TCL Communication's net profits to plunge 63%

Blame it on intensifying smartphone market.

Channel checks suggest that TCL Communication is likely to report a strong handset shipment for Sep, said May Bank KimEng.

"We estimated total shipment of Sep would increase by 12% MoM or 7% YoY to 4.1m units. However, we estimated smartphone shipment only accounted for about 22% of total shipment in Sep (compared to 18% of total shipment in August)," it said in a research report.

Here's more from OCBC:

Based on our estimated smartphone shipment mix of 20% for 3Q12F (compared to 14% in 2Q12), we estimated TCL’s 3Q12F net profit to drop by 88% YoY to HKD26m (its 2Q12 net profit dropped by 63% YoY to HKD79m with 13% smartphone shipment mix). Given that the smartphone market becomes more intensifying, we anticipated TCL’s gross margin to further deteriorate to 17% in 3Q12F (GP margin dropped from 20% in 1Q12 to 19% in 2Q12)

To recap, the management anticipated a potential net loss for 3Q12F since the smartphone sales would be still ramping up.