Skyworth Group Limited · HKEX:751
Skyworth — FY2015/16 Earnings Presentation
44 slides from Skyworth's earnings presentation, Jun 14, 2016
Slide 1: 2015/16 Annual Results
2015/16 Annual Results 14 June 2016 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: Profit Surged 73% vs 2013/14 with Improved Margins
Profit Surged 73% vs 2013/14 with Improved Margins Year ended 31 Mar (HK$ million) 2015/16 2014/15 Change Revenue 42,695 40,135 6.4% Gross profit 9,363 8,023 16.7% Gross margin 21.9% 20.0% 1.9pp Operating profit (EBIT) 3,389 2,569* 31.9% Operating margin 7.9% 6.4%* 1.5pp Profit for the year 2,527 1,
Slide 4: Stringent Control of Expenses
Stringent Control of Expenses Year ended 31 Mar 1H 2015/16 2014/15 Change (% to sales) 2015/16 Selling and distribution 11.1% 12.0% (0.9pp) 11.4% General and administration 6.0% 4.3% 1.7pp 5.3% Total expense rate 17.1% 16.3% 0.8pp 16.7% • S&D: Stable salary and benefits, input more A&P but leveraged
Slide 5: Highly Liquid Position
Highly Liquid Position Year ended 31 Mar Mar 16 Mar 15 Change Sep 15 Change (HK$ million) Inventories - Total 5,494 4,342 26.5% 4,623 18.8% - Finished goods 3,509 2,734 28.3% 2,944 19.2% Liquid bills receivable - On hand 6,945 6,991 (0.7%) 4,624 50.2% - Endorsed to suppliers* - 5 (100%) 4 (100%) - D
Slide 6: Increased Bank Loans but Remains Net Cash
Increased Bank Loans but Remains Net Cash Year ended 31 Mar Mar 16 Mar 15 Change Sep 15 Change (HK$ million) Bank Borrowings 1. Financial liabilities - for bills discounted# 300 301 (0.3%) 387 (22.5%) 2. Other bank loans 7,805 2,285 241.6% 5,959 31.0% - Current 4,950 1,274 288.5% 3,877 27.7% - Non-c
Slide 7: Stringent Account Receivables Management
Stringent Account Receivables Management Mar 16 Mar 15 Change Sep 15 Return on equity holders of the 14.4% 14.3%* 0.1pp 12.5% Company Current ratio (times) 1.5 1.6 (6.3%) 1.5 AR turnover (days) - excluded bills receivables 45 44 2.3% 55 - with discounted bills 108 123 (12.2%) 112 - without discounte
Slide 8: Group Revenue Breakdown by Products 2015/16
Group Revenue Breakdown by Products 2015/16 (2014/15) Overseas TV Digital Set-top box 14.0% (14.4%) & LCD Modules 15.7% (12.5%) White Appliances China TV 5.5% (5.9%) * 56.5% (60.7%) HK$42.7bn 6.4% Others 8.3% (6.5%) ** * White Appliances are mainly refrigerators; washing machines and tablet PC **O
Slide 9: Segmental Profit Breakdown 2015/16 (2014/15)
Segmental Profit Breakdown 2015/16 (2014/15) Diversification of Business to Sustain Growth Overseas TV Digital Set-top box 4.8% (4.6%) & LCD Modules 23.8% (24.6%) White Appliances 5.9% (3.2%) China TV 63.1% (65.0%) Property Holding HK$3,215m 5.4%(6.2%) 23.6% Others -3.0% (-3.6%) 9
Slide 10: Segmental Profit by Operating Segments
Segmental Profit by Operating Segments Total 3,215 2,602 (+23.6%) China TV 1,691 2,028 154 (28.3%) (+19.9%) Overseas TV 120 765 (19.3%) Digital STB & LCD Modules 641 White Appliances 190 83 (+128.9%) (HK$m) Property Holding 2015/16 161 174 (+8.1%) -96 (+2.1%) 2014/15 Others -94 10
Slide 11: Gross Profit Margins
Gross Profit Margins 2015/16 2014/15 Change 1H2015/16 Group 21.9% 20.0% 1.9pp 20.6% China Market Overall 23.9% 22.0% 1.9pp 23.3% Overseas Market Overall 13.2% 13.5% 0.3pp 10.9% TV (China) 24.8% 22.1% 2.7pp 23.5% TV (Overseas) 10.1% 7.6% 2.5pp 8.9% Set-top box (China) 20.1% 22.5% 2.4pp 20
Slide 12: China TV Revenue Mix Upgrading to 4K Smart TV
China TV Revenue Mix Upgrading to 4K Smart TV Well Received Star Models Improved GP Margin % of China TV Sales 2015/16 2014/15 100% 80% 60% 49% 37% 28% 33% 35% 40% 18% 20% 0% Smart TV (4K) Smart TV (Non 4K) Others GP Margin 2015/16 2014/15 1H2015/16 Blended TV 24.8% 22.1% 23.5% Smart TV (4K) 31.9% 3
Slide 13: China Blended TV ASP
China Blended TV ASP Decline Due to Lower Panel Price and More Online Sales Improved Gross and Net Profit Margins ASP (HK$, net of tax and rebate ) 4,000 2,979 3,121 3,114 3,051 3,000 2,712 2,577 2,404 1,961 2,000 1,712 1,000 0 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 ASP 2015/16 2014/1
