The debate between TCL Electronics' "growth stocks" and "value stocks" has a new answer

Ask AI · Why can TCL Electronics simultaneously satisfy value and growth investment logic?

Text | Walnut

For a long time, when mentioning value stocks and growth stocks, the secondary market often has this stereotypical impression—value stocks are related to industry cycles, with stable performance and low growth elasticity, while growth stocks have ample growth potential but are more volatile in the short term.

The home appliance manufacturing industry is a typical stronghold of value stocks, with low valuation and high dividends being common features of home appliance giants. The halo of growth stocks is mostly associated with hot sectors like AI and embodied intelligence.

But there are exceptions, such as TCL Electronics (01070.HK).

Recently, TCL Electronics delivered an unexpectedly strong performance. By 2025, revenue will reach HKD 114.58B, a year-on-year increase of 15.4%; adjusted net profit attributable to the parent will grow faster than revenue, up 56.5% to HKD 2.51 billion, with gross profit margin rising for four consecutive quarters.

In terms of cash flow, TCL Electronics’ cash and cash equivalents increased by 54.2% year-on-year. With abundant cash reserves and strong profitability, ROE further rose to 13%. In addition, continuing its past high dividend payout plan, TCL Electronics’ annual dividend payout ratio reached 50% of adjusted net profit attributable to the parent.

This aligns with the market’s general perception of it as a “TV value stock”: high dividends, high ROE, and stable performance. Behind these figures, TCL Electronics’ market value has also soared. Over the past year, its market cap rose from over HKD 16 billion to over HKD 35 billion, an increase of over 118%. This new signal reveals that:

The “margin of safety” of TCL Electronics’ value attribute is resonating with the “growth elasticity” of new businesses.

On investor platforms like Xueqiu, discussions about TCL Electronics show an interesting phenomenon: traditional value investors are calculating dividend yields and waiting for valuation recovery, while growth investors already see the explosive potential of TCL Electronics in AI glasses, photovoltaics, and internet businesses.

Currently, TCL Electronics is becoming a unique investment target: it has the “bottom” of a value stock and the “momentum” of a growth stock.

1. The “bottom” of value stocks: structural upgrade of the fundamentals

For value investors, TCL Electronics’ “margin of safety” undoubtedly lies in its core TV business.

Data shows that the dual improvement in profitability and market share of the TV business directly confirms TCL Electronics’ status as a value stock.

Omdia data indicates that by 2025, TCL TV’s shipment volume will remain among the top two global brands, with TCL Mini LED TV shipments increasing sharply by 118.0% year-on-year, and global market share rising to 31.1%, firmly holding the first place worldwide.

In terms of profit, the company’s financial report shows that the overall gross profit of the display business increased by 16.4% year-on-year. The high-end and large-screen segments have driven the gross margin of large display products in both domestic and international markets to rise.

Objectively speaking, in the past year, few companies have achieved both profit and share growth. Especially affected by the decline in domestic market subsidies and weak consumer demand in Q4 last year, some TV giants saw revenue growth but profit margins remained thin, as reflected in their annual reports.

Why can TCL Electronics solidify the “bottom” of value and achieve dual growth in share and profit?

The answer lies in the evolution of its fundamentals.

First, TCL Electronics does not engage in price wars but leverages a systematic output of “products + brand + channels” to fight the value battle.

This systematic capability helps TCL Electronics maintain profits in the domestic stock market and seize market share from Korean brands in international incremental markets.

According to Loutu Technology data, last year, the domestic TV market’s total shipments reached 32.89 million units, a historic low, but the upgrade demand for replacement was significant, with high-end and large-screen becoming the mainstream trend.

TCL Electronics responded to this trend by flexibly adjusting its product mix, focusing resources on mid-to-high-end products. High-value products not only preserved profit margins—domestic market gross profit margin increased by 1.9 percentage points year-on-year—but also stabilized market share. According to Zhongyikang data, TCL TV’s retail market share in China increased to 24.2%.

Overseas, the logic is similar: TCL Electronics exports its systematic capabilities abroad, capturing market share from Korean brands in the mid-to-high-end segment.

