Skyworth Group Limited · HKEX:751
Skyworth — FY2009/10 Earnings Presentation
37 slides from Skyworth's earnings presentation, Jul 2, 2010
Slide 1: 2009/10 Annual Results Announcement
2009/10 Annual Results Announcement 2 July, 2010 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: Solid Achievements 2009/10
Solid Achievements 2009/10 Outperforming Results Turnover 49% Gross Profit Margin 1.2 pp Expenses Rate 2.1 pp Profit 164% ROE 22% Leading Position No. 1 LCD TV market share in China (21%*) Overseas TV turnaround Digital set top box revenue 45%, overseas GP% 8.6pp LCD module segment
Slide 4: Surging Top Line and Improved Gross Margin
Surging Top Line and Improved Gross Margin For the year ended 31 Mar (HK$ million) 2009/10 2008/09 Change Turnover 22,769 15,329 48.5% Gross profit 4,873 3,093 57.5% Gross margin 21.4% 20.2% 1.2pp Operating profit (EBIT) 1,660 700 137.1% Operating margin 7.3% 4.6% 2.7pp Profit for the year 1,326 503
Slide 5: Leverage Cost Structure
Leverage Cost Structure Year ended 31 Mar 1H 2009/10 2008/09 Change (% to sales) 2009/10 Selling and Distribution 13.0% 14.2% (1.2pp) 12.8% General and Administration 3.0% 3.6% (0.6pp) 3.2% 16.0% 17.8% (1.8pp) 16.0% Total expenses rate • S&D expenses consisting mainly marketing and branding promotio
Slide 6: Highly Liquid Position
Highly Liquid Position Year ended 31 Mar Mar 10 Mar 09 Change Sep 09 Change (HK$ million) Inventories - Total 3,298 1,267 160.3% 2,737 20.5% - Finished goods 1,805 795 127.0% 1,537 17.4% Liquid bills receivable - On hand 2,804 2,389 17.4% 2,413 16.2% - Endorsed to suppliers* 706 993 (28.9%) 655 7.8%
Slide 7: Net Cash
Net Cash Year ended 31 Mar Mar 10 Mar 09 Change Sep 09 Change (HK$ million) Secured bank borrowings - Construction loans - 85 n/a - - - Financial liabilities - for discounted bills# 3,428 1,157 196.3% 1,989 70.0% - for forex hedging^ 2,325 125 1,760% 1,986 17.1% - for trust receipts 957 - n/a - n/a
Slide 8: ROE Shifted Up Sharply
ROE Shifted Up Sharply Mar 10 Mar 09 Change Return on Equity 21.7% 10.6% 11.1pp Current Ratio (times) 1.3 1.5 (13.3%) AR Turnover (days) - with discounted bills 116 138 (15.9%) - without discounted bills 78 115 (32.2%) Inventories Turnover - Total 47 47 - - Raw materials 17 15 13.3% - Finished goods
Slide 9: 90% Revenue Generated in China Market under Brand
90% Revenue Generated in China Market under Brand Revenue Breakdown by Products 2009/10 (2008/09) China TV Overseas ODM TV 84.2% (80.1%) 6.0% (9.9%) HK$ 22.8bn Digital Set-top box 8.3% (8.5%) 48.5% LCD Module 0.83%(0.69%) Others 0.67%(0.81%) * * Others include property rental, precision molding and
Slide 10: Gross Profit Margin Growth
Gross Profit Margin Growth Mar 10 Mar 09 Change pp Sep 09 Group 21.4% 20.2% 1.2pp 22.7% China TV 21.8% 21.7% 0.1pp 23.4% Overseas ODM TV 5.3% 2.4% 2.9pp 4.8% China Set-top Box 27.8% 34.7% 6.9pp 33.8% ODM Set-top Box 20.3% 11.7% 8.6 pp 20.3% LCD Module 18.7% 21.8% 3.7pp 20.9% • China TV: Pi
Slide 11: Segmental Profit by Business Segments
Segmental Profit by Business Segments Total 1608 730 China TV 1229 514 Overseas TV 0 -28 Digital Set Top Boxes 272 191 LCD Module 61 2009/10 31 Other Electronic Products 10 2008/09 -2 Property Holding 36 24 (HK$m) 0 0 0 0 0 70 70 70 70 0 17 37 57 77 97 -3 11 13 17 15 Operational Profit China TV HK$1
Slide 12: China TV Revenue 2009/10 TV Sales Volume
2009/10 TV Sales Volume China TV Revenue 56% 2009/10 2008/09 Change 2009/10 Achieved (Units) (Apr - Mar) (Apr - Mar) % Target % China TV 7,034k 6,259k 12% 6,500k 108% comprises: - Flat panel TV 5,989.6k 2,475.9k 142% 5,500k 109% - CRT TV 1,045.0k 3,782.6k (72.4%) 1,000k 105% Overseas TV 1,972k 2,8
Slide 13: China TV Revenue Mix: Shifting CCFL to LED LCD TV
China TV Revenue Mix Shifting CCFL to LED LCD TV % of China TV 100% Sales 90% 72% 2009/10 2008/09 50% 28% 4% 0% 6% 0% CCFL LCD TV LED LCD TV CRT TV GP Margin 2009/10 2008/09 Change pp 1H 2009/10 LED TV 31.6% N/A (Launched since Oct 2009) CCFLTV 21.7% 22.8% 1.1pp 23.9% CRT TV 15.2% 29.6% 14.4pp 2
