Skyworth Group Limited · HKEX:751

Skyworth — FY2012/13 Earnings Presentation

32 slides from Skyworth's earnings presentation, Jun 27, 2013

  1. Slide 1: 2012/13 Annual Results

    2012/13 Annual Results 27 June 2013 1

  2. 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

  3. Slide 3: Strong Top Line Growth and Stable Payout

    Strong Top Line Growth and Stable Payout Year ended 31 Mar (HK$ million) 2012/13 2011/12 Change Turnover 37,824 28,137 34.4% Gross profit 7,406 5,956 24.3% Gross margin 19.6% 21.2% (1.6pp) Operating profit (EBIT) 2,036 1,732 17.6% Operating margin 5.4% 6.2% (0.8pp) Profit for the period 1,594 1,268

  4. Slide 4: Stringent Cost Structure

    Stringent Cost Structure Year ended 31 Mar 1H 2012/13 2011/12 Change (% to sales) 2012/13 Selling and distribution 12.0% 13.4% (1.4pp) 12.7% General and administration 3.7% 3.2% 0.5pp 3.7% 15.7% 16.6% (0.9pp) 16.4% Total expense rate • S&D expenses decreased mainly due to increase in sales revenue •

  5. Slide 5: Highly Liquid Position

    Highly Liquid Position Year ended 31 Mar 1H 2012/13 2011/12 Change Change (HK$ million) 2012/13 Inventories - Total 5,109 3,151 62.1% 4,815 6.1% - Finished goods 3,169 2,025 56.5% 2,846 11.3% Liquid bills receivable - On hand 8,282 7,700 7.6% 6,655 24.4% - Endorsed to suppliers* 1,491 1,049 42.1% 1,

  6. Slide 6: Bank loans replaced Bills to Finance Working Capital

    Bank loans replaced Bills to Finance Working Capital Year ended 31 Mar 1H 2012/13 2011/12 Change Change (HK$ million) 2012/13 Bank borrowings Financial liabilities - for discounted bills# - 369 - - - - for forex hedging^ - 123 - - - - Other bank loans 5,806 3,791 53.2% 3,885 49.4% - Current 5,581 3,

  7. Slide 7: Higher ROE

    Higher ROE Mar 13 Mar 12 Change Sep 12 Return on equity 15.1% 14.8% 0.3pp 12.9% Current ratio (times) 1.4 1.6 (12.5%) 1.4 AR turnover (days) - excluded bills receivables 31 30 3.3% 39 - with discounted bills 122 136 (10.3%) 134 - without discounted bills 120 129 (7.0%) 132 Inventory Turnover (days)

  8. Slide 8: April - May 2013 TV Sales Volume

    April - May 2013 TV Sales Volume Target: China TV Volume p 15% 3D Cloud TV will be 30% In May 2013 Cloud TV reached 22% of Mix 2013/14 Targeted 2013/14 2012/13 Change (’000 units) YoY Growth (Apr - May 13) (Apr –May 12) % Target % China TV 1,617 1,137 42% 10,000 15% comprises: - 3D Cloud TV 350.5 6

  9. Slide 9: 2012/13 TV Sales Volume

    2012/13 TV Sales Volume China TV Mix: 18% Cloud TV 30% 3D LED TV 48%2D LED TV In March 2013 Cloud TV reached 22% of Mix 2012/13 Targeted Change (’000 units) 2012/13 2011/12 Volume % Target Achieved% China TV 8,705 7,024 24% 8,100 107% comprises: - Cloud TV 1,594.8 0.0 n/a 1,800 89% - 3D LED TV 2,635

  10. Slide 10: Around 85% Revenue Generated in China Market under Brand

    Around 85% Revenue Generated in China Market under Brand Revenue Breakdown by Products 2012/13 (2011/12) Overseas TV 6.5% (5.8%) Digital Set-top box China TV 10.3% (11.6%) 73.3% (78.3%) LCD Module 1.4%(1.0%) HK$37.8bn White Appliances 4.5%(1.7%) * p 34.4% Others 4.0%(1.6%) ** *White Appliances main

