Skyworth Group Limited · HKEX:751
Skyworth — FY2013/14 Earnings Presentation
38 slides from Skyworth's earnings presentation, Jun 25, 2014
Slide 1: 2013/14 Annual Results
2013/14 Annual Results 25 June 2014 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 and Payout
Stable Gross Margin and Payout Year ended 31 Mar (HK$ million) 2013/14 2012/13 Change Turnover 39,480 37,824 4.4% Gross profit 7,629 7,406 3.0% Gross margin 19.3% 19.6% (0.3pp) Operating profit (EBIT) 1,837 2,036 (9.8%) Operating margin 4.7% 5.4% (0.7pp) Profit for the year 1,433 1,594 (10.1%) Net p
Slide 4: R&D Expenses Gearing Up for Smart TV Era
R&D Expenses Gearing Up for Smart TV Era Year ended 31 Mar 1H 2013/14 2012/13 Change (% to sales) 2013/14 Selling and distribution 12.5% 12.0% 0.5pp 11.8% General and administration 4.2% 3.7% 0.5pp 3.8% 16.7% 15.7% 1.0pp 15.6% Total expense rate • S&D expenses increased in advertising and promotion
Slide 5: Highly Liquid Position
Highly Liquid Position Year ended 31 Mar Mar 14 Mar 13 Change Sep 13 Change (HK$ million) Inventories - Total 4,188 5,109 (18.0%) 5,003 (16.3%) - Finished goods 2,761 3,169 (12.9%) 3,222 (14.3%) Liquid bills receivable - On hand 9,644 8,282 16.4% 7,556 27.6% - Endorsed to suppliers* 123 1,491 (91.8%
Slide 6: Bank loans replaced Bills to Finance Working Capital
Bank loans replaced Bills to Finance Working Capital Year ended 31 Mar Mar 14 Mar 13 Change Sep 13 Change (HK$ million) Bank Borrowings 1. Financial liabilities - for bills discounted# 294 - N/A - N/A - for forex hedging^ 829 - - 152 445.4% 2. Other bank loans 4,580 5,806 (21.1%) 4,088 12.0% - Curre
Slide 7: Share Price Below Book Value & Stringent Inventories Management
Share Price Below Book Value & Stringent Inventories Management Mar 14 Mar 13 Change Sep 13 Return on equity 11.6% 15.1% (3.5pp) 13.6% Current ratio (times) 1.3 1.4 (7.1%) 1.4 AR turnover (days) - excluded bills receivables 38 31 22.6% 41 - with discounted bills 130 122 6.6% 122 - without discounted
Slide 8: Group Revenue Breakdown by Products 2013/14 (2012/13)
Group Revenue Breakdown by Products 2013/14 (2012/13) Overseas TV 8.2% (6.5%) Digital Set-top box 10.5% (10.3%) White Appliances 6.4% (4.5%) * China TV 66.5% (71.6%) LCD Modules 2.2% (1.4%) HK$39.48bn 4.4% Others 6.2% (4.0%) ** *White Appliances are mainly refrigerators; washing machines and table
Slide 9: Segmental Profit Breakdown 2013/14(2012/13)
Segmental Profit Breakdown 2013/14(2012/13) Diversification of Business to Sustain Growth Digital Set-top box White Appliances 20.5% (17.3%) 10.7% (3.6%) Overseas TV LCD Modules -0.7% (-0.7%) 11.3% (6.5%) HK$2.1bn 8.9% Property Holding China TV 4.1%(2.3%) 55.8% (75.7%) Others -1.7% (-4.7%) 9
Slide 10: Segment Profit by Operating Segments
Segment Profit by Operating Segments 2084 (-9%) Total 2288 1163 (-33%) China TV 1733 Overseas TV -14 (+7%) -15 Digital Settop Boxes 428 (+8%) 396 LCD Modules 236 (+59%) 2013/14 148 White Appliances 223(+169%) 2012/13 83 Property Holding 85 (+63%) 52 Others -37 (+66%) -109 (HK$m) 10
Slide 11: Gross Profit Margin by Products
Gross Profit Margin by Products Mar 14 Mar 13 Change Sep 13 Group 19.3% 19.6% 0.3pp 19.1% TV (China) 20.1% 20.9% 0.8pp 19.6% TV (Overseas) 7.2% 4.2% 3.0pp 7.1% Set-top box (China) 25.1% 27.8% 2.7pp 27.5% Set-top box (Overseas) 21.8% 20.4% 1.4pp 23.5% White Appliances (refrigerator 21.9% 20