Slide 14: Blended China TV ASP Surged with More LCD TV Units
Blended China TV ASP Surged with More LCD TV Units Pricing Power with Premium Brand and Product Innovation ASP (HK$, net of tax and rebate) 2,712 40% 3,000 1,459 1,712 1,961 35% 30% 2,000 1,342 + 38.3% 25% 20% 1,000 + 4.6% + 8.7% + 17.3% + 14.5% 15% 10% 5% 0 0% 2005/06 2006/07 2007/08 2008/09 2009/1
Slide 15: Diverse Sales Network and Logistics Skills
Diverse Sales Network and Logistics Skills Revenue Breakdown 2009/10 (2008/09) Domestic/ Exports Direct/ Bulk Hypermarket Distributors* Sales 4.0% (4.0%) 7.4% (9.6%) 7.0% (6.7%) Individual Large Scale Electronic Chain Stores Shops 22.0% (20.6%) 59.6% (59.1%) One layer from 40 branches, 169 sales o
Slide 16: 2010/11 Apr–May TV Sales Volume
2010/11 Apr – May TV Sales Volume China TV LED TV Targets 30% 2010/11 2009/10 Change 2010/11 Achieved (Units) (Apr - May) (Apr - May) % Target % China TV 866k 896k (3%) 7,500k 12% comprises: - CCFL TV 700.4k 696.1k 1% 5,500k 13% - LED TV 89.5k - n/a 2,000k 4% Overseas TV 359k 167k 115% 2,000k 18% To
Slide 17: Seasonality of China TV
Seasonality of China TV China TV Sales Volume by Month 1,200 FY10 FY09 1,000 FY08 FY07 800 FY06 ('000) Unit Sales FY05 600 400 200 - Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar 17
Slide 18: Digital Set Top Box Captures Overseas ODM Market
Digital Set Top Box Captures Overseas ODM Market China Market Migrating to Digitalisation 2015 Convergence of Media, Internet and Telecommunications Sales HK$ million 2,000.0 1,500.0 1,000.0 500.0 - 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 1H2009 2009/10 Total 92.8 175 368 733 1,120 1,309 822
Slide 19: Overseas Sales Geography Summary
Overseas Sales Geography Summary TV Product Mix Migrating to LCD TV 2009/10 2008/09 % overseas sales 60% 38% 37% 31% 40% 30% 21% 19% 20% 5% 8% 1% 1% 6% 3% 0% America Europe Asia Middle East Australasia Africa TV - Global strategic ODM customers, exploring self-brand strategy STB - High- end prod
Slide 20: China TV Market Shares April 2009 - March 2010
China TV Market Shares April 2009 - March 2010 Overall (Volume) LCD TV (Volume) Rank Brand % Rank Brand % 1 Hinsense 14.3% 1 Skyworth 15.7% 2 Skyworth 14.2% 2 Hisense 15.6% 3 Changhong 13.6% 3 TCL 13.0% 4 TCL 13.4% 4 Konka 11.3% 5 Konka 12.6% 5 Changhong 10.1% 6 Haier 7.4% 6 Haier 7.3% 7 Sharp 4.9%
Slide 21: China LCD TV Market Share (March 2010)
China LCD TV Market Share (March 2010) Top 6 Domestic Brands Secured 75% LCD TV (Volume) LCD TV (Revenue) Brand March Brand March 2010 2010 1 Hisense 15.8% 1 Hisense 15.2% 2 Skyworth 14.5% 2 Skyworth 13.1% 3 TCL 13.6% 3 TCL 11.8% 4 Changhong 11.4% 4 Konka 9.2% 5 Konka 11.2% 5 Changhong 8.6% 6 Haier
Slide 22: 2009 Home Appliances To Countryside
2009 “Home Appliances To Countryside” No. 1 LCD TV Volume Market Share LG 1.0% Others 2.0% No.1 LCD revenue market share 22.9% TCL 62% total sales volume Haier Rowa 1.7% 9.2% was LCD TV 10.3% Konka % of Skyworth total LCD 7.1% Changhong TV Volume and Revenue 22.3% CY 2009 2010 YTD 16% & 10% 47%
Slide 23: Speed Up Replacement and Penetration of LCD TV
Speed Up Replacement and Penetration of LCD TV “TV to Countryside” Sales Volume (m units) 1H2009 1.9 20% LCD TV 2H2009 6.0 Dec 70% LCD TV 2009 7.8 48% LCD TV 2010 (Jan – May) 7.3 72% LCD TV 2010E 10 - 12 70 - 75% LCD TV (25 - 30% of nationwide volume in 2010E) “Swapping Old for New” Sales Volume Jun
Slide 24: Subsidy Policies Extensions
Subsidy Policies Extensions Home Appliances To Countryside Retail price cap raised from RMB3,500 to RMB$7,000 in Feb 2010 but designated products NOT YET launched, subsidy cap at RMB$455, this time captured Skyworth 48 LCD TV models including 55” CCFL LCD TV and 11 LED backlit models up to 37” M
Slide 25: Subsidy Policies Extensions
Subsidy Policies Extensions Swapping Old For New 1 June, 2010 – end of 2011, 19 additional provinces and cities (Hebei, Shanxi, Liaoning, Dalian, Jilin, Heilongjiang, Anhui, Fujian, Xiamen, Jiangxi, Henan, Hubei, Hunan, Chongqing, Sichuan, Guizhou, Shaanxi, Gansu, Qinghai) are covered Restricts
