Skyworth Group Limited · HKEX:751
Skyworth — FY2014/15 Earnings Presentation
44 slides from Skyworth's earnings presentation, Jun 22, 2015
Slide 1: 2014/15 Annual Results
2014/15 Annual Results 22 June 2015 1
Slide 2: Forward Looking Statement
Forward Looking Statement This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and businesses of Skyworth. These forward-looking statements represent Skyworth’s expectations or beliefs concerning fut
Slide 3: Improved Gross & Operating Margins
Improved Gross & Operating Margins Year ended 31 Mar (HK$ million) 2014/15 2013/14 Change Turnover 40,135 39,480 1.7% Gross profit 8,023 7,629 5.2% Gross margin 20.0% 19.3% 0.7pp Profit for the year 3,350 1,433 133.8% (Including one-off gain) (Excluding one-off gain) Operating profit (EBIT) 2,569 1,
Slide 4: Stable Payout
Stable Payout 2014/15 2013/14 Change (HK cents) Basic EPS 40.0% 62.51 44.64 Diluted EPS (Excluding one-off gain) 62.35 44.58 39.9% Basic EPS 148.0% 110.71 44.64 Diluted EPS (Including one-off gain) 110.43 44.58 147.7% Dividend per share (Excluding one-off gain and including special 24.5 15.0 63.3% d
Slide 5: Stringent Control of Expenses
Stringent Control of Expenses Year ended 31 Mar 1H 2014/15 2013/14 Change (% to sales) 2014/15 Selling and distribution 12.0% 12.5% (0.5pp) 12.2% General and administration 4.3% 4.2% 0.1pp 4.3% Total expense rate 16.3% 16.7% (0.4pp) 16.5% • S&D: Reduced in brand building, meanwhile gaining market sh
Slide 6: Highly Liquid Position
Highly Liquid Position Year ended 31 Mar Mar 15 Mar 14 Change Sep 14 Change (HK$ million) Inventories - Total 4,342 4,188 3.7% 5,302 (18.1%) - Finished goods 2,734 2,761 (1.0%) 3,680 (25.7%) Liquid bills receivable - On hand 6,991 9,644 (27.5%) 6,720 4.0% - Endorsed to suppliers* 5 123 (95.9%) 48 (8
Slide 7: Reduced Bank Loans
Reduced Bank Loans Year ended 31 Mar Mar 15 Mar 14 Change Sep 14 Change (HK$ million) Bank Borrowings 1. Financial liabilities - for bills discounted# 301 294 2.4% 98 207.1% - for forex hedging^ - 829 (100%) 628 (100%) 2. Other bank loans 2,285 4,580 (50.1%) 2,892 (21.0%) - Current 1,274 5,156 (75.3
Slide 8: Net Cash Company with Stringent Inventories Management
Net Cash Company with Stringent Inventories Management Mar 15 Mar 14 Change Sep 14 Return on equity holders of the 14.3% 11.6% 2.7pp 14.0% Company(excluding one-off gain) Current ratio (times) 1.6 1.3 23.1% 1.4 AR turnover (days) - excluded bills receivables 44 38 15.8% 51 - with discounted bills 12
Slide 9: Group Revenue Breakdown by Products 2014/15
Group Revenue Breakdown by Products 2014/15 (2013/14) Overseas TV 14.4% (8.2%) Digital Set-top box 10.9% (10.5%) White Appliances 5.9% (6.4%) * China TV 60.7% (66.5%) LCD Modules 1.6% (2.2%) HK$40.14bn 1.7% Others 6.5% (6.2%) ** * White Appliances are mainly refrigerators; washing machines and tab
Slide 10: Segmental Profit Breakdown 2014/15 (2013/14)
Segmental Profit Breakdown 2014/15(2013/14) Diversification of Business to Sustain Growth Digital Set-top box Overseas TV 19.0% (20.5%) 4.6% (-0.7%) White Appliances 3.2% (10.7%) LCD Modules 5.6%(11.3%) Property Holding China TV HK$2,602m 65.0% (55.8%) 25% 6.2%(4.1%) Others -3.6% (-1.7%) 10
Slide 11: Segmental Profit by Operating Segments
Segmental Profit by Operating Segments Total 2,602 2,084 (+25%) China TV 1,691 1,163 120(+957%) (+45%) Overseas TV -14 494 (+15%) Digital Settop Boxes 428 LCD Modules 147 (-38%) (HK$m) 236 White Appliances 83 (-63%) 2014/15 223 2013/14 Property Holding 161 (+89%) 85 Others -94 (-154%) -37 11
Slide 12: Gross Profit Margins
Gross Profit Margins 2014/15 2013/14 Change 1H2014/15 Group 20.0% 19.3% 0.7pp 19.5% China Market Overall 22.0% 20.8% 1.2pp 20.7% Overseas Market Overall 13.5% 12.1% 1.4pp 13.5% TV (China) 22.1% 20.1% 2.0pp 20.8% TV (Overseas) 7.6% 7.2% 0.4pp 9.2% Set-top box (China) 21.4% 25.1% 3.7pp 21.
