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MarketScreener Homepage  >  Equities  >  SHENZHEN STOCK EXCHANGE  >  TCL Technology Group Corporation    000100   CNE000001GL8

TCL TECHNOLOGY GROUP CORPORATION

(000100)
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China stocks rally on investor optimism, but corporate earnings lag

03/26/2019 | 12:40am EST
FILE PHOTO: An investor looks at an electronic board showing stock information at a brokerage house in Shanghai

SHANGHAI/BENGALURU (Reuters) - A sharp rally in Chinese stocks this year has been driven more by investor optimism than fundamentals, based on an analysis of corporate earnings estimates in an economy expanding at its slowest pace in 28 years.

As the 2018 earnings reporting season begins for mainland firms, analysts are issuing more downgrades than upgrades for corporate earnings, even as they hope that China's stimulus plans for the economy kick in.

That implies that investors who have pushed the market up 22 percent this year are hoping for a turnaround in earnings, which often lags share prices.


(GRAPHIC: China earnings yet to improve - https://tmsnrt.rs/2UOrRnV


(GRAPHIC: Asia's estimated earnings for 2019 - https://tmsnrt.rs/2USI63y

China has promised billions of dollars in tax cuts and infrastructure spending to help businesses and protect jobs. Hopes of a deal with the United States to end a year-long trade war have also boosted stock prices.

Beijing has vowed to use more policy tools to ensure the economy grows within a targeted range of 6.0 to 6.5 percent.

"The impact from Beijing's tax cuts and expenses reductions in 2019 will be between 150-400 billion yuan ($22.37-59.64 billion) on the A-share market, accounting for 4-9 percent of their net profits," investment bank China International Capital Corporation Limited (CICC) said in report.

Those supportive measures will systematically improve the profitability of Chinese companies, CICC said.

(GRAPHIC
: China's industrial profits shrank in December - https://tmsnrt.rs/2HETCMK

As companies this month release their annual results for 2018, investors need to see prospects for improved profitability to push the market any higher.

"It's a misperception that solid fundamentals are not needed for a bull run, which is now in its first stage, and the signal for the second stage will be earnings growth recovery after bottoming out," Haitong Securities wrote in report.

(GR
APHIC: Shanghai firms revenue and profit growth - https://tmsnrt.rs/2CyoQRF

The rebound has been led by the financial sector, which President Xi Jinping has labelled a key part of China's core competitiveness and Beijing has vowed to liberalise further.

Some financial firms have posted hefty earnings. Ping An Insurance Group said it would return up to 10 billion yuan to shareholders through its first share buyback after a forecast-beating jump in annual profit.

Yet estimates for the sector have not been marked higher.


(GRAPHIC: China MSCI financials - https://tmsnrt.rs/2USUMr3

Consumer firms are also expected to gain from measures to boost consumption. Liquor makers have been pushed to record highs by investors, including foreigners who have long favoured firms with strong brand names and solid profits.

Shares of Fuling Zhacai, dubbed one of China's "super brands", hit a new high after it reported strong profit growth in 2018 and expected a 26 percent revenue gain in 2019.


(GRAPHIC: China MSCI consumer discretionary - https://tmsnrt.rs/2UXX0FS

Investors are also tracking mainland-listed tech firms as Beijing seeks to reduce dependence on foreign technology to counter U.S. curbs on China's tech advancement.

Xiaomi-backed TCL Corp reported strong 2018 earnings, sending its stock up nearly 70 percent this year.


(GRAPHIC: MSCI China tech - https://tmsnrt.rs/2HFL6xp

Market participants believe a new technology board in Shanghai will help improve the valuations for tech firms already listed on the A-share market.

Shenzhen's Nasdaq-style start-up board index Chinext has soared 32 percent this year. That compares with a 15 percent rise for Nasdaq in the same period.

(GRAPH
IC: China's Nasdaq-style tech board outperforms - https://tmsnrt.rs/2Cwq9Ax

Still, given how far some companies have missed their earnings' estimates in 2018, analysts are reluctant to upgrade their forecasts until they see a decisive turn in profitability.

(GRAPHIC: Percentage of
Chinese firms missing expected earnings in 2018 - https://tmsnrt.rs/2Cyy4xd

(Reporting by Luoyan Liu; Additional reporting by Patturaja Murugaboopathy in BENGALURU; Editing by Vidya Ranganathan and Darren Schuettler)

By Luoyan Liu and Patturaja Murugaboopathy


© Reuters 2019
Stocks mentioned in the article
ChangeLast1st jan.
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BYD COMPANY LIMITED -1.45% 189.9 End-of-day quote.388.80%
HOPE, INC. -2.41% 6080 End-of-day quote.88.82%
JUST GROUP PLC -2.86% 56 Delayed Quote.-27.03%
LINE CORPORATION 0.19% 5380 End-of-day quote.0.56%
MSCI CHINA (STRD, UHD) -2.79% 105.505 Real-time Quote.27.47%
PING AN INSURANCE GROUP COMPANY 2.18% 89.15 End-of-day quote.4.32%
RISE, INC. 4.17% 25 End-of-day quote.-16.67%
SHANGHAI STOCK EXCHANGE B SHARES INDEX -2.73% 237.995 Real-time Quote.-4.73%
SHENZHEN STOCK EXCHANGE A SHARE INDEX -0.16% 2354.2212 Real-time Quote.30.83%
TCL TECHNOLOGY GROUP CORPORATION -2.29% 6.84 End-of-day quote.53.02%
US DOLLAR / CHINESE YUAN RENMINBI (USD/CNY) 0.04% 6.5764 Delayed Quote.-5.57%
WILL GROUP, INC. 0.91% 999 End-of-day quote.-20.21%
XIAOMI CORPORATION 1.72% 26.6 End-of-day quote.146.75%
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Financials
Sales 2020 81 055 M 12 326 M 12 326 M
Net income 2020 3 489 M 531 M 531 M
Net Debt 2020 53 585 M 8 149 M 8 149 M
P/E ratio 2020 27,3x
Yield 2020 1,22%
Capitalization 90 807 M 13 806 M 13 809 M
EV / Sales 2020 1,78x
EV / Sales 2021 1,61x
Nbr of Employees -
Free-Float 77,7%
Chart TCL TECHNOLOGY GROUP CORPORATION
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TCL Technology Group Corporation Technical Analysis Chart | MarketScreener
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Technical analysis trends TCL TECHNOLOGY GROUP CORPORATION
Short TermMid-TermLong Term
TrendsBullishNeutralBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 11
Average target price 8,07 CNY
Last Close Price 7,01 CNY
Spread / Highest target 42,7%
Spread / Average Target 15,1%
Spread / Lowest Target -9,56%
EPS Revisions
Managers
NameTitle
Dong Sheng Li Chairman & Chief Executive Officer
Lian Ming Bo President & Director
Zhuo Hui He Chairman-Supervisory Board
Xu Bin Huang Chief Financial Officer & Director
Xiao Lin Yan Chief Technology Officer & Senior Vice President
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