Skyworth Group Limited · HKEX:751
Skyworth — H1 2019 Earnings Presentation
46 slides from Skyworth's earnings presentation, Aug 27, 2019
Slide 1: 2019 Interim Results
2019 Interim Results 27 August 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: Six months ended 30 June 2019 results summary
Year-end changed from March to December, HKD to RMB Jan – Jun Jan – Jun Change Six months ended 30 June 2019 2018 % (RMB m) (RMB m) Revenue 17,230 17,351 (0.7%) Gross profit 3,387 2,996 13.1% Gross profit margin 19.7% 17.3% 2.4pp Operating profit (EBIT) 785 597 31.5% Operating profit margin 4.6% 3.4
Slide 4: Operating Expenses
Operating Expenses Six months ended 30 Jun Jan - Jun Apr - Dec 2017/18 (% to sales) 2019 2018 Selling and distribution 10.7% 9.5% 9.9% General and administration 7.7% 7.1% 6.3% Total expense rate 18.4% 16.6% 16.2% S&D: Restructuring and implementing new incentive system G&A: R&D expenses (5.3% o
Slide 5: Cash Flow
Cash Flow Jun 19 Dec 18 Change (RMB million) (RMB million) (%) Inventories - Total 5,617 6,031 (6.9%) - Finished goods 3,141 3,883 (19.1%) Liquid bills receivable - On hand 4,277 6,442 (33.6%) - Discounted to banks# 600 500 20.0% (cash equivalent) 4,877 6,942 (29.7%) Pledged bank deposits 139 123 13
Slide 6: Borrowings
Borrowings Jun 19 Dec 18 Change (RMB million) (RMB million) (%) Borrowings 1. Financial liabilities - for bills discounted# 600 500 20.0% 2. Other loans 5,806 5,824 (0.3%) Current 5,537 5,590 (0.9%) Non-current 869 734 18.4% 3. Panda Bond 2,081 2,026 2.7% (1st Issue, interests included) 4. Convertib
Slide 7: Financial ratios Jun 19 vs Dec 18
Jun 19 Dec 18 Change Return on equity holders of the 2.4% 3.6% (1.2pp) Company Current ratio (times) 1.4 1.4 - AR turnover (days) - excluded bills receivables 97 75 29.3% - with discounted bills 160 131 22.1% - without discounted bills 154 127 21.3% Inventory Turnover (days) - Total 77 65 18.5% - Ra
Slide 8: Group Revenue Breakdown by Products Jan – Jun 2019
Group Revenue Breakdown by Products Jan – Jun 2019 White Appliances Digital Set-top box and LCD Modules (000810.SZ) 9.8%* 21.1% RMB17.23bn Others Overseas TV 17.0% RMB17.35bn 13.6%** (Jan – Jun 2018) China TV 38.5% * White Appliances are mainly refrigerators and washing machines in China ** Others i
Slide 9: Gross Profit Margins Recovering
Gross Profit Margins Recovering Jan – Jun 2019 Apr – Dec 2018 2017/18 Group 19.7% 18.7% 16.7% China Market Overall 20.8% 19.9% 20.5% Overseas Market Overall 16.2% 15.6% 9.4% (China) 19.7% 20.0% 21.8% TV (Overseas) 14.8% 13.6% 6.6% Set-top box & (China) 18.9% 14.4% 11.4% LCD Modules (Overseas) 27.1%
Slide 10: Segmental Profit Breakdown Jan – Jun 2019
Segmental Profit Breakdown Jan – Jun 2019 Diversification of Business to Sustain Growth Property Holding 12.0% Others 38.6% White Appliances 9.3% RMB708m RMB863m (Apr – Dec 2018) Overseas TV 3.5% Digital Set-top box and LCD Module (000810.SZ) 42.9% China TV (6.3%) 10
Slide 11: Segmental Profit/ Loss by Operating Segments
Segmental Profit/ Loss by Operating Segments 708 Total 863 -45 China TV 248 25 Overseas TV 127 304 Digital STB & LCD Modules 221 66 (RMB m) White Appliances 71 Jan – Jun 2019 85 Property Holding 128 Apr – Dec 2018 Others 273 68 China TV: Improved scale, weaker gross profit margin and expenses surg
Slide 12: HB BE
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Slide 13: TV Sales Volume
TV Sales Volume Jan – Jun 2019 YoY Jan – Mar 2019 YoY 2019 2018 2019 2018 Unit Increase/ Unit Unit Increase/ Unit (‘000) (‘000) (Decrease) (‘000) (‘000) (Decrease) China Market 4,076 3,657 11.5% 2,058 1,905 8.0% Overseas Market 3,373 3,075 9.7% 1,623 1,651 (1.7%) Total 7,449 6,732 10.7% 3,681 3,556
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 But Facing Severe Online Competition Jan-Jun2019 Apr-Dec2018 100% 75% 78% 80% 60% 40% 25% 22% 20% 0% Smart TV (4K) Smart TV (Non 4K) GP Margin Jan – Jun 2019 Apr – Dec 2018 2017/18 Blended TV 19.7% 20.0% 21
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 Jan – Jun 2019 Apr – Dec 2018 2017/18 Blended TV RMB 1,629 RMB1,808 HKD2,495 Smart TV (4K) 2,220 2,428
