Skyworth Group Limited · HKEX:751
Skyworth — CLSA China Conference 2010
31 slides from Skyworth's conference presentation, May 17, 2010
Slide 1: CLSA China Conference
CLSA China Conference 17-19 May, 2010 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: LCD TV Replacement Demand in China
LCD TV Replacement Demand in China 400m Units = 40m units x 10 years 70% > 8 years old Robust growth in the coming years, given 15% penetration rate (60 m existing LCD TV) & increasing affordability Rural & Urban CRT TV Hinterlands Cities 120 m CRT TV 280 m (140% penetration) New TV (90% penetration
Slide 4: Industry Outlook: Golden Decade
Industry Outlook Golden GoldenDecade Decade Rapid RapidValue Value&& Volume VolumeUpgrade Upgrade Digitalisation Digitalisation&& Replacement Replacement&& Countryside Countryside 3C 3CConvergence Convergence Penetration Penetration Consumption Consumption Brands Vertical Panel, Module Diversified C
Slide 5: China TV National Unit Growth By Products
China TV National Unit Growth By Products LCD TV Growth 35% in 2010 Units (m) Sales 40 0.0 2.0 volume 2006 2007 2008 2009 2010E 35 0.32 0.15 0.65 1.05 (m units) 0.61 1.5 3.9 7.74 CRT 30.46 27.07 20.2 11.0 4.0 30 13.0 LCD 3.90 7.74 13.0 26.0 36.0 25 26.0 36.0 PDP 0.61 0.65 1.5 2.0 2.0 20 PTV 0.32 0.1
Slide 6: Huge Replacement and Penetration of LCD TV in Rural Areas
Huge Replacement and Penetration of LCD TV in Rural Areas and Hinterlands Cities “TV to Countryside” Sales Volume (m units) 1H2009 1.85 20% LCD TV 2H2009 5.98 Dec 70% LCD TV 2009 7.83 48% LCD TV 2010E 10 - 12 70 - 75% LCD TV (25 - 30% of nationwide volume in 2010E) “Swapping Old for New” Sales Volum
Slide 7: Subsidy Policies Extensions
Subsidy Policies Extensions Home Appliances To Countryside Nationwide till Feb 2013 Retail price cap raised from RMB3,500 to RMB$7,000 in Feb 2010 but NOT YET LAUNCED DESIGNATED PRODUCTS, subsidy cap at RMB$455, this time captured Skyworth 48 LCD TV models including 55” LCD TV and 11 LED backlit
Slide 8: 90% Revenue Generated in China Market under Brand
90% Revenue Generated in China Market under Brand Revenue Breakdown by Products 1H2009 (1H2008) China TV Overseas ODM TV 83.7% (75.6%) 6.2% (13.7%) HK$ 10.0bn Digital Set-top box 8.2% (8.6%) S35.7% Others 1.9%(2.1%) * * Others include property rental, LCD module, precision molding and car electronic
Slide 9: China TV Market Shares April 2009 - March 2010
China TV Market Shares April 2009 - March 2010 Overall (Volume) LCD TV (Volume) Rank Brand % Rank Brand % 1 Hisense 14.3% 1 Skyworth 15.7% 2 Skyworth 14.2% 2 Hisense 15.6% 3 Changhong 13.6% 3 TCL 13.0% 4 TCL 13.4% 4 Konka 11.3% 5 Konka 12.6% 5 Changhong 10.1% 6 Haier 7.4% 6 Haier 7.3% 7 Sharp 4.9% 7
Slide 10: China LCD TV Market Share (March 2010)
China LCD TV Market Share (March 2010) Top 6 Domestic Brands Secured 75% LCD TV (Volume) LCD TV (Revenue) Brand March Brand March 2010 2010 1 Hisense 15.8% 1 Hisense 15.2% 2 Skyworth 14.5% 2 Skyworth 13.1% 3 TCL 13.6% 3 TCL 11.8% 4 Changhong 11.4% 4 Konka 9.2% 5 Konka 11.2% 5 Changhong 8.6% 6 Haier
Slide 11: 2009 LCD TV Sale Under Home Appliances To Countryside
2009 LCD TV Sale Under “Home Appliances To Countryside” No. 1 Volume Market Share LG 1.0% Others 2.0% TCL Haier 9.2% No.1 LCD revenue Rowa 1.7% 10.3% market share 22.9% Konka Overall revenue 7.1% Changhong market share 20% 22.3% Overall volume market share 18% Hisense 62% sales volume is 22.