  11. Slide 11: Gross Profit Margin by Products Group

    Gross Profit Margin by Products Mar 13 Mar 12 Change Sep 12 Group 19.6% 21.2% q 1.6pp 20.1% China TV 20.9% 21.8% q 0.9pp 21.4% Overseas TV 4.2% 6.1% q 1.9pp 4.6% China set-top box 27.8% 27.8% - 30.0% ODM set-top box 20.4% 13.5% p 6.9pp 16.4% LCD module (small size) 10.8% 12.3% q 1.5pp 11.2% Whi

  12. Slide 12: Segmental Profit by Business Segments

    Segmental Profit by Business Segments Total 2288 2023 China TV 1733 1510 Overseas TV -15 -11 Digital Settop Box 396 385 LCD Module 148 123 2012/13 White Appliances 83 2011/12 -11 Property Holding 52 57 Others -109 (HK$m) -30 12

  13. Slide 13: China TV Revenue Mix

    China TV Revenue Mix 2D LED Upgrading to 3D LED TV and 3D Cloud TV % of China TV Sales 2012/13 2011/12 80% 70% 60% 45% 50% 32% 35% 32% 33% 40% 30% 22% 20% 10% 0% 1% 0% Cloud TV 3D TV (CCFL + LED) 2D LED TV 2D CCFL TV GP Margin 2012/13 1H2012/13 2011/12 1H2011/12 Flat Panel TV 21.7% 22.1% 21.9% 21.7%

  14. Slide 14: Blended China TV ASP

    Blended China TV ASP Pricing Power with Premium Brand and Product Innovation ASP (HK$, net of tax and rebate) 3,114 40% 2,979 3,121 3,007 35% 3,000 2,712 30% + 3.6% 25% 2,000 1,712 1,961 +9.8% 20% 1,459 1,283 1,342 +38.3% +4.8 % 15% 1,000 +17.3% -3.7% 10% +14.5% 5% +8.7% +4.5% +4.6% 0% 0 -5% 04/05 0

  15. Slide 15: Sophisticated Distribution Channels into Rural Market

    Sophisticated Distribution Channels into Rural Market China TV Revenue Breakdown 2012/13 (2011/12) Direct Sales Skyworth 4.9% (4.3%) Specialty Hypermarket 4.5% (4.1%) Domestic/ Exports Online Stores in Distributors 3.8% (1.8%) major cities 0.5% (1.6%) Large Scale 9.7% (5.8%) Chain Stores 18.4% Other

  16. Slide 16: Skyworth Specialty Stores 3,500 located in Major Cities

    Skyworth Specialty Stores 3,500 located in Major Cities (Beijing ) (Shenzhen) 16

  17. Slide 17: China TV Market Shares May 2012 – April 2013

    China TV Market Shares May 2012 – April 2013 (Domestic LCD TV 82%) LCD TV (Volume) LCD TV (Revenue) Rank Brand % Rank Brand % 1 Skyworth 17.5% 1 Skyworth 17.3% 2 TCL 16.6% 2 Hisense 16.4% 3 Hisense 16.1% 3 TCL 14.8% 4 Konka 13.7% 4 Konka 11.0% 5 Changhong 11.3% 5 Changhong 9.1% 6 Haier 6.3% 6 Samsun

  18. Slide 18: China LCD TV Market Shares (April 2013 YoY)

    China LCD TV Market Shares (April 2013 YoY) Skyworth Maintained No.1 Market Shares, Domestic brands 76% LCD TV (Volume) LCD TV (Revenue) Brand Apr Apr Change Brand Apr Apr Change (%pt) (%pt) 2013 2012 2013 2012 1 Skyworth 17.9% 17.4% 0.5% 1 Skyworth 16.4% 16.1% 0.3% 2 Hisense 16.1% 16.1% - 2 Hisense

  19. Slide 19: Digital Set Top Box Gross Margin Improved

    Digital Set Top Box Gross Margin Improved China Migrating to Digitalisation by 2015, Overseas Grows China Cable STB Penetration 64% Only 400m units total Demand in 2013-17 Growth Drivers in HD, Multi-funional, Satellite, Terrestrial and IPTV, OTT Boxes (Sales HK$ million) 4,000.0 3,000.0 2,000.0 1,0