Slide 13: LCD Modules / White Appliances
White Appliances LCD in Nanjing Modules 13
Slide 14: China TV Revenue Mix Upgrading to 4K Smart TV
China TV Revenue Mix Upgrading to 4K Smart TV Well Received New Models Improved GP Margin % of China TV Sales 2014/15 2013/14 100% 80% 60% 52% 37% 33% 35% 40% 28% 15% 20% 0% 4K Smart TV Smart TV Others GP Margin 2014/15 2013/14 1H2014/15 Blended Flat TV 22.1% 20.5% 21.0% 4K Smart TV 30.4% 31.7% 28.3
Slide 15: China Blended TV ASP Decline Due to Lower Panel Price and More Online Sales
China Blended TV ASP Decline Due to Lower Panel Price and More Online Sales Gross and Net Profit Margin Improved ASP (HK$, net of tax and rebate) 4,000 2,979 3,121 3,114 3,051 3,000 2,712 2,633 2,577 1,961 2,000 1,712 1,000 0 07/08 08/09 09/10 10/11 11/12 12/13 13/14 1H14/15 14/15 ASP 2014/15 2013/1
Slide 16: Well Built Distribution Channels into Rural Market
Well Built Distribution Channels into Rural Market China TV Revenue Breakdown 2014/15 (2013/14) Fast Growing Online Channel Same Profitability vs Offline Direct Sales Skyworth Hypermarket 3.6% (4.8%) 4.1% (4.8%) Online Specialty Others Stores in 2.1% (1.0%) 11.6% (7.4%) Large Scale major cities Chai
Slide 17: Skyworth Specialty Stores Located in Major Cities
Skyworth Specialty Stores 3,771 located in Major Cities (Beijing) (Shenzhen) 17
Slide 18: Skyworth Strategic Retail Customers in 3rd 4th Tier Cities
Skyworth Strategic Retail Customers in 3rd 4th Tier Cities 18
Slide 19: Digital Set Top Box
Digital Set Top Box (創維數字 SZ000810 Backdoor Listing in Sep 2014) Market Cap HK$40bn by Jun 2015 No.1 China Cable Operators Market & Exporter, Top 5 in Global Market Growth Drivers in Servicing and Operating Systems, Big Data Monetisation 4,000 (Sales HK$ million) 3,000 2,000 1,000 - 2007/08 2008/09
Slide 20: Overseas Revenue Geographical Summary
Overseas Revenue Geographical Summary Skyworth TV Entering Emerging and European Markets Acquired METZ in Germany in June 2015 % overseas sales 2014/15 2013/14 60% 50% 35% 42% 40% 32% 30% 25% 24% 20% 11% 13% 5% 4% 8% 10% 0% 1% 0% America Europe Asia Middle East Australasia Africa TV - Skyworth Bra
Slide 21: 2014/15 TV Sales Volume
2014/15 TV Sales Volume 4K Smart TV 15% Other Smart TV 36% of Mix 4K Smart TV reached 20% in Jan 2015 2014/15 2013/14 (’000 units) Change% (Apr 14 – Mar 15) (Apr 13 – Mar 14) China TV 9,459 8,601 10% comprises: - 4K Smart TV 1,385.5 648.0 114% - Smart TV 3,435.1 2,422.8 42% - Other Flat TV 4,638.1 5
Slide 22: 2015/16 TV Sales Volume Targets
2015/16 TV Sales Volume Targets: 4K Smart TV 25% Other Smart TV 40% of Mix 4K Smart TV reached 19% in April 2015 2015/16 2014/15 Change 2015/16 Targeted (’000 units) YoY (Apr – May 15) (Apr – May 14) % Target Growth% China TV 1,318 1,186 11% 10,000 5.7% comprises: - 4K Smart TV 243.7 164.0 49% 2,500
Slide 23: China TV Market Shares 2014
