Skyworth Group Limited · HKEX:751
Skyworth — FY2017/18 Earnings Presentation
44 slides from Skyworth's earnings presentation, Jun 12, 2018
Slide 1: 2017/18 Annual Results
2017/18 Annual Results 12 June 2018 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 ended 31 Mar financial summary
Year ended 31 Mar (HK$ million) 2017/18 2016/17 Change Revenue 46,260 42,845 8.0% Gross profit 7,710 8,567 (10.0%) Gross profit margin 16.7% 20.0% (3.3pp) Operating profit (EBIT) 1,273 2,339 (45.6%) Operating profit margin 2.8% 5.5% (2.7pp) Profit for the year 588 1,529 (61.5%) Net profit margin 1.3
Slide 4: Operating Expenses
Operating Expenses Year ended 31 Mar 1H 2017/18 2016/17 Change (% to sales) 2017/18 Selling and distribution 9.9% 11.9% (2.0pp) 10.9% General and administration 6.3% 6.7% (0.4pp) 6.2% Total expense rate 16.2% 18.6% (2.4pp) 17.1% S&D: Stringent control and further reduced in 2H G&A: R&D expenses
Slide 5: Strong Cash Flow
Strong Cash Flow (HK$ million) Mar 18 Mar 17 Change Sep 17 Change Inventories - Total 6,486 6,666 (2.7%) 6,770 (4.2%) - Finished goods 3,927 3,878 1.3% 3,987 (1.5%) Liquid bills receivable - On hand 6,177 6,057 2.0% 4,094 50.9% - Discounted to banks# 573 420 36.4% 436 31.4% (cash equivalent) 6,750 6
Slide 6: Net Cash
Net Cash (HK$ million) Mar 18 Mar 17 Change Sep 17 Change Borrowings 1. Financial liabilities - for bills discounted# 573 420 36.4% 436 31.4% 2. Other loans 8,749 7,572 15.5% 7,245 20.8% - Current 7,687 4,979 54.4% 5,629 36.6% - Non-current 1,635 3,013 (45.7%) 2,052 (20.3%) 3. Panda Bond (1st Issue)
Slide 7: Financial ratios and turnover
Mar 18 Mar 17 Change Sep 17 Return on equity holders of the 2.9% 8.5% (5.6pp) (2.4%) Company Current ratio (times) 1.4 1.4 - 1.4 AR turnover (days) - excluded bills receivables 57 47 21.3% 59 - with discounted bills 109 105 3.8% 106 - without discounted bills 105 102 2.9% 102 Inventory Turnover (day
Slide 8: Group Revenue Breakdown by Products 2017/18 (2016/17)
Group Revenue Breakdown by Products 2017/18 (2016/17) Digital Set-top box and LCD Overseas TV Modules (000810.SZ) 26.3% (20.9%) 17.9% (15.3%) White Appliances 5.8% (4.9%) * HK$46.3bn 8.0% Others 7.6% (10.6%)** China TV 42.4% (48.3%) * White Appliances are mainly refrigerators; washing machines and
Slide 9: Gross Profit Margins Improved in 2H
Gross Profit Margins Improved in 2H 2017/18 2016/17 Change 1H2017/18 Group 16.7% 20.0% 3.3pp 15.8% China Market Overall 20.5% 22.3% 1.8pp 19.3% Overseas Market Overall 9.4% 14.5% 5.1pp 9.2% (China) 21.8% 23.1% 1.3pp 19.8% TV (Overseas) 6.6% 11.8% 5.2pp 5.9% Set-top box & (China) 11.4% 14.4
Slide 10: Segmental Profit Breakdown
Segmental Profit Breakdown 2017/18 (2016/17) Diversification of Business to Sustain Growth Digital Set-top box and LCD Overseas TV Module (000810.SZ) 13.5% (23.8%) 7.4% (21.2%) White Appliances -1.7% (-1.7%) China TV Property Holding 63.9% (47.0%) 17.5%(9.9%) HK$1,228m 39.2% Others -0.6% (-0.2%) 1
Slide 11: Segmental Profit/ Loss by Operating Segments
Segmental Profit/ Loss by Operating Segments 1,228 (-39.2%) Total 2,019 785 China TV 949 (-17.3%) 91 (-78.7%) Overseas TV 428 166 (-65.5%) Digital STB & LCD Modules 481 (HK$m) White Appliances -21 (-40.0%) - 35 2017/18 215 (7.0%) 2016/17 Property Holding 201 - 8 (60.0%) Others -5 China TV: Decline
Slide 12: 2017/18 TV Sales Volume
2017/18 TV Sales Volume 4K TV reached 56% in FY18 vs 46% in FY17 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 achieved
Slide 13: 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 2017/18 2016/17 100% 80% 75% 68% 60% 25% 32% 40% 20% 0% Smart TV (4K) Smart TV (Non 4K) GP Margin 2017/18 2016/17 1H2017/18 Blended TV 21.8% 23.1% 19.8% Smart TV (4K) 25.4% 28.3% 23.7% Smart TV (Non 4K) 11.
