Skyworth Group Limited · HKEX:751
Skyworth — FY2018 Earnings Presentation
45 slides from Skyworth's earnings presentation, Mar 28, 2019
Slide 1: 2018 Annual Results
2018 Annual Results 28 March 2019 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: Year-end changed from March to December, HKD to RMB
Year-end changed from March to December, HKD to RMB Apr – Dec 2018 Apr – Sep 2018 Nine months ended 31 Dec (RMB million) (HKD million) Revenue 30,192 22,252 Gross profit 5,658 4,012 Gross profit margin 18.7% 18.0% Operating profit (EBIT) 973 679 Operating profit margin 3.2% 3.1% Profit for the perio
Slide 4: Operating Expenses
Operating Expenses Nine months ended 31 Dec Apr - Dec Apr - Sep 2017/18 (% to sales) 2018 2018 Selling and distribution 9.5% 9.5% 9.9% General and administration 7.1% 7.0% 6.3% Total expense rate 16.6% 16.5% 16.2% S&D: Implementing new incentive system, appropriate control G&A: R&D expenses (4.4
Slide 5: Cash Flow
Cash Flow Dec 18 Mar 18 (RMB million) (HKD million) Inventories - Total 6,031 6,486 - Finished goods 3,883 3,927 Liquid bills receivable - On hand 6,442 6,177 - Discounted to banks# 500 573 (cash equivalent) 6,942 6,750 Pledged bank deposits 123 417 Cash and bank balances 3,314 9,095 Trade receivabl
Slide 6: Net Cash
Net Cash Dec 18 Mar 18 (RMB million) (HKD million) Borrowings 1. Financial liabilities - for bills discounted# 500 573 2. Other loans 5,824 8,749 - Current 5,590 7,687 - Non-current 734 1,635 3. Panda Bond (1st Issue, interests included) 2,026 2,555 Total borrowings (1+2+3) 8,350 11,877 Trade payabl
Slide 7: Financial ratios and turnover days
Dec 18 Mar 18 Return on equity holders of the Company 3.6% 2.9% Current ratio (times) 1.4 1.4 AR turnover (days) - excluded bills receivables 75 57 - with discounted bills 131 109 - without discounted bills 127 105 Inventory Turnover (days) - Total 65 62 - Raw materials 23 25 - Finished goods 41 37
Slide 8: Group Revenue Breakdown by Products
Group Revenue Breakdown by Products Apr – Dec 2018 White Appliances Digital Set-top box and LCD Modules (000810.SZ) 7.0%* 18.5% RMB30.19bn Others Overseas TV 17.4% HKD22.25bn 15.8%** (Apr – Sep 2018) China TV 41.3% * White Appliances are mainly refrigerators; washing machines and tablet PC ** Others
Slide 9: Gross Profit Margins Recovering
Gross Profit Margins Recovering Apr – Dec 2018 Apr – Sep 2018 2017/18 Group 18.7% 18.0% 16.7% China Market Overall 19.9% 19.4% 20.5% Overseas Market Overall 15.6% 14.5% 9.4% (China) 20.0% 19.3% 21.8% TV (Overseas) 13.6% 12.2% 6.6% Set-top box & (China) 14.4% 13.3% 11.4% LCD Modules (Overseas) 22.6%
Slide 10: Segmental Profit Breakdown
Segmental Profit Breakdown Apr – Dec 2018 Diversification of Business to Sustain Growth White Appliances 8.2% Digital Set-top box and LCD Module Property Holding (000810.SZ) 25.6% 14.8% RMB863m HKD751m Others (Apr – Sep 2018) 8.0% Overseas TV 14.7% China TV 28.7% 10
Slide 11: Segmental Profit/ Loss by Operating Segments