China TV Market Shares 2014 (Domestic LCD TV 78%) LCD TV (Volume) LCD TV (Revenue) Rank Brand % Rank Brand % 1 Skyworth 16.8% 1 Skyworth 16.2% 2 Hisense 16.5% 1 Hisense 16.0% 3 TCL 13.9% 3 TCL 12.0% 4 Konka 13.2% 4 Konka 11.0% 5 Changhong 12.3% 5 Changhong 10.4% 6 Haier 5.7% 6 Samsung 10.1% 7 Samsun
Slide 24: 2015–17E China Market TV Sales Volume Forecast
2015 – 17E China Market TV Sales Volume Forecast TV Volume 2015E YoY 2016E YoY 2017E YoY (m units) Total 44.73 0.3% 44.68 0.1% 45.35 1.5% 2015E high-end TV penetration: 4K 33% Smart 85% 55”+ 19% 2015E online sales volume 45% will reach 26%, 27% in 2016, 29% in 2017 1Q2015 Skyworth Chin
Slide 25: Labour Day Holiday 2015 China Market High-end Products Penetration
Labour Day Holiday 2015 China Market High-end Products Penetration: 4K 37% Smart 73% 55”+ 27% Wide Color Spectrum 3% Curved 2.2% Ultra Light & Slim 1% Online Sales 16% Size is Growing 55” 5.4% YoY Average 32" 20% Size 39'/40" 12% 2015 45.4” 42"/43" 14% Labour 46"/48" 8% Day 47"/49" 7% 50" 10% 2015E
Slide 26: coocaa Research Institute – OS, Big Data & Smart Home
coocaa Research Institute – OS, Big Data & Smart Home 26
Slide 27: Skyworth Smart TV and Users in China
Skyworth Smart TV and Users in China Smart TV installed since Penetration Rate 9.8m units 51% 2012 in 2014/15 (Up to 31 May 2015) Conversion Rate Accumulated Activated Users 7.6m 78% to 90% Daily Active Users 3.0m 40% to 50% Weekly Active Users 4.0m 53% to 70% Daily Data 20T Top 3 Online T
Slide 28: Monetisation of Big Data Strategies
Monetisation of Big Data Strategies Six Revenue Streams (RMB$80m in 2015-17) Content ($20m) 影视(2000) Advertising ($20m) Gaming ($10m) Education ($10m) Travel ($10m) Shopping ($10m) 28
Slide 29: Advertising Revenue Breakdown
Advertising Revenue Breakdown Top 10 Ad before or Education Apps during Content 1. 义方教育 12% 2. 沪江网校 Turn On TV 3. 才智小天地 Loading Ad 4. YY 100教育 Turn on TV 5. 小尼克学堂 Content Ad (Static ) 56% 6. 口袋故事 7. 果果乐园 (Dynamic) 12% 8. 贝瓦儿歌 9. 宝贝全计划 Others 8% 10. 铁皮人儿童绘本 Front Page Block Ad 12% coocaa Shopping Mal
Slide 30: Appendices
Appendices Skyworth & Internet coocaa TV, 4K Curved OLED TV & 4K HDR TV Awards & Certificates Production Capacity and Strategic Alliances LCD TV Replacement Cycle and Stages in China Market Penetration of Digital Cable STB in China New Digital STB Products in China Global STB Demand
Slide 31: Skyworth & Internet
Skyworth & Internet Largest Smart TV market shares with Self-developed TV OS coocaa Strategic Alliances with Tencent, Alibaba, JD, iCNTV, QIY, Voole 31
Slide 32: 2014 Top 4 Most Popular OTT box in China
2014 Top 4 Most Popular OTT box in China 32
Slide 33: coocaa TV Most Popular Online Brand
coocaa TV Most Popular Online Brand 33
Slide 34: Skyworth 4K Curved OLED TV in CES Jan 2015
Skyworth 4K Curved OLED TV in CES Jan 2015 Global Technology & Industrial Design Standards 34