Slide 12: White Appliances LCD Modules
White Appliances LCD Modules 12
Slide 13: China TV Revenue Mix Upgrading to 4K UHD Cloud TV
China TV Revenue Mix Upgrading to 4K UHD Cloud TV % of China TV Sales 2013/14 2012/13 100% 80% 68% 52% 60% 33% 32% 40% 20% 15% 0% 0% 4K Cloud TV Cloud TV Other Flat TV GP Margin 2013/14 2012/13 1H2013/14 Flat Panel TV 20.5% 21.7% 20.1% 4K Cloud TV 31.7% N/A N/A Cloud TV 24.6% 31.5% 27.8% Other Flat
Slide 14: China Blended TV ASP
China Blended TV ASP Pricing Power with Premium Brand and Product Innovation ASP (HK$, net of tax and rebate ) 4,000 3,114 3,051 2,979 3,121 3,000 2,712 1,961 2,000 1,712 1,459 1,000 0 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 ASP 2013/14 2012/13 1H2013/14 4K Cloud TV 6,037 N/A N/A Cloud TV 4,
Slide 15: Sophisticated Distribution Channels into Rural Market
Sophisticated Distribution Channels into Rural Market China TV Revenue Breakdown 2013/14 (2012/13) Direct Sales 4.8% (5.0%) Skyworth Hypermarket 4.8% (4.5%) Domestic/ Exports Distributors Online Specialty Large Scale 1.0% (0.5%) 7.4% (3.8%) Stores in major cities Chain Stores 18.2% 10.2% (9.7%) (18.
Slide 16: Skyworth Specialty Stores 3,699 located in Major Cities
Skyworth Specialty Stores 3,699 located in Major Cities (Beijing) (Shenzhen) 16
Slide 17: Skyworth Strategic Retail Customers in 3rd 4th Tier Cities
Skyworth Strategic Retail Customers in 3rd 4th Tier Cities 17
Slide 18: Digital Set Top Box Gross Margin Stable
Digital Set Top Box Gross Margin Stable China Migrating to Digitalisation by 2015, Overseas Growing China Cable STB Penetration 64% Only, 400m units total Demand in 2013-17 Growth Drivers in HD, Multi-functional, Satellite, Terrestrial and IPTV, OTT Boxes (Sales HK$ million) 4,000 3,000 2,000 1,000
Slide 19: Overseas Revenue Geographical Summary
Overseas Revenue Geographical Summary Skyworth TV Entering Emerging Markets % overseas sales 2013/14 2012/13 50% 42% 42% 40% 32% 30% 26% 20% 20% 13% 8% 10% 4% 6% 5% 1% 1% 0% America Europe Asia Middle East Australasia Africa TV - Skyworth Brand sales 9.3%, ramping up gradually TV - Product mix m
Slide 20: 2013/14 TV Sales Volume
2013/14 TV Sales Volume 4K Cloud TV 7% All Cloud TV 31% of Mix In Mar 2014, 4K Cloud TV reached 11% (’000 units) 2013/14 2012/13 Change% (Apr 13 - Mar 14) (Apr 12 – Mar 13) China TV 8,601 8,705 (1%) comprises: - 4K Cloud TV 636.6 0.0 n/a - Cloud TV 1,987.3 1,594.7 25% - Other Flat TV 5,977.4 7,110.0
Slide 21: 2014/15 TV Sales Volume Targets
2014/15 TV Sales Volume Targets: 4K Cloud TV 20% Other Cloud TV 40% of Mix In April 2014, 4K Cloud TV reached 15% 2014/15 2013/14 Change 2014/15 Targeted (’000 units) YoY (Apr - May 14) (Apr – May 13) % Target Growth% China TV 1,186 1,617 (27%) 9,000 4.6% comprises: - 4K Cloud TV 164.0 20.6 696% 1,8
Slide 22: 2014 China Market TV Sales Volume Forecast
2014 China Market TV Sales Volume Forecast TV Volume 2014E 2013 YoY 2012 YoY (m units) Total 49.06 51.01 3.8% 45.53 12.0% 2014E 40” – 50” TV reach 46% in volume 7%YoY 50” – 60” reach 13% in volume 34%YoY with 50” & 55” fast growing High-end TV Penetration in 2014E: Smart TV 69% 4K TV 21%
Slide 23: China TV Market Shares May 2013 – Apr 2014
