Skyworth Group Limited · HKEX:751
Skyworth — 1H2014/15 Earnings Presentation
37 slides from Skyworth's earnings presentation, Nov 25, 2014
Slide 1: 2014/15 Interim Results
2014/15 Interim Results 25 November 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: Improved Margins and Stable Payout
Improved Margins and Stable Payout Six months ended 30 Sep (HK$ million) 1H2014/15 1H2013/14 Change Turnover 18,478 20,022 (7.7%) Gross profit 3,612 3,833 (5.8%) Gross margin 19.5% 19.1% 0.4pp Operating profit (EBIT) 1,171 1,043 12.3% Operating margin 6.3% 5.2% 1.1pp Profit for the period 908 806 12
Slide 4: Stringent Control of Expenses
Stringent Control of Expenses Six months ended 30 Sep 1H 1H Change 2013/14 (% to sales) 2014/15 2013/14 Selling and distribution 12.2% 11.8% 0.4pp 12.5% General and administration 4.3% 3.8% 0.5pp 4.2% 16.5% 15.6% 0.9pp 16.7% Total expense rate • S&D expenses controlled well in advertising and promot
Slide 5: Highly Liquid Position
Highly Liquid Position Six months ended 30 Sep Sep 14 Sep 13 Change Mar 14 Change (HK$ million) Inventories - Total 5,302 5,003 6.0% 4,188 26.6% - Finished goods 3,680 3,222 14.2% 2,761 33.3% Liquid bills receivable - On hand 6,720 7,556 (11.1%) 9,644 (30.3%) - Endorsed to suppliers* 48 658 (92.7%)
Slide 6: Reduce Bank Loans & Extend Payables
Reduce Bank Loans & Extend Payables Six months ended 30 Sep Sep 14 Sep 13 Change Mar 14 Change (HK$ million) Bank Borrowings 1. Financial liabilities - for bills discounted# 98 - N/A 294 (66.7%) - for forex hedging^ 628 152 313.2% 829 (24.2%) 2. Other bank loans 2,892 4,088 (29.3%) 4,580 (36.9%) - C
Slide 7: Net Cash Company with Share Price At Book Value
Net Cash Company with Share Price At Book Value Sep 14 Sep 13 Change Mar 14 Return on equity 14.0% 13.6% 0.4pp 11.6% Current ratio (times) 1.4 1.4 - 1.3 AR turnover (days) - excluded bills receivables 51 41 24.4% 38 - with discounted bills 135 122 10.7% 130 - without discounted bills 134 122 9.8% 12
Slide 8: Group Revenue Breakdown by Products 1H2014/15
Group Revenue Breakdown by Products 1H2014/15 (1H2013/14) Overseas TV 11.0% (8.3%) Digital Set-top box 12.3% (10.8%) White Appliances 7.2% (5.6%) * China TV 61.7% (68.7%) LCD Modules 1.9% (2.5%) HK$18.48bn 7.7% Others 5.9% (4.1%) ** * White Appliances are mainly refrigerators; washing machines and
Slide 9: Segmental Profit Breakdown 1H2014/15
Segmental Profit Breakdown 1H2014/15(1H2013/14) Diversification of Business to Sustain Growth Digital Set-top box Overseas TV 21.8% (22.5%) 3.9% (-3.6%) White Appliances 2.3% (8.2%) LCD Modules 6.7% (8.2%) China TV HK$1,278m Property Holding 60.6% (65.3%) 9.0% 6.4%(2.1%) Others -1.7% (-2.7%) 9
Slide 10: Segmental Profit by Operating Segments
Segmental Profit by Operating Segments 1,278 (+9%) Total 1,169 China TV 774 (+1%) 763 Overseas TV 50 (+219%) -42 Digital Settop Boxes 279 (+6%) 263 LCD Modules 85 (-11%) 96 White Appliances 29 (-70%) 1H2014/15 96 Property Holding 82 (+242%) 1H2013/14 24 Others -21 (+32%) -31 (HK$m) 10
Slide 11: Gross Profit Margin by Products
Gross Profit Margin by Products 1H2014/15 1H2013/14 Change 2013/14 Group 19.5% 19.1% 0.4pp 19.3% TV (China) 20.8% 19.6% 1.2pp 20.1% TV (Overseas) 9.2% 7.1% 2.1pp 7.2% Set-top box (China) 21.2% 27.5% 6.3pp 25.1% Set-top box (Overseas) 23.3% 23.5% 0.2pp 21.8% White Appliances (refrigerator 1
Slide 12: White Appliances / LCD Modules
White Appliances LCD Modules 12
Slide 13: China TV Revenue Mix Upgrading to 4K Cloud TV
China TV Revenue Mix Upgrading to 4K Cloud TV Well Received New Models Improved GP Margin % of China TV 1H2014/15 1H2013/14 100% Sales 80% 55% 60% 34% 36% 40% 40% 26% 20% 9% 0% 4K Cloud TV Cloud TV Others GP Margin 1H2014/15 1H2013/14 2013/14 Flat Panel TV 21.0% 20.1% 20.5% 4K Cloud TV 28.3% 35.8% 3
Slide 14: China Blended TV ASP Declining
China Blended TV ASP Declining Due to Lower Panel Price and More Online Sales ASP (HK$, net of tax and rebate ) 4,000 3,121 3,114 3,051 3,000 2,712 2,979 2,633 1,961 2,000 1,712 1,459 1,000 0 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 1H14/15 ASP 1H2014/15 1H2013/14 2013/14 4K Cloud TV 5,231 6,
Slide 15: Sophisticated Distribution Channels into Rural Market
Sophisticated Distribution Channels into Rural Market China TV Revenue Breakdown 1H2014/15 (1H2013/14) Direct Sales Hypermarket 3.5% (4.7%) Skyworth 3.7% (4.6%) Domestic/ Exports Specialty Distributors Online Large Scale 2.3% (1.8%) 10.3% (6.4%) Stores in Chain Stores major cities 19.9% 11.0% (9.5%)