Slide 12: Diverse and Loyal Sales Network
Diverse and Loyal Sales Network Revenue Breakdown 1H2009 (1H2008) Domestic/ Exports Direct/ Bulk Distributors* Sales Hypermarket 7.4% (7.0%) 8.3% (11.3%) 3.9% (3.5%) Individual Large Scale Electronic Chain Stores Shops 23.8% (21.0%) 56.6% (57.2%) ¾ One layer from 40 branches, 169 sales offices to 18
Slide 13: Differentiated Products - ASP and Margin Premium
Differentiated Products - ASP and Margin Premium LED backlight LCD TV Built-in settop box LCD TV 4C (cable, computer, communication, content) 3D Home Entertainment Center Environmental Friendly series – energy saving by 30% Countryside Models (24” LCD TV, 32” LED backlight) 42LED10 iF Ch
Slide 14: Well Equipped for Earnings Growth
Well Equipped for Earnings Growth Upstream supply chain management Strategic partnerships with LG Display and CMO Adequate Production Capacity 2010/ 11 Shenzhen 7m units Guangzhou 2m units Inner Mongolia 1m units Logistics investments in regional logistic centers in Chengdu, Jiangxi and Nanjing Down
Slide 15: 2009/10 TV Sales Volume
2009/10 TV Sales Volume China TV Revenue S 55% 2009/10 2008/09 Change 2009/10 Achieved (Units) (Apr - Mar) (Apr - Mar) % Target % China TV 7,034k 6,259k 12% 6,500k 108% comprises: - Flat panel TV 5,989.6k 2,475.9k 142% 5,500k 109% - CRT TV 1,045.0k 3,782.6k (72.4%) 1,000k 105% Overseas TV 1,972k 2,8
Slide 16: Solid Achievements in 1H 2009/10
751 Shares has been Included as Constitute Shares in MSCI Global Market Index Solid Achievements in 1H 2009/10 Historic Results Turnover 36% Gross Profit Margin 4.1 pp Expenses Rate 2.1 pp Profit 530% ROE 23% Leading Position No. 1 LCD TV market share in China (20%*) Overseas TV turnar
Slide 17: Gross Profit Margin Growth
Gross Profit Margin Growth Sep 09 Sep 08 Change pp Mar 09 Group 22.7% 18.6% S 4.1pp 20.3% China TV 23.4% 20.4% S 3.0pp 22.5% Overseas ODM TV 4.8% 2.5% S 2.3pp 2.4% China Set-top Box 33.8% 35.4% T 1.6pp 34.7% ODM Set-top Box 20.3% 12.5% S 7.8pp 11.7% • China TV: Pioneer, well differentiated and marke
Slide 18: Segmental Profit by Business Segments
Segmental Profit by Business Segments 835 Total 344 647 China TV 194 Overseas TV 9 -2 Digital Set Top 137 Boxes 116 29 1H2009 Other Electronic Products 27 1H2008 13 Property Holding 9 5 5 5 5 5 5 5 5 95 -5 (HK$m) 19 29 39 49 59 69 79 89 Operational Profit China TV HK$666m S 243% Overseas OEM TV HK$9
Slide 19: China TV Revenue Mix
China TV Revenue Mix Cease CRT TV Production in Next Year % of China TV 100% Sales 94% 1H2009 1H2008 80% 60% 60% 40% 26% 20% 11% 5% 1% 0% LCD TV High Definition TV (CRT) Traditional CRT TV GP Margin 1H2009 1H2008 Change pp 2008/09 LCD TV 23.9% 19.2% S 4.7pp 22.8% HDTV (CRT) 2.8% 28.3% T 25.5pp 29.6%
Slide 20: Blended China TV ASP Surges with More LCD TV Units
Blended China TV ASP Surges with More LCD TV Units Pricing Power with Premium Brand and Product Innovation ASP (HK$, net of tax and rebate) 2,570 40% 35% 3,000 1,712 1,961 30% 2,000 1,342 1,459 25% + 31.1% 20% 1,000 + 8.7% + 17.3% 15% + 4.6% + 14.5% 10% 5% 0 0% 2005/06 2006/07 2007/08 2008/09 1H2009
Slide 21: Digital Set Top Box Capture Overseas ODM Market
