Skyworth Group Limited · HKEX:751
Skyworth — 1H2016/17 Earnings Presentation
40 slides from Skyworth's earnings presentation, Nov 22, 2016
Slide 1: 2016/17 Interim Results
2016/17 Interim Results 22 Nov 2016 (Updated 20 April 2017) 1 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: Stable Gross Margin
Stable Gross Margin Six months ended 30 Sep (HK$ million) 1H2016/17 1H2015/16 Change Revenue 20,291 19,549 3.8% Gross profit 4,170 4,023 3.7% Gross margin 20.6% 20.6% 0.0pp Operating profit (EBIT) 1,316 1,321 (0.4%) Operating margin 6.5% 6.8% (0.3pp) Profit for the period 948 985 (3.8%) Net profit m
Slide 4: Operating Expenses
Operating Expenses Six months ended 30 Sep 1H 1H Change 2015/16 (% to sales) 2016/17 2015/16 Selling and distribution 11.7% 11.4% 0.3pp 11.1% General and administration 6.9% 5.3% 1.6pp 6.0% Total expense rate 18.6% 16.7% 1.9pp 17.1% S&D: Raise basic salary and benefits for frontline staff as incen
Slide 5: Highly Liquid Position
Highly Liquid Position (HK$ million) Sep 16 Sep 15 Change Mar 16 Change Inventories - Total 6,075 4,623 31.4% 5,494 10.6% - Finished goods 3,676 2,944 24.9% 3,509 4.8% Liquid bills receivable - On hand 4,552 4,624 (1.6%) 6,945 (34.5%) - Endorsed to suppliers* - 4 (100%) - 0.0% - Discounted to banks#
Slide 6: Net Cash
Net Cash (HK$ million) Sep 16 Sep 15 Change Mar 16 Change Bank Borrowings 1. Financial liabilities - for bills discounted# 463 387 19.6% 300 54.3% 2. Other bank loans 6,484 5,959 8.8% 7,805 (16.9%) - Current 4,229 3,877 9.1% 4,950 (14.6%) - Non-current 2,718 2,469 10.1% 3,155 (13.9%) Bank borrowings
Slide 7: Return on equity holders of the Company
Sep 16 Sep 15 Change Mar 16 Return on equity holders of the 10.9% 12.5% (1.6pp) 14.4% Company Current ratio (times) 1.5 1.5 0.0% 1.5 AR turnover (days) - excluded bills receivables 53 55 (3.6%) 45 - with discounted bills 109 112 -2.7% 108 - without discounted bills 105 109 -3.7% 106 Inventory Turnov
Slide 8: Group Revenue Breakdown by Products 1H2016/17 (1H2015/16)
Group Revenue Breakdown by Products 1H2016/17 (1H2015/16) Digital Set-top box 14.5% (13.0%) Overseas TV 22.2% (15.8%) White Appliances 5.3% (5.8%) * HK$20.3bn Others 11.8% (7.9%)** 3.8% China TV 46.2% (57.5%) * White Appliances are mainly refrigerators; washing machines and tablet PC ** Others inc
Slide 9: Stable Gross Profit Margins
Stable Gross Profit Margins 1H2016/17 1H2015/16 Change 2015/16 Group 20.6% 20.6% 0.0pp 21.9% China Market Overall 24.2% 23.3% 0.9pp 23.9% Overseas Market Overall 12.4% 10.9% 1.5pp 13.2% TV (China) 24.5% 23.5% 1.0pp 24.8% TV (Overseas) 9.8% 8.9% 0.9pp 10.1% Set-top box (China) 17.6% 19.7% 2
Slide 10: Segmental Profit Breakdown 1H2016/17 (1H2015/16)
Segmental Profit Breakdown 1H2016/17 (1H2015/16) Diversification of Business to Sustain Growth Digital Set-top box 22.8% (19.3%) Overseas TV White Appliances 15.1% (6.0%) 1.3% (4.3%) Property Holding HK$1,160m 9.0%(7.2%) 11.7% Others 6.2% (-2.1%) China TV 45.6% (65.3%) 10
Slide 11: Segmental Profit by Operating Segments
Segmental Profit by Operating Segments 1,160 Total 1,313 (-11.7%) 529 (-38.3%) China TV 858 175 Overseas TV (+121.5%) 79 264 (+3.9%) Digital STB 254 15 (-73.2%) (HK$m) White Appliances 56 104 (+9.5%) 1H2016/17 Property Holding 95 1H2015/16 Others 73 (+351.7%) -29 China TV: Higher operating expense
Slide 12: China TV Revenue Mix Upgrading to High-End
China TV Revenue Mix Upgrading to High-End Well Received Star Models Stablalising GP Margin % of China TV Sales 1H2016/17 1H2015/16 100% 80% 66% 60% 43% 40% 25% 30% 27% 20% 9% 0% Smart TV (4K) Smart TV (Non 4K) Others GP Margin 1H2016/17 1H2015/16 2015/16 Blended TV 24.5% 23.5% 24.8% Smart TV (4K) 2