Segmental Profit/ Loss by Operating Segments Total 863 751 China TV 248 -106 127 Overseas TV 145 Digital STB & LCD Modules 221 166 White Appliances 71 Apr – Dec 2018 49 (RMBm) 128 Property Holding 109 Apr – Sep 2018 (HKDm) 68 Others 388 China TV: Improved scale and gross profit margin, but expense
Slide 12: TV Sales Volume
TV Sales Volume Apr – Dec 2018 YoY Jan – Mar 2019 YoY 2018 2017 2019 2018 Unit Unit Increase/ Unit Unit Increase/ (‘000) (‘000) (Decrease) (‘000) (‘000) (Decrease) China Market 6,899 5,962 16% 2,058 1,905 8.0% Overseas Market 4,861 6,302 (23%) 1,639 1,651 (0.7%) Total 11,760 12,264 (4%) 3,697 3,556
Slide 13: 2017/18 TV Sales Volume
2017/18 TV Sales Volume 4K TV reached 56% in 2017/18 vs 46% in 2016/17 2017/18 2016/17 (’000 units) (Apr17-Mar18) (Apr16-Mar17) Change% China TV 7,867 9,339 (16%) comprises: - 4K 4,368.1 4,291.2 2% - Non-4K 3,498.7 5,047.3 (31%) Overseas TV 7,953 6,941 15% Total 15,820 16,280 (3%) Targeted volume ac
Slide 14: China TV Revenue Mix Upgrading to High-End
China TV Revenue Mix Upgrading to High-End Pushed Star Models to Offset Pressure on GP Margin Apr-Dec2018 Apr-Sep2018 100% 78% 73% 80% 60% 40% 22% 27% 20% 0% Smart TV (4K) Smart TV (Non 4K) GP Margin Apr – Dec 2018 Apr – Sep 2018 2017/18 Blended TV 20.0% 19.3% 21.8% Smart TV (4K) 23.3% 21.7% 25.4% S
Slide 15: China TV Blended ASP
China TV Blended ASP Raise Price on New Models and Larger Size Proportion Display Technology Upgrade Era CRT LCD OLED 3,000 (RMB) ASP (HK$, net of tax and rebate) 2,500 2,000 1,500 1,000 500 - ASP Apr – Dec 2018 Apr – Sep 2018 2017/18 Blended TV RMB1,808 HKD2,111 HKD2,495 Smart TV (4K) 2,428 2,920 3
Slide 16: China TV Revenue Breakdown
China TV Revenue Breakdown (Apr – Dec 2018) Nationwide Well Built Distribution Channels Strong in Rural Ongoing Reforms to Enhance Customers Loyalty and Suit Diversified Consumer Behaviors Other Electronic Shops cover 3rd, 4th tier Online cities to rural 36.8% 26.8% Others 9.4% Skyworth Large Scale
Slide 17: O2O Community Stores Synergistic Partner with TMALL
O2O Community Stores Synergistic Partner with TMALL Around 5,000 Stores located in Major to 3rd and 4th Tier Cities Products + Experience + Community Service 17
Slide 18: Strategic Retail Customers and Flagship Stores
Strategic Retail Customers and Flagship Stores in 3rd 4th Tier Cities 18
Slide 19: China TV Market
China TV Market TV Volume 2009 2012 2013 2015 2016 2017 2018 2019E YoY (m units) Total 29.4 44.5 47.8 46.7 50.9 47.5 47.7 48.5 1.6% 2018 China TV Revenue 8.6% ASP RMB3,121 9.0% TV Size 6.8% 2019E China TV Revenue 1.5% Government Subsidy to boost TV Display Technology and Consumption
Slide 20: China TV Market Shares
China TV Market Shares (Domestic Brands 80%) 4K UHD TV (Volume) 4K UHD TV (Revenue) 2019 2019 2018 2018 (Jan – Feb) (Jan – Feb) 1 Skyworth 17.3% 16.4% 1 Skyworth 17.4% 16.0% 2 Hisense 14.9% 17.6% 2 Hisense 16.0% 18.1% 3 TCL 13.0% 12.4% 3 TCL 13.0% 12.5% 4 Xiaomi 11.5% 2.4% 4 Changhong 10.4% 10.1% 5
Slide 21: Digital Set Top Box (000810.SZ)
Digital Set Top Box 創維數字 (000810.SZ) (Spin-off Listed in Shenzhen A Share Market in Sep 2014) No.1 in China Cable Operators & Export Market, No. 2 in Global Market Market Cap RMB12bn by March 2019, Skyworth holds 57.2% 12,000 Sales 10,000 (RMB mil) 8,000 (Sales HKD mil) 6,000 4,000 2,000 - 2010/11 2