Slide 16: Skyworth Specialty Stores 3,881 located in Major Cities
Skyworth Specialty Stores 3,881 located in Major Cities (Beijing) (Shenzhen) 16
Slide 17: Skyworth Strategic Retail Customers in 3rd 4th Tier Cities
Skyworth Strategic Retail Customers in 3rd 4th Tier Cities 17
Slide 18: Digital Set Top Box
Digital Set Top Box (Backdoor Listing in Sep 2014 SZ000810) China Migrating to Digitalisation by 2015 - 20, Overseas Better Growth China Cable STB Penetration 65% Only, 380m units total Demand in 2014-17 Growth Drivers in HD, Multi-functional, Satellite, Terrestrial and OTT, IPTV Boxes (Sales HK$ mi
Slide 19: Overseas Revenue Geographical Summary
Overseas Revenue Geographical Summary Skyworth TV Entering Emerging Markets % overseas sales 1H2014/15 1H2013/14 60% 49% 50% 40% 24% 28% 26% 30% 26% 17% 20% 8% 6% 5% 9% 10% 1% 1% 0% America Europe Asia Middle East Australasia Africa TV - Skyworth Brand sales 10.5%, ramping up gradually TV - Prod
Slide 20: 2014/15 TV Sales Volume
2014/15 TV Sales Volume Targets: 4K Cloud TV 20% Other Cloud TV 40% of Mix In Sep 2014, 4K Cloud TV reached 15% 2014/15 2013/14 Change 2014/15 Targeted (’000 units) YoY (Apr – Oct 2014) (Apr – Oct 2013) % Target Growth% China TV 5,041 4,869 4% 9,000 4.6% comprises: - 4K Cloud TV 679.5 240.0 183% 1,8
Slide 21: China Market TV Sales Volume Forecast
2014 – 17 China Market TV Sales Volume Forecast TV Volume 2014E 2013 YoY 2012 YoY (m units) Total 45.09 47.79 5.6% 44.46 12.5% 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 T
Slide 22: China TV Market Shares Oct 2013 – Sep 2014
China TV Market Shares Oct 2013 – Sep 2014 (Domestic LCD TV 78%) LCD TV (Volume) LCD TV (Revenue) Rank Brand % Rank Brand % 1 Skyworth 17.0% 1 Skyworth 16.2% 2 Hisense 16.4% 1 Hisense 16.2% 3 TCL 13.9% 3 TCL 12.1% 4 Konka 12.8% 4 Konka 10.8% 5 Changhong 12.2% 5 Changhong 10.3% 6 Haier 5.6% 6 Samsung
Slide 23: National Day Holiday 2014 China LCD TV
National Day Holiday 2014 China LCD TV Sales Volume 8.1% Sales Revenue 15.6% YoY High-end Products Penetrating 4K 27% 23% Smart TV 64% 7% 50”+ 36% 7% Size is Growing 55”+ 7% Size ASP 100% (RMB) 1% 5% 70"+ 32” 1,482 80% 0% 4% 17% 60"-69" 42” 2,352 12% 60% 24% 51"-59" 11% 49” 3,413 46"-50"
Slide 24: Appendices
coocaa 酷開 55”TV A55 智慧屏幕 极快、简单、好玩 ￥6999.0 Appendices 2013/14 Sales Volume 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 Digi
Slide 25: 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% 2013/14 2012/13 (’000 units) 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 26: Skyworth & Internet
Skyworth & Internet Self-developed OS “coocaa OS”, Content “Hollywood Express”, Online Brand “coocaa” TV Cooperations with Alibaba, Tencent, QIY, Xunlei and Nibiru 26
Slide 27: Skyworth coocaa TV Most Popular Online Brand in 2013
Skyworth coocaa TV Most Popular Online Brand in 2013 27
Slide 28: Skyworth OLED TV Launched in Dec 2013
Skyworth OLED TV Launched in Dec 2013 28
Slide 29: 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% 29
Slide 30: Advertising Award
Advertising Award coocaa TV Integrated Sales and Marketing Program 30
Slide 31: 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 32: LCD TV Replacement Demand in China
LCD TV Replacement Demand in China >250m units CRT TV Remained at the end of 2014 > 10 years old Growth sustains, given 48% LCD TV penetration rate (260m units installed) & increasing affordability Urban CRT TV Rural CRT TV 110m 140m (1.4 TV /household) (1.2 TV /household) TV Demand • 70% Replacemen
Slide 33: 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 34: 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, Internet and Interactive 14m Sales Volume, 60% HD STB in 2H2014E 600 (m) units 507 490 500 457 473 420 437 390 400 364 235 241 300 229 215 2
Slide 35: New Digital STB Products in China
New Digital STB Products in China Satellite STB 2012-17 Digital STB Total Sales Volume in China Potential households 100 increase by 50m a year 92.16 92.03 Existing > 26.5m 83.01 households penetration 80 75.2 Rural > 200m households to be covered 68.35 IPTV, OTT Box Sales 13m units in 2013E
Slide 36: Global Settop Box Stable Demand
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 37: Vision
Vision To create a globally prominent brand of consumer electronic products ir@skyworth.com.hk investor.skyworth.com