The leading display maker reported its revenue rose 15.3% in the first quarter, as its profit for the period more than doubled on rising margins

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TV and display giant TCL Electronics Holdings Ltd. (1070.HK) last week reported its revenue rose 15.3% in the first quarter and its profit more than doubled, as its newer and higher margin businesses like large displays and mini LED TVs made strong gains. The company also broke new ground with its announcement of a landmark deal to form a joint venture with Japan's Sony (6758.T), one of the display industry's oldest and most respected brands.

Of TCL Electronics' HK$29.2 billion ($3.7 billion) in first-quarter revenue, the biggest share – about 57% – came from large-sized displays that are becoming a mainstay at homes and businesses. Revenue from that part of the company's business rose 17.2% to HK$16.7 billion from HK$14.3 billion a year earlier. Reflecting the move towards ever-bigger screens, the company said the average screen size for the displays it sold rose to 55.6 inches in the first quarter, larger by 2.3 inches from a year earlier.

"Benefitting from the continuous increase in the proportion of mid- to high-end and large-sized TVs, the effect of product mix upgrade was further demonstrated," the company said. "Mid- to high-end products maintained their leading edge in global shipment."

Meanwhile, the company's internet business emerged as a key profit driver. Revenue from that segment rose 13.2% to HK$740 million, while its gross margin rose sharply to 65%. The growth was driven primarily by its high-margin overseas internet operations, whose revenue contribution increased by more than 20 percentage points, backed by deeper collaborations with platforms such as Google, Roku and Netflix.

TCL Electronics also reported strong triple-digit growth for its mini LED TVs, which are taking up an increasingly large part of its core display business. Mini LED TV shipments more than doubled during the quarter, rising 102% to account for 15.4% of all display shipments, up 6.6 percentage points from a year earlier. Mini LED TV shipments for overseas markets were especially strong, rising 178% year-on-year.

Larger-screen TVs typically carry higher margins than more mature mid-sized display models, and the strong growth in those two areas helped to raise the company's gross margin to 16.1% from 14.6% a year earlier. That helped to lift the company's profit to HK$359 million, up 124% from the HK$161 million it recorded a year earlier.

TCL Electronics is one of China's oldest and most successful TV brands, outlasting early rivals like Skyworth (0751.HK) and Konka (000016.SZ) to become a global leader with increasing name recognition. The company added to its brand clout in the first quarter with its agreement, signed in March, to set up a joint venture with Sony. The venture will assume responsibility for the Japanese company's home entertainment business, including its signature televisions.

Outside displays, TCL Electronics also reported steady progress for its newer photovoltaic business, whose revenue rose 12.7% year-on-year during the first quarter to HK$4.81 billion. Its smart connection and smart home segment also rose 19.6% to HK$494 million, accounting for 1.7% of revenue in the first quarter.

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