China TV Market Shares May 2013 – Apr 2014 (Domestic LCD TV 78%) LCD TV (Volume) LCD TV (Revenue) Rank Brand % Rank Brand % 1 Skyworth 17.3% 1 Skyworth 16.3% 2 Hisense 16.5% 2 Hisense 16.2% 3 TCL 14.2% 3 TCL 12.4% 4 Konka 12.5% 4 Konka 10.5% 5 Changhong 11.6% 5 Changhong 10.0% 6 Haier 5.4% 6 Samsung
Slide 24: China LCD TV Market Shares (April 2014 YoY)
China LCD TV Market Shares (April 2014 YoY) Skyworth Maintained No.1 Market Shares, Domestic brands 75% LCD TV (Volume) LCD TV (Revenue) Brand Apr Apr Change Brand Apr Apr Change (%pt) (%pt) 2014 2013 2014 2013 1 Skyworth 16.5% 17.9% (1.4%) 1 Skyworth 15.8% 16.4% (0.6%) 2 Hisense 16.0% 16.1% (0.1%)
Slide 25: Appendices
Appendices CNY 2014 China TV Market Skyworth & Internet CooCaa TV and OLED TV Awards & Certificates Production Capacity and Strategic Alliances LCD TV Replacement Cycle and Stages in China Market Penetration of Digital Cable STB in China New Digital STB Products in China Global STB
Slide 26: Chinese New Year 2014 China LCD TV
Chinese New Year 2014 China LCD TV Sales Volume 3.4% Sales Revenue 0.8% YoY High-end products Penetrating 4K 7.5% Smart TV 59% Size is Growing 40”+ 44% 58% Size ASP 100% 5% (RMB) 9% 70"+ 18% 32” 1,553 80% 23% 60"-69" 51"-59" 37”- 39” 2,647 21% 60% 26% 46"-50" 40” - 43” 2,876 16% 40"-45" 40% 8% 4
Slide 27: Skyworth & Internet
Skyworth & Internet Self-developed OS “Skyworth Tianci”, Hollywood Express, Coocaa TV Cooperation with Alibaba, Tencent, QIY, Xunlei and Nibiru 27
Slide 28: Skyworth CooCaa TV Most Popular Online Brand in 2013
Skyworth CooCaa TV Most Popular Online Brand in 2013 28
Slide 29: Skyworth OLED TV Launched in Dec 2013
Skyworth OLED TV Launched in Dec 2013 29
Slide 30: Awards and Certificates
Awards and Certificates 2nd Generation 4K TV - RGBW 4 Colours 4K TV Certified by China Electronics Chamber of Commerce and LGD National Certificate: Full Colour Spectrum 4K 3 colors replaced 2 colors DCI 107% NTSC 117% 30
Slide 31: Skyworth 4K Market Leader Outperforming
Skyworth 4K Market Leader Outperforming Vivid Picture Quality 31
Slide 32: 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 TV Production Capacity 2014/15 (14m units) Shiyan, Shenzhen 10m units (one-off land disposal of Gongming, Shen
Slide 33: LCD TV Replacement Demand in China
LCD TV Replacement Demand in China >300m units CRT TV Remained at the end of 2013 > 10 years old Growth sustains, given 40% LCD TV penetration rate (215m units installed) & increasing affordability Urban CRT TV Rural CRT TV 170m 130 m (1.4 TV /household) (1.2 TV /household) TV Demand • 70% Replaceme
Slide 34: 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)
Slide 35: 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 15% to 13.4m, Penetration 3.5m units in 2013E 600 (m) units 507 490 500 457 473 420 437 390 400 364 235
Slide 36: New Digital STB Products in China
New Digital STB Products in China 2012-17 Digital STB Total Sales Satellite STB Volume in China Potential households 100 increase by 50m a year 92.16 92.03 Existing > 26.5m 83.01 households penetration 75.2 80 Rural > 200m households to be covered 68.35 60 59.21 IPTV, OTT Box Sales 13m units
Slide 37: Global Settop Box Stable Demand from Retail and Cable Operators
Global Settop Box Stable Demand from Retail and Cable Operators Total Volume 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
Slide 38: Vision
Vision To create a globally prominent brand of consumer electronic products ir@skyworth.com.hk investor.skyworth.com