Slide 13: China TV Blended ASP Lag Behind Panel Cost Fluctuations
China TV Blended ASP Lag Behind Panel Cost Fluctuations Ramping Up New and Star Series Mix in 2H to Stabilize ASP ASP (HK$, net of tax and rebate) 4,000 2,979 3,121 3,114 3,051 3,000 2,712 2,577 2,404 1,961 2,123 2,000 1,712 1,000 0 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 1H16/17 ASP 1
Slide 14: China TV Revenue Breakdown 1H2016/17 (1H2015/16)
China TV Revenue Breakdown 1H2016/17 (1H2015/16) Nationwide Well Built Distribution Channels Strong in Rural Ongoing Reforms to Enhance Customers Loyalty and Suit Diversified Consumer Behaviors Other Online Electronic 17.6% Shops cover Skyworth (17.2%) 3rd tier cities Community to rural 34.6% Stores
Slide 15: O2O Community Stores Synergistic Partner with TMALL
O2O Community Stores Synergistic Partner with TMALL 3,060 located in Major Cities Around 2,000 located in 3rd and 4th tier Cities 15
Slide 16: Strategic Retail Customers in 3rd 4th Tier Cities
Strategic Retail Customers in 3rd 4th Tier Cities Flagship Stores 1,500 will be opened in the Rural 16
Slide 17: 2016/17 TV Sales Volume
2016/17 TV Sales Volume 4K Smart TV Reached 46% vs 28% Total Smart TV 85% vs 70% YoY 4K Smart TV reached 53% in January 2017 2016/17 2015/16 Targeted (Apr 16 – (Apr 15 – Change 2016/17 YoY (’000 units) Mar 17) Mar 16) % Target Growth % China TV 9,339 10,036 (7%) 11,000 9.6% comprises: - Smart TV (4K
Slide 18: Digital Set Top Box
Digital Set Top Box 創維數字 (000810.SZ Spin-off Listed in Sep 2014) No.1 China Cable Operators Market & Exporter, Top 3 in Global Market Market Cap HK$20bn by Oct 2016, Skyworth holds 59.4% 7,000 6,000 (Sales HK$ million) 5,000 4,000 3,000 2,000 1,000 - 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 1
Slide 19: 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 1H2016/17 1H2015/16 60%
Slide 20: Internationalization – Growth Driver
Internationalization – Growth Driver Acquired Toshiba TV Plant in Indonesia to Expand in ASEAN Countries Skyworth Metz OLED 4K HDR TV into European Market 20
Slide 21: China TV Market Shares Oct 2015 – Sep 2016
China TV Market Shares Oct 2015 – Sep 2016 (Domestic Brands 77%) All TV (Volume) All TV (Revenue) Rank Brand % Rank Brand % 1 Skyworth 17.7% 1 Skyworth 17.3% 2 Hisense 15.9% 2 Hisense 16.8% 3 TCL 13.6% 3 TCL 12.7% 4 Changhong 11.6% 4 Changhong 10.3% 5 Konka 11.3% 5 Samsung 9.9% 6 Haier 7.0% 6 Konka
Slide 22: China Market TV Sales Volume Forecast
China Market TV Sales Volume Forecast TV Volume 2012 2013 2014 2015 YoY 2016E YoY (m units) Total 44.46 47.79 44.61 46.74 4.8% 50.56 7.1% China TV sales volume Jan – Aug 2016 6.8% reached 30.5m units National Day Holiday Oct 2016 average TV size 1.8” YoY reached 48.8” 50” 3% 55” 3.6
Slide 23: Skyworth & Internet
Skyworth & Internet Largest Smart TV Household Entrance with Self TV OS “coocaa” Strategic Alliances with QIY, Tencent, Alibaba, iCNTV, Voole, JD 23
Slide 24: Skyworth Smart TV Users in China
Skyworth Smart TV Users in China Additional 8m – 10m Smart TV Households Entrance in 2016 Internet TV installed since 2012 22.18m units Penetration 2016/17 85% (Up to 31 Mar 2017) Conversion Rate Smart TV Daily Active Users 8.62m 39% Smart TV Weekly Active Users 10.51m 47% Turn-on TV Ad Dail
Slide 25: Monetisation of Smart TV Users on Opened Platform
Monetisation of Smart TV Users on Opened Platform HK$50m in 2015/16 HK$100m in 2016/17 1H2016/17 Achieved Over HK$50m: 75% Content 22% Ad Content Advertising Apps Store (RMB160bn market) E-commerce: Gaming Travel Education Shopping/ Health (RMB100bn market) Care/ Music/ KTV 25