Slide 26: Forecasted China TV National Unit Growth
Forecasted China TV National Unit Growth Assuming 80% of existing CRT TVs in urban areas are upgraded to LCD TVs in six years 000 Unites CRT LCD Others +11% 70,000 60 mn units +15% 60,000 +21% 54 mn units -7% 47 mn units 50,000 +15% 39 mn units +29% 56 mn units 40,000 +51% 49 mn units 30,000 +87% 38
Slide 27: The Overlay of TV Upgrade and Replacement
The Overlay of TV Upgrade and Replacement (2010 – 2013 Boom) Urban begins 2nd wave upgrade (CCFL – LED) while Rural begins 1st wave of upgrade (CRT – LCD) Time required for Market Permeation of Color TV and Flat TV in China from 20% to 100% Color TVs Urban 1986 11 years 1997 (Boom 1995 – 1999) Rural
Slide 28: Differentiated Products - ASP and Margin Premium
Differentiated Products - ASP and Margin Premium LED backlight Built-in settop box 4C (cable, computer, communication, content) 3D Home Entertainment Center Environmental Friendly series – energy saving by 30% Countryside High-end Models (55” LCD TV, 37” LED backlight) 42LED10 iF China D
Slide 29: Labour Cost in COGS
Labour Cost in COGS 2009/10 2008/09 Change 2010/11E Labour cost* in COGS 1.6% 1.8% 62% <1.9% COGS 100% 46% 100% * Included pension cost, staff benefits, staff insurance, and staff training Sensitivity on HKD/USD vs RMB Fluctuation IF RMB Appreciated by 5% HK$ million Total effect on profit befor
Slide 30: Appendices
Appendices LCD TV Replacement Demand in China China Becomes the World Largest LCD TV Market in 2010 LCD TVs > 80% of TV sales Industry Outlook TV Production Capacity Penetration of STB/ household in China Global demand of STB 30
Slide 31: LCD TV Replacement Demand in China
LCD TV Replacement Demand in China 400m Units = 40m units x 10 years 70% > 8 years old Robust growth in the coming years, given 15% penetration rate (60 m existing LCD TV) & increasing affordability Rural & Urban CRT TV Hinterlands Cities 120 m CRT TV 280 m (140% penetration) New TV (90% penetration
Slide 32: Industry Outlook
Industry Outlook Golden GoldenDecade Decade Rapid RapidValue Value&& Volume VolumeUpgrade Upgrade Digitalisation Digitalisation&& Replacement Replacement&& Countryside Countryside 3C 3CConvergence Convergence Penetration Penetration Consumption Consumption Brands Vertical Panel, Module Diversified C
Slide 33: China Becomes the World Largest LCD TV Market in 2010
China Becomes the World Largest LCD TV Market in 2010 LCD TV > 80% TV sales High mid/long term growth visibility on accelerating upgrade to LCD TV China LCD sales expanded much more faster in 2008 and 2009 than in the US, Europe, or Japan. Chinese consumers have stronger upgrade demand for new produ
Slide 34: Well Equipped for Earnings Growth
Well Equipped for Earnings Growth Upstream supply chain management Strategic partnerships with LG Display and CMO Adequate Production Capacity 2010/ 11 Shenzhen 7m units Guangzhou 2m units Inner Mongolia 1m units Logistics investments in regional logistic centers in Chengdu, Jiangxi and Nanjing Down
Slide 35: China Digital Set-top Box Penetration
China Digital Set-top Box Penetration Government Push & Unique Broadcasting Model In China Gives Domestic Manufacturers An Edge Over International Competitors (m) Units 710 700 672 640 615 600 580 534 498 500 400 300 227 238 195 205 216 211 174 184 173 193 200 150 125 99 100 72 0 2009 2010E 2011E 20
Slide 36: Global Set-top Box Huge Demand
Global Set-top Box Huge Demand 2009 YoY 29% 74% Made in China, YoY 42% (m) Units/ Year 120 110 100 100 91.2 91.2 83.8 76.5 80 71.1 59.3 60 40 10.8 14 15.3 16 20 0 2008 2009 2010E 2011E DVB-C DVB-T (DTT & iDTV & Combo) DVB-S (DTH & FTA) Source: iSupplyi, IMS Research, ST, Sony 2007 36
Slide 37: Objective Vision
Objective Wholly devoted to provide excellent digital audio-visual life to humans Vision To be the world’s No. 1 in the audio-visual industry ir@skyworth.com.hk www.skyworth.com/investor