  20. Slide 20: Overseas Revenue Geographical Summary

    Overseas Revenue Geographical Summary Skyworth TV Entering Emerging Markets % overseas sales 2012/13 2011/12 42% 40% 37% 26% 30% 27% 20% 24% 20% 10% 6% 5% 5% 4% 3% 1% 0% America Europe Asia Middle East Australasia Africa n TV - Skyworth Brand sales 9.4% n TV - Product mix migrating to LED TV, volu

  21. Slide 21: Labour Holiday China LCD TV Sales Volume Growth 7.7%

    Labour Holiday China LCD TV Sales Volume Growth 7.7% High-end products 3D Smart TV Penetration 50% Skyworth No.1 Market Shares in UHD TV LCD Sales Volume in Labour Holiday 600 500 400 300 200 100 0 2012 2013 Source: AVC Labour Holiday 15 Apr – 5 May 2013 Weekly Monitored Sales Data (453 cities 4,288

  22. Slide 22: Differentiated Product Mix - ASP and Margin Premium

    Differentiated Product Mix - ASP and Margin Premium Cloud TV (4Kx2K UHD TV 84” 65” 50” 39”, Android, FPR 3D, ultra slim border) l2K content is upgraded to 4K; 4K HDMI (No distortion of 4K content input) lSelf-developed iOS; Gesture and voice control; Multi-screens interactions l“Hollywood Express

  23. Slide 23: What is NEXT?

    Gesture & Voice Display What is NEXT? Remote Technology Control Content - Speed, Applications Content and Cloud iOS Storage and Design and Energy Services Transmission Efficiency “Hollywood Express” ØMovie subscription packages for Skyworth cloud TV households 23

  24. Slide 24: LCD TV Replacement Demand in China

    LCD TV Replacement Demand in China 350m units CRT TV Remained at the end of 2012 > 10 years old Growth sustains, given 33% LCD TV penetration rate (170m units installed) & increasing affordability Urban CRT TV Rural CRT TV 200m 150 m (1.4 TV TV /household) (1.2 TV /household) TV Demand • 70% Replace

  25. Slide 25: Appendices

    Appendices Ø 2013 China Market TV Sales Volume Forecast Ø LCD TV Replacement Stages in China Ø Production Capacity and Strategic Alliances Ø Penetration of Digital Cable STB in China Ø New Digital STB Products in China Ø Global STB Demand 25

  26. Slide 26: 2013 China Market TV Sales Volume Forecast

    2013 China Market TV Sales Volume Forecast TV Volume 2013E 2012 YoY (m units) LCD 40.68 38.07 p 7% PDP 2.5 2.8 q 11% CRT 0.98 1.03 q 5% Total 44.16 41.90 p 5% v Another market forecasts LCD TV sales 45.3m units p 12.5% in 2013E; 51.7m units p 13.9% in 2014E v 1Q2013 China LCD TV sales volume

  27. Slide 27: 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)

  28. Slide 28: 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 Production Capacity 2013/14 (14m units) Shiyan, Shenzhen 10m units (Gongming old plant will be developed to a

  29. Slide 29: 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) Growth Drivers – Higher Penetration + Upgrade to HD and Interactive HD STB Sales Volume p 15% to 13.4m, Penetration 35m units in 2013E 600 (m) units 507 490 500 457 473 420 437 390 400 364 235

  30. Slide 30: New Digital STB Products in China

    New Digital STB Products in China 2012-17 Digital STB Total Sales Satellite STB Volume in China v Potential households 100 increase by 50m a year 92.16 92.03 v Existing > 26.5m 83.01 households penetration 75.2 80 v Rural > 200m households to be covered 68.35 60 59.21 IPTV, OTT Box v Sales 13m u

  31. Slide 31: Global Settop Box Stable Demand from Retail and Cable Operators

    Global Settop Box Stable Demand from Retail and Cable Operators Total Volume p 19% YoY in 2012 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 85.3 90 (m) Units/ Year 74.3 80 69.5 70 60 50.8 50 41.3 42.5

  32. Slide 32: Vision

    Vision To create a globally prominent brand of consumer electronic products ir@skyworth.com.hk investor.skyworth.com

Skyworth Group — FY2012/13 Earnings Presentation on 6ix