In the highly competitive North American market, through channel coverage and high-end product upgrades, TCL Electronics’ average product price increased by over 20% year-on-year in the past year. According to CICC Securities’ research, compared to 2024, SKU count, average price, and product quality in key channels like Best Buy and Costco have all significantly improved, demonstrating the effectiveness of its high-end strategy.

In the diverse and highly fragmented European market, TCL Electronics has rapidly enhanced brand strength through comprehensive coverage of key channels and localized “one country, one policy” operations, achieving double-digit revenue growth within the year.

Second, TCL Electronics is not “following” technological trends but “defining” them.

While Samsung and LG still stick to OLED, TCL Electronics’s deep accumulation and first-mover advantage in Mini LED technology, combined with TCL Huaxing’s industry chain synergy, have made Mini LED a “Chinese standard.”

Gaining the right to define technology offers two major benefits: one, through vertical integration and collaboration with TCL Huaxing, TCL Electronics has strong cost control; two, leveraging broad application scenarios, the technology can rapidly iterate within these scenarios, accelerating penetration. As a result, TCL Electronics’ high-end Mini LED TVs have a significant quality-price and scene advantage over Korean OLED products of similar level.

Driven by Chinese brands like TCL Electronics, Mini LED TVs are becoming a major trend in the global TV market. According to Qunzhi Consulting, by 2025, global Mini LED TV shipments will reach 13.5 million units, with penetration rising to 6.1%, and by 2030, this figure is expected to reach 16.8%. Mini LED is poised to lead the transformation of the high-end TV market.

Third, TCL Electronics’ strategic partnership with Sony is expected to open new space for its globalization.

Following the official joint venture announcement in January, TCL Electronics recently disclosed a final agreement with Sony on strategic cooperation in the home entertainment field. In “Cai Jing Wu Ji,” this is seen not just as a business partnership but as a deep integration of branding, technology, and channels.

According to the announcement, the two parties plan to establish a joint venture, with TCL holding 51% and Sony 49%. The joint venture will undertake Sony’s home entertainment business, including R&D, manufacturing, sales, and service of consumer TVs, B2B displays, projectors, and home audio products globally, expected to officially launch by April 2027.

Sony’s brand strength is formidable, with strong expertise in audio-visual technology and chips. TCL Electronics has advanced display technology, a comprehensive industrial layout, and an efficient manufacturing system. The combination is expected to attract high-value customers, increase global high-end market share, and help TCL Electronics transition from “scaling overseas” to “building a global brand.”

The significance of the fundamentals is not only in continuous cash generation but also in achieving structural upgrades and unlocking new growth value. This is the core logic behind value investors’ optimism about TCL Electronics.

2. The “momentum” of growth stocks: a new inflection point

Value stocks focus on fundamental iteration, while growth stocks emphasize future growth potential.

But historical experience shows that the expansion of new technologies and new businesses usually follows an S-curve: slow at the start, rapid in the middle, and slowing down later due to costs and regulation. For a company with a clear main track, how should the future’s new curve be evaluated? It depends on whether the new business has reached a growth inflection point.

At least, signals from financial reports indicate that TCL Electronics’ high-margin, high-stickiness, and high-elasticity new business segments such as internet services and smart home are already accelerating visibly.

The internet business, with a gross margin of 56.4%, has achieved both volume and profit growth, with revenue up 18.3% year-on-year. Innovative sectors like photovoltaics, smart glasses, and companion robots also performed well: photovoltaic revenue grew 63.6%, gross profit increased 47.5%, TCL Electronics’ AR glasses brand LeBird has maintained the top position in China’s online channels for four consecutive years, and the first split-type AI companion robot TCL AiMe has attracted attention at CES and other major exhibitions…

This shows that outside the main track, TCL Electronics’ “second curve” is blooming with multiple points.

Growth stocks are about earning future profits, but to assess whether a company can generate higher profits in the future, two dimensions should be considered:

One, is the growth track certain? Two, has the company formed a complete business model?

Looking at TCL Electronics’ new business layout, it meets both criteria.