Slide 16: China TV Revenue Breakdown by Channel
China TV Revenue Breakdown Jan – Jun 2019 (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 Online 3rd, 4th tier 34.4% (36.8%) cities to rural 23.3% (26.8%) Ot
Slide 17: O2O Community Stores Synergistic Partner with TMALL
O2O Community Stores Synergistic Partner with TMALL Around 4,000 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% 2019E China TV Revenue 1.5% 2018 China TV Revenue 8.6% ASP RMB3,121 9.0% TV Size 6.8% 818 YoY Online sales volume 12.4% Revenue 4.2% ASP RMB1,800 vs 6
Slide 20: China Online and Offline Monthly TV Sales Volume
China Online and Offline Monthly TV Sales Volume and YoY % Change (Jan – Aug 2019) Online Offline Units (k’000) 20
Slide 21: China TV Market Shares
China TV Market Shares (Domestic Brands 86% by Volume) 4K UHD TV (Volume) 4K UHD TV (Revenue) 2019 2019 2018 2018 (Jan – Jul) (Jan – Jul) 1 Skyworth 17.0% 16.4% 1 Hisense 17.3% 16.0% 2 Hisense 16.0% 17.6% 2 Skyworth 17.0% 18.1% 3 TCL 12.6% 12.4% 3 TCL 12.0% 12.5% 4 Xiaomi 12.6% 2.4% 4 Changhong 9.3%
Slide 22: 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 RMB9.4bn by June 2019, Skyworth holds 57.2% 12,000 10,000 Sales (Sales HKD mil) (RMB mil) 8,000 6,000 4,000 2,000 - 2010/11 2
Slide 23: 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 24: 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 Jan- Jun 19 Apr-Dec 18
Slide 25: 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 25
Slide 26: 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 26
Slide 27: Big Data Analysis on coocaa TV OS
Big Data Analysis Timely Consumers’Behavior on Skyworth coocaa TV OS 27
Slide 28: Coocaa Invested by Baidu, Tencent, iQIYI
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 29: 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 30: Coocaa Market Leader in Monetisation of TV OS Users
Coocaa Market Leader in Monetisation of TV OS Users Financial Year Revenue Revenue Split 2015/16 HK$50m 2016/17 HK$166m Content 63% Ad 28% 2017/18 HK$342m Content 46% Ad 39% Segmental Profit HK$60m HK$298m Apr – Sep 2018 Segmental Profit HK$49m RMB415m Apr – Dec 2018 Segmental Profit RMB96m Jan – De
Slide 31: Skyworth Smart TV Users in China
Skyworth Smart TV Users in China Additional 8m – 10m coocaa TV OS Users Every Year Accumulated Activated Users 39.12m (2018 vs 17 37% YoY) (Internet TV installed since 2012) (By July 2019) Conversion Rate 60% Smart TV Monthly Active Users 23.67m (2018 vs 17 51% YoY) Smart TV Monthly Activated Us
Slide 32: 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 32
Slide 33: Upgrade Users' Experience Promotion Activities
Upgrade Users’ Experience Promotion Activities To Induce Content Subscription and Conversion 精选推荐位 五一活动 状态栏&VIP主入口 33
Slide 34: 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% 34
Slide 35: coocaa Shopping, Sports and Health, Gaming
coocaa Shopping coocaa Sports and Health Gaming on Big Panel Alliances with Geek Box, Ministation (Tencent) 35
Slide 36: 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 36
Slide 37: Appendices
Appendices Transformation and Escalation Strategies (38) Land and Recurrent Rental Income in Shenzhen (39) Brand Valuation and Investment in Smart Production (40) Integrated Chain Management and Production Capacity (41) LCD TV Replacement Demand in China (42) Global OTT TV & Video Revenu
Slide 38: 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 39: Assets and Recurrent Rental Income in Shenzhen
Assets and Recurrent Rental Income in Shenzhen Nanshan Qianhai Shiyan 39
Slide 40: Brand Valuation in China Achieved RMB100bn in 2017
Brand Valuation in China Achieved RMB100bn in 2017 Headquarter & Smart Production Base in GZ Development Zone 40
Slide 41: 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 42: 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 43: Global OTT TV & Video Revenue Forecasts by Region
Source: Digital TV Research (Jul 2016) 43
Slide 44: 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) 44
Slide 45: 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) 45
Slide 46: 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)