As early as July, TCL Group planned to acquire a 10.04% stake in its China Star Optoelectronics. In the evening, TCL Group released more details on the acquisition of equity of Shenzhen Huaxing Optoelectronics Technology Co., Ltd.
TCL purchased a 10.04% stake in China Star Optoelectronics, which was held by Changjiang Hanyi, Xingyu Limited, Lin Zhouxing, Lin Zhouxing, Lin Zhouxing, and Lin Zhouxing, through the issuance of shares. The parties negotiated a price of RMB 4.034 billion.
After the transaction is completed, TCL Group will directly hold 85.71% stake in China Star Optoelectronics, and Yangtze River Hanwing will receive 7.84% of TCL shares. In the future, TCL will continue to buy back the remaining shares of China Star Optoelectronics.
Huaxing Optoelectronics
Huaxing Optoelectronics is the second largest TV LCD panel manufacturer in mainland China. It is mainly engaged in the R&D, production and sales of semiconductor display panels. It was jointly established by TCL Corporation and Shenzhen Shenchao Technology in November 2009.
According to the IHS research data, the company’s share of the global TV panel market in 2016 was 13%, which is among the suppliers of TFT-LCD display panels that have a certain influence in the world.
TCL Profit Dairy Cow
As we all know, China Star Optoelectronics has always been an important source of profits for the TCL Group. In 2015, China Star Optoelectronics contributed revenue of 18.038 billion yuan, accounting for 17.77% of TCL's total revenue. In the first quarter of 2017, China Star Optoelectronics contributed revenue of 6.54 billion, accounting for 26.30%.
In the first half of 2017, TCL achieved sales revenue of 51.3 billion yuan, an increase of 9.41% year-on-year, and net profit attributable to shareholders of listed companies was 1.03 billion yuan, an increase of 70.7% year-on-year. In the same period, Huaxing Optoelectronics achieved sales revenue of RMB 13.54 billion, which was an increase of 49.2% year-on-year, and realized EBITDA of RMB 5.48 billion, an increase of 149.7% year-on-year.
In recent years, China Star Optoelectronics has also continuously invested heavily in order to expand the panel's production capacity. Among the current production lines, the G11 project and Wuhan's flexible screen production line have received the most attention. Among them, the G11 project is expected to start production next year, and it will hit a large-size screen and will have a large capacity increase on the color TV screen. The flexible AMOLED production line is expected to start production in 2019 and mass production in the first half of 2020. It is expected that the monthly production capacity will reach 45,000 glass substrates after full production.
Backdoor failed to give up independent listing
As a “profit dairy cow†of TCL Group, Huaxing Solar has played a significant role in the contribution of TCL Group's performance in recent years. With the increasing financial needs of Huaxing Optoelectronics to deploy the G11 project and the flexible screen production line in Wuhan, the TCL Group has always wanted to find a financing platform for it, but the two backdoor listings have not been successful.
Li Dongsheng once disclosed that for the company, the largest capital investment is Huaxing Optoelectronics. After the completion of the transaction, the remaining shares of China Star Optoelectronics include the 11.00% equity held by China Development Fund and the 3.28% equity held by Guangdong Finance Trust. TCL will repurchase this part of the equity in the future and look forward to forming a more efficient and competitive semiconductor display industry group.
Recently, Li Dongsheng stated that subject to the restrictions of domestic capital market supervision rules, the plan to split the listing of Huaxing Optoelectronics in the A-share market was hampered. “According to the existing regulatory rules of China and Hong Kong, we plan to use TCL Group as the financing platform of China Star Optoelectronics and gradually integrate the terminal product business into the Hong Kong listed company platform. “The domestic listed companies are mainly Huaxing Optoelectronics + other commercial businesses, multimedia and communications. Businesses will set up an enterprise group of end products, placed in Hong Kong listed companies.
The key to TCL transformation
Since TCL's "double +" transition, the company has become more closely integrated with the Internet-related industries. Although it is still being explored, "Intelligent" is the trend that TCL has always been.
At the IFA Consumer Electronics Show in Germany, TDL Group Chairman Li Dongsheng said that semiconductor display technology, artificial intelligence and Internet services, and intelligent manufacturing upgrades will be the future direction of TCL.
Specifically for the semiconductor industry, Li Dongsheng’s goal for the company is to surpass Samsung within three to five years, and the main bearer of this goal is China Star Optoelectronics.
In addition, TCL Group also integrates its semiconductor display business. In May of this year, TCL Group transferred approximately 37% of Hua Hin's shares held by it to China Star Optronics, aiming to integrate the upstream and downstream companies of the panel more closely.
TCL said that after the completion of the transaction, the listed company's continued profitability will be enhanced, and it will also help to strengthen support for all aspects of Huaxing Optoelectronics' operation and improve its business execution efficiency. On this basis, it will deepen the deployment of LCD panel products. The development plan of the field can further enhance the comprehensive competitiveness and profitability of listed companies.
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