In terms of track layout, TCL Electronics does not expand indiscriminately but focuses precisely and makes breakthroughs in key areas.

In photovoltaics, TCL Electronics positions itself at the energy windfall, using a light-asset model to achieve a leapfrog advantage; in internet services, it is reconstructing comprehensively with AI, continuously improving interaction and content capabilities. Its overseas flagship models are among the first to integrate Google Gemini, while domestically, it relies on self-developed intelligent agents and AI product innovations to break product and experience homogenization.

In today’s rapidly developing physical AI, whether it’s smart glasses transitioning from niche toys to mainstream markets or embodied intelligence entering the “year of large-scale commercial deployment,” TCL Electronics is already ahead with LeBird and TCL AiMe, securing tickets to the future.

From a business model perspective, TCL Electronics’ closed-loop has begun to take shape.

Compared to traditional home appliances, pure hardware, or internet companies, TCL Electronics’ integrated hardware and software advantage establishes a “hardware entry—system retention—service monetization” closed loop.

In other words, as user numbers grow, stickiness increases, and platform monetization capabilities expand, it shifts from “selling hardware” to “selling ecosystems,” similar to Apple and other tech giants.

It’s clear that TCL Electronics’ “second curve” is not just storytelling but a clear future profit path. This is what growth stock investors should focus on. Once the technology matures and the track expands, TCL Electronics will be among the first beneficiaries.

3. Growth and value are not mutually exclusive

Looking back at TCL Electronics’ dual nature, is it unusual for a stock to possess both value and growth characteristics?

Many investors see it as such, given that the “growth vs. value” debate has lasted for decades, with two distinct investment logics.

But the answer to this question was long ago provided by Warren Buffett: “Growth and value cannot be distinguished; growth itself is part of the valuation formula.”

First, growth without quality is empty talk.

Good growth is not achieved by burning money, so the “bottom” of value stocks often provides safety margins and room for trial-and-error in exploring new businesses.

Applying this to TCL Electronics, if it can grasp the structural opportunities brought by the global TV industry’s large-screen trend and display technology upgrades—continuously expanding market share and increasing profits—this will be the foundation for future revaluation.

Second, growth that ignores “input-output ratio” is ineffective.

Whether it’s a high-growth tech company or a traditional home appliance or liquor company often labeled as “value stocks,” the core is not only how much is invested for growth but also how much can be earned back in the future. This actually tests whether the company has a healthy growth outlook.

AI investment is a window to assess health.

“Cai Jing Wu Ji” observes that, unlike flashy tech stunts or gambling on AI, TCL Electronics’s AI layout always revolves around pragmatic “value creation,” making AI truly functional and valuable.

Internally, TCL Electronics uses AI to drive efficiency across the entire chain—from R&D, manufacturing, supply chain, to sales—achieving comprehensive cost reduction and efficiency gains.

Externally, it returns to the fundamental principle of product experience, from the underlying Fuxi large model technology base, breakthroughs in industry color gamut with SQD‑Mini LED, eye-protection upgrades with NXTPAPER 4.0 display tech, to new categories like smart glasses and AI companion robots, integrating AI deeply into product experience.

From current valuation levels, TCL Electronics’ PE multiple in the double digits still follows the value stock logic of undervaluation, even though it already has the qualities of a growth stock.

And whether a company has long-term growth confidence and strength is also reflected in its equity incentives.

According to TCL Electronics’ stock incentive plan, the 2025 target is: an increase of 45% or more in adjusted net profit attributable to the parent compared to 2024. To achieve this, adjusted net profit must reach HKD 2.33 billion or more, and management and core employees eligible for incentives will receive 100% equity incentives.

Compared with the financial data, TCL Electronics has already exceeded this target for 2025, and the steady implementation of equity incentives has set a good tone for this year’s growth.

For TCL Electronics, the labels of growth stock and value stock are not important; they are not mutually exclusive. More importantly, in the complex environment of industry competition, cyclical fluctuations, and AI waves, this company has found a deterministic growth path where value and growth resonate. As the saying goes, gold will shine when the time comes, only waiting for the market noise to fade.