Slide 35: The First 4K HDR TV Launched in the World
The First 4K HDR (High Dynamic Range) TV launched in the World & Skyworth high-end products extending into overseas markets 35
Slide 36: Awards and Certificates
Awards and Certificates 1st & 2nd Generation 4K TV - RGBW 4 Colours 4K TV (Aug 2013 & Apr 2014) Certified by Innolux, China Electronics Chamber of Commerce and LGD National Certificate: Full Colour Spectrum 4K 3 colors replaced 2 colors DCI 107% NTSC 117% 36
Slide 37: 14cores 64bits Processor, 4 Colours 4K, MEMC, E-Local Dimming
14cores 64bits Processor, 4 Colours 4K, MEMC, E-Local Dimming 37
Slide 38: Vertical Integration and Chain Management
Vertical Integration and Chain Management Upstream supply chain management Strategic partnerships with LG Display and CMI Investments in panel (LGD 8.5G fab in Guangzhou), module production TV Production Capacity 2015/16 (15m units) Shiyan, Shenzhen 11m units Guangzhou 3m units Inner Mongolia 1m uni
Slide 39: LCD TV Replacement Demand in China
LCD TV Replacement Demand in China >250m units CRT TV Remained at the end of 2014 > 10 years old Growth sustains, given 51% LCD TV penetration rate (260m units installed) & increasing affordability Urban CRT TV Rural CRT TV 100m remained 150m remained (1.6 TV /household) (1.2 TV /household) TV Deman
Slide 40: The Overlay of TV Upgrade and Replacement
The Overlay of TV Upgrade and Replacement (2012 – 2018E Boom) Urban begins 2nd Wave Upgrade (CCFL – LED) while Rural begins 1st Wave of Replacement (CRT – LCD) Time required for Market Permeation of Color TV and Flat TV in China from 20% to 100% Color TVs Urban 1986 11 years 1997 (Boom 1995 – 1999)
Slide 41: Digital Cable Set-top Box Penetration in China
Digital Cable Set-top Box Penetration in China Digital Broadcasting starts in 2015 (28 100 HD TV channels) Digital STB Penetration 80%, HD STB 20% ONLY Growth Drivers – Higher Penetration + Upgrade to HD + Internet Services 600 (m) units 507 490 500 457 473 420 437 390 400 364 235 241 300 230 215 22
Slide 42: New Digital STB Products in China
New Digital STB Products in China Satellite STB 2012-17 Digital STB Total Sales Volume in China Potential households 100 increase by 50m a year 92.16 92.03 Existing > 26.5m 83.01 households penetration 80 75.2 Rural > 200m households to be covered 68.35 IPTV, OTT Box 60 59.21 Sales 13m units
Slide 43: Global Set-top Box Stable Demand from Cable and Retail Operators
Global Settop Box Stable Demand from Cable and Retail Operators Over 230m units Every Year , Total Volume 11% YoY in 2014 DVB-S Growth in US, EU, Africa, South America, India and China DVB-C Upgrade to HD and Smart in North America, EU, Middle East and North Africa (m) units 252.3 250 226.5 198.6
Slide 44: Vision
Vision To create a globally prominent brand of consumer electronic products ir@skyworth.com.hk investor.skyworth.com