operating Revenue, Cost of Sales and Net Profit
Attributable to the Listed Company’s Ordinary Shareholders or Their Compositions


In April 2019, the Company completed the handover of major assets in a restructuring.
Therefore, the operating revenue data of 2019 and 2018 are not comparable as the former
only includes the January-March 2019 operating revenue generated by the said assets,
while the latter comprises the January-December 2018 such revenue. Adopting the same
reference basis, operating revenue would be up by 18.72% in 2019 compared to 2018.


                                                                                                                    22
                                                  Achieve Global Leaders hip by Innovation and Efficiency



6. Possibility of Listing Suspension or Termination


□ Applicable   √ Not applicable

7. Matters Related to Financial Reporting


(1) YoY Changes to Accounting Policies, Accounting Estimates or Measurement
Methods


√ Applicable □ Not applicable
For details, see “36. Changes to main accounting policies and estimates” in “III Significant
accounting policies and estimates” in “Part X Financial Statements” of the full text of the
annual report.

(2) Retrospective Restatements due to Correction of Material Accounting Errors in
the Reporting Period


□ Applicable   √ Not applicable

(3) YoY Changes to the Scope of Consolidated Financial Statements


Compared with 2018, 2019 saw the official exclusion of the intelligent terminal and
supporting businesses from the consolidated financial statements as the Restructuring was
completed in April 2019. The consolidated financial statements of 2019 included the Q1
data of the restructured businesses, while those of 2018 included the full-year data.




                                                                                                        23

关闭窗口