Slide 26: Coocaa Invested by QIY in Sep 2016
Coocaa (non-profitable entity yet) Invested by QIY in Sep 2016 Given RMB$3bn at Valuation Best Hardware + Best Content + Smartest Memberships Paid Users Numbers and Membership Renewal Rate Increased Speedily in Sep and Oct 2016 TV Households Getting Used to Pay for Content 26
Slide 27: Coocaa Alliances Top Tier Content Providers
Coocaa Alliances Top Tier Content Providers (QIY and Tencent) Offering the Best Experience to Skyworth Smart TV Users Content Total Total coocaa Paid Content Users Users Revenue 2015 16m 600k RMB24m 2016E 24m 1.5m RMB60m 2017E 32m 3.5m RMB150m Variety Document Hollywood (No. of episodes) Movie Drama
Slide 28: 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% 28
Slide 29: coocaa Online Education and coocaa Travel
coocaa Online Education coocaa Travel For different age segments Abundant demand in domestic and global travel link up with content on TV Top 5 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 29
Slide 30: coocaa Shopping, Sports and Health, Gaming on Big Panel
coocaa Shopping coocaa Sports and Health Gaming on Big Panel Alliances with Geek Box, Ministation (Tencent) 30
Slide 31: Appendices
Appendices TV Technology Leader (32 - 33) OLED 4K HDR TV in CES (34) 2015/16 TV Sales Volume (35) Production Capacity and Chain Management (36) Global OTT TV & Video Revenue Forecasts by Region (37) LCD TV Replacement Demand in China (38) New Digital STB Demand in China (39) 31
Slide 32: TV Technology Leader
TV Technology Leader OLED + 4K HDR AR TV – Gaming and Education Apps 32
Slide 33: Globally First OLED 4K HDR TV from Skyworth
Globally First OLED 4K HDR TV from Skyworth Partnering to Produce and Sponsor Singing Contest Program on Beijing TV 33
Slide 34: Skyworth OLED 4K HDR TV in CES Jan 2016
Skyworth OLED 4K HDR TV in CES Jan 2016 Global Technology & Industrial Design Standards 34
Slide 35: 2015/16 TV Sales Volume
2015/16 TV Sales Volume 4K Smart TV 28% Total Smart TV 70% of Mix No.1 LCD TV market share in China 1.4pp at 21.4% in 2015 (‘000 units) 2015/16 2014/15 Change% China TV 10,036 9,459 6% comprises: - Smart TV (4K) 2,793.8 1,385.5 102% - Smart TV (non-4K) 4,249.3 3,435.1 24% - Other Flat TV 2,992.8 4
Slide 36: Vertical Integration and Chain Management
Vertical Integration and Chain Management Upstream supply chain management Strategic partnerships with LG Display, Innolux and BOE Investments in panel (LGD 8.5G fab in Guangzhou), module production TV Production Capacity 2016/17 (17m units ) Shiyan, Shenzhen 9m units Guangzhou 4m units Lishui, Nanj
Slide 37: Global OTT TV & Video Revenue Forecasts by Region
Source: Digital TV Research (Jul 2016) 37
Slide 38: LCD TV Replacement Demand in China
LCD TV Replacement Demand in China >200m units CRT TV Remained at the end of 2015 LCD started in 2004 > 10 years old Growth sustains, given 56% LCD TV penetration rate (310m units installed) & increasing affordability Urban CRT TV Rural CRT TV 77m remained 126m remained (1.6 TV /household) (1.2 TV /
Slide 39: New Digital STB Demand in China
New Digital STB Demand in China Satellite STB Potential households increase by 50m a year 2012-17 Digital STB Total Sales Existing > 26.5m households Volume in China penetration 100 Rural > 200m households to be 92.16 92.03 covered 83.01 IPTV + OTT Box 75.2 80 Skyworth covered 26 provinces a
Slide 40: Vision
Vision To create a globally prominent brand of consumer electronic products ir@skyworth.com.hk http://investor.skyworth.com