Slide 14: China TV Revenue Breakdown 2015/16 (2014/15)
China TV Revenue Breakdown 2015/16 (2014/15) Well Built Distribution Channels in Rural Market Fast Growing Online Channel Profitable Hypermarket Skyworth 4.9% (4.1%) Online Specialty Large Scale 20.0% Stores in Others Chain Stores 4.7% (5.7%) (11.6%) major cities 16.6% 10.6% (16.7%) (10.6%) Other El
Slide 15: Skyworth Specialty Stores in Major Cities
Skyworth Specialty Stores 2,959 located in Major Cities Around 2,000 located in 3rd and 4th tier Cities (Shenzhen) (Beijing) 15
Slide 16: Skyworth Strategic Retail Customers in 3rd 4th Tier Cities
Skyworth Strategic Retail Customers in 3rd 4th Tier Cities Skyworth Flagship Stores 1,500 will be opened in Rural 16
Slide 17: 2015/16 TV Sales Volume
2015/16 TV Sales Volume 4K Smart TV 28% Total Smart TV 70% of Mix No.1 LCD TV market share in China 1.4pp at 21.4% in 2015 2015/16 2014/15 (’000 units) Change% China TV 10,036 9,459 6% comprises: - Smart TV (4K) 2,793.8 1,385.5 102% - Smart TV (non-4K) 4,249.3 3,435.1 24% - Other Flat TV 2,992.8 4
Slide 18: 2016/17 TV Sales Volume Targets
2016/17 TV Sales Volume Targets: 4K Smart TV 44% Total Smart TV 79% of Mix 4K Smart TV reached 42% in April 2016 2016/17 2015/16 Change 2016/17 Targeted (’000 units) (Apr – May 16) (Apr – May 15) YoY % Target Growth% China TV 1,270 1,318 (4%) 11,000 9.6% comprises: - Smart TV (4K) 511.7 243.7 110% 4
Slide 19: Digital Set Top Box (000810.SZ Spin-off Listed in Sep 2014)
Digital Set Top Box 創維數字 (000810.SZ Spin-off Listed in Sep 2014) No.1 China Cable Operators Market & Exporter, Top 3 in Global Market Market Cap HK$20bn by June 2016, Skyworth holds 59.4% LCD Modules was Injected into Digital STB in 2015/16 7,000 (Sales HK$ million) 6,000 5,000 4,000 3,000 2,000 1,0
Slide 20: 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 Settop Box Acquired STRONG MEDIA in Europe in Sep 2015 % overseas sales 2015/16 2014/15 60% 50%
Slide 21: Internationalization
Internationalization Acquired Toshiba TV Plant in Indonesia to Expands in ASEAN Countries Skyworth Metz TV into European Market 21
Slide 22: China TV Market Shares May 2015 – Apr 2016
China TV Market Shares May 2015 – Apr 2016 (Domestic Brands 78%) All TV (Volume) All TV (Revenue) Rank Brand % Rank Brand % 1 Skyworth 17.8% 1 Skyworth 17.3% 2 Hisense 16.3% 2 Hisense 16.9% 3 TCL 14.2% 3 TCL 13.1% 4 Changhong 11.9% 4 Changhong 10.4% 5 Konka 11.3% 5 Samsung 10.4% 6 Haier 6.5% 6 Konka
Slide 23: China Market TV Sales Volume Forecast
China Market TV Sales Volume Forecast TV Volume 2012 2013 2014 2015 YoY 2016E YoY (m units) Total 44.46 47.79 44.61 46.74 4.8% 48.61 4.0% Skyworth China TV sales volume 2015 12.3% vs Market 4.8% Skyworth market shares gain 2015 YoY 1.4pp 21.4% 2015 market offline sales revenue 7.5% A
Slide 24: Skyworth & Internet
Skyworth & Internet Largest Smart TV Household Entrance with Self TV OS “coocaa” Strategic Alliances with Tencent, QIY, Alibaba, iCNTV, Voole, JD 24
Slide 25: Skyworth Smart TV Users in China
Skyworth Smart TV Users in China Additional 8m Smart TV Households Entrance in 2016 Smart TV installed since 2012 16.68m units Penetration 2015/16 70% (Up to 31 May 2016) Conversion Rate Accumulated Activated Users 13.36m 80% Daily Active Users 5.71m 43% Weekly Active Users 7.58m 57% Adv
Slide 26: Monetisation of Smart TV Users
Monetisation of Smart TV Users (HK50m in 2015/16 HK$100m in 2016/17) Advertising Content (RMB160bn market) Apps Store 影视(2000) E-commerce: Gaming Travel Education Shopping/ Health (RMB100bn market) Care/ Music/ KTV 26
Slide 27: 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% 27
Slide 28: Advertising Daily Input on coocaa by Provinces
