Guolian Minsheng Securities: TCL Electronics collaborates with Sony to expand into the home entertainment sector, and the profit potential of domestic color TVs is expected to be unlocked

Guolian Minsheng Securities released a research report stating that, as of 2025Q4, the global TV shipment share of China’s TOP2 brand has already surpassed that of Korea’s TOP2 brand, and since 2025 China’s brands have been performing better in terms of profitability, while profitability at Japanese and Korean brands has been under pressure. The global competitive landscape has undergone qualitative change as China’s display-industry supply chain has been upgraded. The new joint venture home entertainment business that TCL Electronics (01070) and Sony (SONY.US) plan to establish is expected to fully unlock profit potential, and there is broad scope for synergy across the entire industry chain. As global market share gradually concentrates in the hands of China’s TV industry leader, we expect steady improvement in the profitability of China’s TV industry leader. We recommend investors pay attention to TCL Electronics.

The main viewpoints of Guolian Minsheng Securities are as follows:

TCL Electronics discloses progress in its strategic cooperation with Sony in the home entertainment sector

TCL Electronics and Sony plan to establish a new company to take over Sony’s home entertainment business. The new company will be held 51% by TCL Electronics and 49% by Sony. The new company will carry out end-to-end integrated operations across the entire industry chain on a global basis, including products such as televisions and home audio. The new company may use the SONY trademark for authorized products and marketing materials. In addition, TCL Electronics will acquire 100% of Sony Malaysia’s shares in the Wan Yi factory in Selangor, Malaysia (SOEM). The expected closing date is April 1, 2027.

Cash payment to acquire high-quality assets—both sides win

TCL Electronics will subscribe for 51% of the shares in the new company and for the combined initial estimated consideration for the Malaysia factory, totaling HKD 3.781 billion. The consideration will be paid in cash and will account for 28% of the company’s cash and cash equivalents at the end of 2025. Based on the initial estimated consideration and the home entertainment business’s pre-tax profits of HKD 810 million for 24Q2~25Q1, this transaction’s PE is approximately 4.7x. Sony’s home entertainment business is well known, but its profitability has been under sustained pressure for a long time, constrained by 2025 tariffs, uncertainty in global demand, and intense competition. The business’s 2025 pre-tax profit is only marginal, a sharp decline compared with the pre-tax profit of the prior fiscal year. Sony likely already had a predetermined strategy to split and divest. In this transaction, TCL Electronics does not need to issue new shares to bring high-quality assets into its portfolio—both sides win.

Profit potential is expected to be unlocked, and incremental mid-term earnings are worth looking forward to

Using Sony Displays and Sound total revenue of 818.6 billion yen for 24Q2~25Q1 as the denominator, the pre-tax profit margin of Sony’s home entertainment business is only 2.0%. Going forward, with Sony’s technology and brand value, and also leveraging TCL Electronics’ technical capabilities, scale advantages, end-to-end industry-chain layout, and efficient manufacturing strengths, the new company may be able to unlock profitability potential. Historically, the profit margin of Sony’s home entertainment and audio segments has reached as high as 7.8% (fiscal year 2018). Horizontally for reference: the TVS company under the former Toshiba suffered a deep loss in 2017; after Hisense Visual acquired TVS, its net profit margin improved to 7.0% in 2025.

Overall brand image improvement—synergy effects deserve attention

Omdia shows that in 2017, the share of the Toshiba/Hisense brands in Japan’s TV shipments was 14.6%/5.5%. After Hisense Visual acquired TVS, the two brands’ shares reached 30.0%/14.8% in 2025. Sony has a strong advantage in the high-end and large-screen TV market. In 2025, Sony’s and TCL’s global TV shipment shares were 14.7%/1.8%. Among the global ≥500 USD TV market, TCL/Sony shipment shares were 14.4%/4.4%. For products ≥1000 USD, the complementary effects in North America, Western Europe, and Japan may be even better.

Risk disclosure

Uncertainty in the progress and effectiveness of the strategic cooperation; major fluctuations in raw materials or exchange rates; uncertainty in tariffs or overseas external demand; market competition dragging down profitability.

A large amount of information and precise interpretation—available in the Sina Finance APP

Responsible editor: Shi Lijun