Citi: Initiates TCL ELECTRONICS (01070) with "Buy" Rating, Target Price HK$22.9

Citi issued a research report initiating coverage on TCL ELECTRONICS (01070) with a "Buy" rating and a target price of HK$22.9, the highest target price in the market. The bank expects the company's adjusted net profit to achieve a compound annual growth rate of 25% from 2026 to 2028, and values it at 13x 2027 forecast price-to-earnings ratio, a premium of about 20% over Hisense Visual Technology's three-year average, mainly reflecting TCL ELECTRONICS' faster earnings growth and higher return on equity. Citi noted that TCL is the world's second-largest TV brand, with a 14.9% global shipment market share in the first half of 2026, and is leading the industry's transition toward Mini LED and large-size screens. The bank expects TCL ELECTRONICS' gross margin to reach 19.4% in 2028 as its share of the overseas premium TV market rises. Panel supplier consolidation and localized production capacity should also help support a sustainable upcycle. The bank expects TCL ELECTRONICS' sales to grow 14%, 11% and 10% in 2026, 2027 and 2028, respectively, with adjusted net profit growing 42%, 26% and 24%. On valuation, Citi noted that TCL ELECTRONICS' share price has risen 54% year-to-date, with adjusted net profit growing 56% and 54% year-on-year last year and in the first half of this year, respectively, significantly outperforming the Hang Seng Index. The company currently trades at about 10x forward 12-month price-to-earnings ratio, and the bank believes there is still room for further valuation re-rating.