Advertising Daily Input on coocaa by Provinces 1. Guangdong 2. Henang 3. Shangdong 4. Jiansu 5. Hebei Gaming on Big Panel Alliances with Geek Box, Ministation (Tencent) 28
Slide 29: Coocaa Alliances Top Tier Content Providers
Coocaa Alliances Top Tier Content Providers (Tencent and QIY) Offering the Best Experience to Skyworth Smart TV Users Content Total Total coocaa Paid Content Users Users Revenue 2015 16m 600k RMB24m 2016E 24m 1.5m RMB60m 2017E 32m 3.5m RMB150m Variety Document Hollywood Movie Drama Cartoons Sports M
Slide 30: 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 Top 5 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 30
Slide 31: coocaa Shopping, Sports and Health, Music
coocaa Shopping coocaa Sports and Health coocaa Music 31
Slide 32: Appendices
Appendices Latest Products (33) TV Technology Leader (34) 4K OLED HDR TV in CES & Industrial Design (35) Awards & Certificates (36-37) Production Capacity and Chain Management (38) LCD TV Replacement Cycle and Stages in China Market (39 – 40) Penetration of Digital Cable STB in China (
Slide 33: Globally the First OLED 4K HDR TV from Skyworth
Globally the First OLED 4K HDR TV from Skyworth Partnering Singing Contest on Beijing TV Show voting results on stage 2015 Top 3 Online Sales at JD.COM OTT box in China Online sales growth by 123% YoY Alliances with Tencent, QIY, Mango TV, Baidu, Sohu Apps Store activated users reached 7m 33
Slide 34: TV Technology Leader
TV Technology Leader OLED + 4K HDR, 14cores 64bits Processor, 4 Colours 4K, MEMC, E-Local Dimming 34
Slide 35: Skyworth 4K OLED HDR TV in CES Jan 2016
Skyworth 4K OLED HDR TV in CES Jan 2016 Global Technology & Industrial Design Standards 35
Slide 36: Awards and Certificates
Awards and Certificates 1st & 2nd Generation 4K TV - RGBW 4 Colours 4K TV (Aug 2013 & Apr 2014) Certified by Innolux, China Electronics Chamber of Commerce and LGD National Certificate: Full Colour Spectrum 4K 3 colors replaced 2 colors DCI 107% NTSC 117% 36
Slide 37: National Awards in Quality Sales Services
National Awards in Quality Sales Services 37
Slide 38: Vertical Integration and Chain Management
Vertical Integration and Chain Management Upstream supply chain management Strategic partnerships with LG Display, Innolux and BOE Investments in panel (LGD 8.5G fab in Guangzhou), module production TV Production Capacity 2016/17 (17m units 100% utilisation) Shiyan, Shenzhen 9m units Guangzhou 4m un
Slide 39: LCD TV Replacement Demand in China
LCD TV Replacement Demand in China >200m units CRT TV Remained at the end of 2015 LCD started in 2004 > 10 years old Growth sustains, given 56% LCD TV penetration rate (310m units installed) & increasing affordability Urban CRT TV Rural CRT TV 77m remained 126m remained (1.6 TV /household) (1.2 TV /
Slide 40: The Overlay of TV Upgrade and Replacement
The Overlay of TV Upgrade and Replacement (2012 – 2018E) 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) Rural
Slide 41: 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) Penetration: Digital STB 80%, HD 25%, Interactive 20%, Broadband 7%, OTT 0.7% Growth Drivers – Higher Penetration + Upgrade + Internet Services 600 (m) units 507 490 500 457 473 420 437 390 400
Slide 42: New Digital STB Demand in China
New Digital STB Demand in China Satellite STB 2012-17 Digital STB Total Sales Potential households Volume in China increase by 50m a year 100 92.16 92.03 Existing > 26.5m 83.01 households penetration Rural > 200m households 80 75.2 to be covered 68.35 IPTV + OTT Box Skyworth covered 26 60 59
Slide 43: Global Settop Box Stable Demand from Cable and Retail Operators
Global Settop Box Stable Demand from Cable and Retail Operators Over 230m units Every Year , Total Volume 11% YoY in 2014 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 (m) units 252.3 250 226.5 198.6
Slide 44: Vision
Vision To create a globally prominent brand of consumer electronic products ir@skyworth.com.hk investor.skyworth.com