Slide 22: Set-top box market position
China No.1 in cable operator market for 10 years (peers: 银河，同洲); First tier in telecom IPTV market (peers: Huawei, ZTE); Top 3 in consolidating OTT retail market After speedy growth in 10 years, China product mix is shifting from cable to IPTV and OTT boxes with lower margins. Focus to strengthe
Slide 23: Overseas Revenue Geographical Summary
Overseas Revenue Geographical Summary Skyworth Brand Entering Emerging and European Markets TV Acquired Toshiba TV in ASEAN in early 2016 TV Acquired Sinoprima in Africa in 2014 & METZ in Germany in 2015 Set-top Box Acquired STRONG MEDIA in Europe in Sep 2015 % overseas sales Apr-Dec 2018 Apr-Sep 20
Slide 24: Internationalization – Growth Driver
Internationalization – Growth Driver @CES Las Vegas, IFA Berlin and AWE Shanghai Overseas Production sites in Indonesia, Germany and Africa Branches set up in 20 countries or regions 24
Slide 25: Skyworth Smart TV with Self-developed TV OS coocaa
Skyworth Smart TV with Self-developed TV OS “coocaa” Smart Control and Interactive Hub for Big Data Monetisation at Smart Home and Community 25
Slide 26: Big Data Analysis
Big Data Analysis Timely Consumers’Behavior on Skyworth coocaa TV OS 26
Slide 27: Coocaa Investors and Valuation
Coocaa (Skyworth holds 56.8%) Invested by Baidu (11%) Given Valuation at RMB10bn in Mar 2018 Tencent (6.9%) Given Valuation at RMB3.9bn in Jun 2017 iQIYi (4.1%) Given Valuation at RMB3bn in Sep 2016 Best Smart TV + Best Entertainment + AI in Smart Home Synergies to Transform the Living Room Economy
Slide 28: Monetisation of Skyworth Smart TV & coocaa TV OS Users
Monetisation of Skyworth Smart TV & coocaa TV OS Users Opened Platform for Distribution of Products and Services at a Smart Home and Community Profit Sharing and Synergies with Internet Giants Content Advertising Apps Store (RMB160bn market) E-commerce: Shopping/ Health Gaming Travel Education Care/
Slide 29: Coocaa Market Leader in Monetisation of TV OS Users
Coocaa Market Leader in Monetisation of TV OS Users Revenue in 2016/17 Content 63% Ad 28% Revenue in 2017/18 Content 46% Ad 39% Revenue in CY2018 Content 55% Ad 33% Financial Year Revenue 2015/16 HK$50m 2016/17 HK$166m 2017/18 HK$342m Segmental Profit HK$60m HK$298m Apr – Sep 2018 Segmental Profit H
Slide 30: Skyworth Smart TV Users in China
Skyworth Smart TV Users in China Additional 8m – 10m coocaa TV OS Users Every Year Accumulated Activated Users 37.50m (2018 vs 17 37% YoY) (Internet TV installed since 2012) (By Feb 2019) Conversion Rate 63% Smart TV Monthly Active Users 23.72m (2018 vs 17 51% YoY) Smart TV Monthly Activated Use
Slide 31: TV with AI functions integrated with coocaa OS and Duer OS
TV with AI functions integrated with coocaa OS and Duer OS Content Push Based on Users Category Accurate Recognition and Instant Enquiry Solving Smart Home Assistant – Interactive AI Function 31
Slide 32: 2019 Chinese New Year Red Pockets Snatch
2019 Chinese New Year “Red Pockets Snatch” Activity To Induce Content Subscription and Conversion 32