Digital Set Top Box Capture Overseas ODM Market Revenue, Margin and Cash Flow Improvement China Market Migrating to Digitalisation 2015 Sales HK$ million 1,000.0 500.0 - 2003/04 2004/05 2005/06 2006/07 2007/08 1H2008 2008/09 1H2009 Total 92.8 175 368 733 1,120 635 1,309 822 Overseas - 90 181 171 418
Slide 22: Overseas Sales Geography Summary
Overseas Sales Geography Summary TV Product Mix Migrating to LCD TV 1H2009 1H2008 % overseas sales 60% 40% 40% 30% 34% 31% 23% 17% 20% 5% 7% 2% 2% 6% 3% 0% America Europe Asia Middle East Australasia Africa Global Strategic TV ODM Customers Inventories digested, gradual recovery in orders Reve
Slide 23: Appendices
Appendices ¾ Interim Results 2009/10 ¾ Penetration of STB/ household in China ¾ Global demand of STB 23
Slide 24: Surging Top Line and Gross Margin
Surging Top Line and Gross Margin Decent Payout Every Half Year Six months ended 30 Sep (HK$ million) 1H2009 1H2008 Change Turnover 10,013 7,380 35.7% Gross profit 2,272 1,364 66.6% Gross margin 22.7% 18.6% 4.1pp Operating profit (EBIT) 776 273 184.2% Operating margin 7.7% 3.7% 4.0pp Profit for the
Slide 25: Leverage Cost Structure
Leverage Cost Structure Six months ended 30 Sep 1H2009 1H2008 Change 2008/09 (% to sales) Selling and Distribution 12.8% 14.2% (1.4pp) 14.2% General and Administration 3.2% 3.9% (0.7pp) 3.6% 16.0% 18.1% (2.1pp) 17.8% Total expenses rate • S&D expenses reduced by diversifying through cheaper sales di
Slide 26: Highly Liquid Position
Highly Liquid Position Six months ended 30 Sep Sep 09 Sep 08 Change Mar 09 Change (HK$ million) Inventories - Total 2,737 1,990 37.5% 1,267 116.0% - Finished goods 1,537 1,203 27.8% 795 93.3% Liquid bills receivable - On hand 2,413 1,942 24.3% 2,389 1.0% - Endorsed to suppliers* 655 1,843 64.5% 993
Slide 27: Net Cash with Actual Loan
Net Cash with Actual Loan $ 17 million Six months ended 30 Sep Sep 09 Sep 08 Change Mar 09 Change (HK$ million) Secured bank borrowings - Construction loans - 85 - 85 - - Financial liabilities - for discounted bills# 1,989 58 3,329.3% 1,156 72.1% - for forex hedging^ 1,986 1,020 94.7% 125 1,488.8% -
Slide 28: ROE Shifted Up Sharply
ROE Shifted Up Sharply Sep 09 Sep 08 Change Return on Equity 23.1% 4.4% 18.7pp Current Ratio (times) 1.3 1.3 - AR Turnover (days) - with discounted bills 121 124 (2.4%) - without discounted bills 103 120 (14.2%) Inventories Turnover - Total 56 59 (5.1%) - Finished goods 32 38 (15.8%) AP Turnover - w
Slide 29: China Digital Set-top Box Penetration
China Digital Set-top Box Penetration Government Push & Unique Broadcasting Model In China Gives Domestic Manufacturers An Edge Over International Competitors (m) Units 450 417 425 402 409 400 385 348 352 350 300 250 180 189 200 172 156 163 141 148 137 150 121 100 100 74 49 50 27.9 12.7 0 2006 2007
Slide 30: Global Set-top Box Huge Demand
Global Set-top Box Huge Demand (m) Units/ Year 50.5 51.5 50 47 43.6 42.1 43.5 40 36.4 28.1 30 25.6 23.8 24.7 21.5 20 10 6.6 5.9 5.5 5.2 5.1 4.7 0 2008 2009E 2010E 2011E 2012E 2013E DVB-C DVB-T (DTT & iDTV & Combo) DVB-S (DTH & FTA) Source: iSupplyi, IMS Research, ST, Sony 2007 30
Slide 31: Objective and Vision
Objective Wholly devoted to provide excellent digital audio-visual life to humans Vision To be the world’s No. 1 in the audio-visual industry ir@skyworth.com.hk www.skyworth.com/investor