Slide 14: 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 ASP (HK$, net of tax and rebate) 2,500 2,000 1,500 1,000 500 - ASP 2017/18 2016/17 1H2017/18 Blended TV 2,495 2,217 2,505 Smart TV (4K) 3,353 3,261 3,515 Smart TV (Non 4K) 1,42
Slide 15: China TV Revenue Breakdown by Channel
China TV Revenue Breakdown 2017/18 (2016/17) Nationwide Well Built Distribution Channels Strong in Rural Ongoing Reforms to Enhance Customers Loyalty and Suit Diversified Consumer Behaviors Other Online Electronic 27.6% (23.6%) Shops cover Skyworth 2nd to 3rd tier Community cities 34.9% Stores in ma
Slide 16: 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 16
Slide 17: Strategic Retail Customers and Flagship Stores
Strategic Retail Customers and Flagship Stores in 3rd 4th Tier Cities 17
Slide 18: China TV Market
China TV Market TV Volume 2009 2011 2013 2015 2016 2017 2018E YoY (m units) 51.4 Total 29.4 48.9 54.3 55.0 59.4 53.1 3.3% 13.5% China TV market sales volume recovery since Q417, revenue 4.5% 2018E Global TV shipments 1.8% YoY to 234m units vs 2017 3.4% 2018E Global TV market shares K
Slide 19: China TV Market Shares
China TV Market Shares May 17 – Apr 18 (Domestic Brands Volume 78%) 4K UHD TV (Volume) 4K UHD TV (Revenue) Rank Brand % Rank Brand % 1 Hisense 17.1% 1 Hisense 17.6% 2 Skyworth 15.6% 2 Skyworth 15.3% 3 TCL 12.2% 3 TCL 12.2% 4 Changhong 10.6% 4 Changhong 9.6% 5 Konka 9.2% 5 Sharp 8.9% 6 Sharp 9.0% 6 K
Slide 20: China TV Market Product Mix Size Trending Larger
China TV Market Product Mix Size Trending Larger Size Range Monthly by Volume Size Range Monthly by Revenue (inches”) Jun 17 Dec 17 Mar 18 (inches”) Jun 17 Dec 17 Mar 18 32- 0.0% 0.0% 0.0% 32- 0.0% 0.0% 0.0% 32-36 15.6% 12.8% 13.0% 32-36 5.1% 3.6% 3.9% 37-39 2.5% 2.8% 3.3% 37-39 1.2% 1.2% 1.4% 40-45
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 Operators & Export Market, No. 2 in Global Market Market Cap RMB10bn by June 2018, Skyworth holds 57.4% 9,000 (Sales HK$ million) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - 2010/11 2011
Slide 22: Set-top box market position and trends
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 2017/18 2016/17 60% 51%
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 OS coocaa
Skyworth Smart TV with Self-developed OS “coocaa” Future Smart Large Panel Device and Opened Platform for Big Data Monetisation at Smart Home 25
Slide 26: Big Data Analysis Consumers' Behavior on Skyworth Smart TV
Big Data Analysis Consumers’Behavior on Skyworth Smart TV 26
Slide 27: Coocaa Valuation and Investors
Coocaa (Skyworth holds 64.3%) 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: TV with AI functions integrated with coocaa 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 28
Slide 29: Monetisation of Skyworth Smart TV Users
Monetisation of Skyworth Smart TV Users 2018/19 Revenue Target HK$500m vs HK$342m in 2017 HK$50m in 2015/16 HK$166m in 2016/17 2016/17 Content 63% Ad 28% 2017/18 Content 46% Ad 39% Content Advertising Apps Store (RMB160bn market) E-commerce: Shopping/ Health Gaming Travel Education Care/ Music/ KTV
Slide 30: Skyworth Smart TV Users in China
Skyworth Smart TV Users in China Additional 8m – 10m Smart TV Household Every Year Internet TV installed since 2012 29.17m units (May 2018) Transformation Rate Smart TV Monthly Active Users 16.60m 56% Smart TV Monthly Activated Users 419k Penetration > 90% 2017/18 Coocaa Monetisation Revenue fro
Slide 31: 2018 Chinese New Year Red Pockets Snatch
2018 Chinese New Year “Red Pockets Snatch” Activity To Induce Transformation and Explore New Advertising Pattern 31
Slide 32: Paid Content Market Estimates in China
Paid Content Market Estimates in China Content Potential Smart TV Content Annual Revenue Content Activated Paid ARPU Split to TV Revenue Households Users (RMB) Platforms (RMB) (RMB) 2015 40m 3% 200 120m 30m 2016 69m 5% 250 684m 171m 2017E 105m 7% 350 2.14bn 535m 2018E 143m 10% 500 6.23bn 1.56bn Sour
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 Land and Recurrent Rental Income in Shenzhen (37 -38) Brand Valuation (38) Integrated Chain Management and Production Capacity (39) LCD TV Replacement Demand in China (40) Global OTT TV & Video Revenue Forecasts by Region (41) China Settop Box Product Mix (42) 2016 -2022 Glo
Slide 37: Assets and Recurrent Rental Income in Shenzhen
Assets and Recurrent Rental Income in Shenzhen Nanshan Qianhai Shiyan 37
Slide 38: Brand Valuation in China Achieved RMB100bn in 2017
Brand Valuation in China Achieved RMB100bn in 2017 Headquarter & Smart Production Base in GZ Development Zone 38
Slide 39: 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 40: 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 41: Global OTT TV & Video Revenue Forecasts by Region
Source: Digital TV Research (Jul 2016) 41
Slide 42: 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) 42
Slide 43: 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) 43
Slide 44: Vision
Vision To create a globally prominent brand of consumer electronic products ir@skyworth.com.hk http://investor.skyworth.com