Slide 33: Advertising on Big Panel Revenue Breakdown
Advertising on Big Panel Revenue Breakdown Coocaa Highest CPM in the Market Ad before or during Content Turn On TV 12% Loading Ad (Static ) 56% Turn On TV Content Ad (Dynamic) 12% Others 8% Front Page Block Ad 12% 33
Slide 34: coocaa Shopping, Sports and Health, Gaming
coocaa Shopping coocaa Sports and Health Gaming on Big Panel Alliances with Geek Box, Ministation (Tencent) 34
Slide 35: coocaa Online Education and Travel
coocaa Online Education coocaa Travel For different age segments Abundant demand in domestic and global travel link up with content on TV Paid Education Apps 1. 果果乐园 2. 义方快乐学堂 3. 才智小天地 4. 百映生活学苑 5. 乐学名师课堂 35
Slide 36: Appendices
Appendices Transformation and Escalation Strategies (37) Land and Recurrent Rental Income in Shenzhen (38) Brand Valuation and Investment in Smart Production (39) Integrated Chain Management and Production Capacity (40) LCD TV Replacement Demand in China (41) Global OTT TV & Video Revenu
Slide 37: Skyworth Transformation and Escalation Strategies
Skyworth Transformation and Escalation Strategies (2017-2021) Driven by Manufacturing and Servicing Industries Construct 4 Major Business Segments: 1. TV and TV OS Monetisation 2. Smart Appliances (white smart appliances) 3. Smart Systems and Solutions (STB, car electronics) 4. Modern Services Missi
Slide 38: Assets and Recurrent Rental Income in Shenzhen
Assets and Recurrent Rental Income in Shenzhen Nanshan Qianhai Shiyan 38
Slide 39: Brand Valuation and Smart Production
Brand Valuation in China Achieved RMB100bn in 2017 Headquarter & Smart Production Base in GZ Development Zone 39
Slide 40: Integrated Chain Management and Production Capacity
Integrated Chain Management and Production Capacity Upstream Strong and Cost Efficient Supply Chain Management Strategic partnerships with LG Display, Innolux and BOE Investments in LGD 8.5G LCD Panel fab & module fab in Guangzhou TV Production Capacity 2018/19 (19.5m units ) Shiyan, Shenzhen 10m un
Slide 41: LCD TV Replacement Demand in China
LCD TV Replacement Demand in China 75% Penetration at the end of 2017 First Generation LCD launched in 2004 Demand sustains, given low TV penetration rate, lower TV price, increasing affordability and new Urban TV technology eg. Smart, OLED Rural TV penetration penetration (1.8 TV /household) (1.3 T
Slide 42: Global OTT TV & Video Revenue Forecasts
Source: Digital TV Research (Jul 2016) 42
Slide 43: China Settop Box Product Mix
China Settop Box Product Mix 2018 OTT Box 16m units, IPTV Box 45m, Cable Box 16m OTT Box IPTV Box Cable Box Source: Guideline Research 格蘭研究 (Mar 2017) 43
Slide 44: 2016-2022 Global Settop Box Sales Volume
2016-2022 Global Settop Box Sales Volume 3.40 (m units） 334 337 331 3.30 326 321 3.20 315 3.10 308 3.00 296 2.90 2.80 2.70 2015年 2016年 2017年 2018年 2019年 2020年 2021年 2022年 Source: Grand View Research (2016) 44
Slide 45: Vision
Vision To create a globally prominent brand of consumer electronic products ir@skyworth.com.hk http://investor.skyworth.com Wechat Subscription ID: skyworth-1988 (创维集团), SKYWORTH1988-TV (创维电视)