Skyworth Group Limited · HKEX:751
Skyworth — 1H2015/16 Earnings Presentation
44 slides from Skyworth's earnings presentation, Nov 23, 2015
Slide 1: 2015/16 Interim Results
2015/16 Interim Results 23 November 2015 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) 1H2015/16 1H2014/15 Change Revenue 19,549 18,478 5.8% Gross profit 4,023 3,612 11.4% Gross margin 20.6% 19.5% 1.1pp Operating profit (EBIT) 1,321 1,171 12.8% Operating margin 6.8% 6.3% 0.5pp Profit for the period 985 908 8.5% N
Slide 4: Stringent Control of Expenses
Stringent Control of Expenses Six months ended 30 Sep 1H 1H Change 2014/15 (% to sales) 2015/16 2014/15 Selling and distribution 11.4% 12.2% (0.8pp) 12.0% General and administration 5.3% 4.3% 1.0pp 4.3% Total expense rate 16.7% 16.5% 0.2pp 16.3% • S&D: Stable salary and benefits, input more A&P but
Slide 5: Highly Liquid Position
Highly Liquid Position Six months ended 30 Sep Sep 15 Sep 14 Change Mar 15 Change (HK$ million) Inventories - Total 4,623 5,302 (12.8%) 4,342 6.5% - Finished goods 2,944 3,680 (20.0%) 2,734 7.7% Liquid bills receivable - On hand 4,624 6,720 (31.2%) 6,991 (33.9%) - Endorsed to suppliers* 4 48 (91.7%)
Slide 6: Increased Bank Loans
Increased Bank Loans Six months ended 30 Sep Sep 15 Sep 14 Change Mar 15 Change (HK$ million) Bank Borrowings 1. Financial liabilities - for bills discounted# 387 98 294.9% 301 28.6% - for forex hedging^ - 628 (100%) - - 2. Other bank loans 5,959 2,892 106.1% 2,285 160.8% - Current 3,877 2,192 76.9%
Slide 7: Stringent Inventories Management
Stringent Inventories Management Sep 15 Sep 14 Change Mar 15 Return on equity holders of the 12.5% 14.0% (1.5pp) 14.3% Company Current ratio (times) 1.5 1.4 7.1% 1.6 AR turnover (days) - excluded bills receivables 55 51 7.8% 44 - with discounted bills 112 135 (17.0%) 123 - without discounted bills 1
Slide 8: Group Revenue Breakdown by Products
Group Revenue Breakdown by Products 1H2015/16 (1H2014/15) Overseas TV 15.8% (11.0%) Digital Set-top box 11.2% (12.3%) White Appliances 5.8% (7.2%) * China TV 57.5% (61.7%) LCD Modules 1.8% (1.9%) HK$19.55bn 5.8% Others 7.9% (5.9%) ** * White Appliances are mainly refrigerators; washing machines an
Slide 9: Segmental Profit Breakdown 1H2015/16
Segmental Profit Breakdown 1H2015/16(1H2014/15) Diversification of Business to Sustain Growth Digital Set-top box Overseas TV 16.1% (21.8%) 6.0% (3.9%) White Appliances 4.3% (2.3%) LCD Modules 3.2%(6.7%) China TV HK$1,313m Property Holding 65.3% (60.6%) 7.2%(6.4%) 2.7% Others -2.1% (-1.7%) 9
Slide 10: Segmental Profit by Operating Segments
Segmental Profit by Operating Segments Total 1,313 1,278 (+2.7%) China TV 858 774 (+10.9%) Overseas TV 79 (+58.0%) 50 212 (-24.0%) Digital Settop Boxes 279 LCD Modules 85 42 (-50.6%) 29 56 (+93.1%) White Appliances (HK$m) Property Holding 95 (+15.9%) 1H2015/16 82 Others -29 (+38.1%) 1H2014/15 -21 10
Slide 11: Gross Profit Margins
Gross Profit Margins 1H2015/16 1H2014/15 Change 2014/15 Group 20.6% 19.5% 1.1pp 20.0% China Market Overall 23.3% 20.7% 2.6pp 22.0% Overseas Market Overall 10.9% 13.5% 2.6pp 13.5% TV (China) 23.5% 20.8% 2.7pp 22.1% TV (Overseas) 8.9% 9.2% 0.3pp 7.6% Set-top box (China) 20.2% 21.2% 1.0pp 2
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 1H2015/16 1H2014/15 100% 80% 60% 43% 30% 34% 40% 40% 26% 27% 20% 0% Smart TV (4K) Smart TV (Non 4K) Others GP Margin 1H2015/16 1H2014/15 2014/15 Blended Flat TV 23.5% 21.0% 22.1% Smart TV (
Slide 13: China Blended TV ASP
China Blended TV ASP Decline Due to Lower Panel Price and More Online Sales Gross and Net Profit Margin Improved ASP (HK$, net of tax and rebate ) 4,000 2,979 3,121 3,114 3,051 3,000 2,712 2,577 2,525 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 1H15/16 ASP 1H2015/16 1H2
Slide 14: Well Built Distribution Channels into Rural Market
Well Built Distribution Channels into Rural Market China TV Revenue Breakdown 1H2015/16 (1H2014/15) Fast Growing Online Channel Same Profitability vs Offline Hypermarket Skyworth Large Scale Online 3.7% (3.7%) Specialty Chain Stores Others 17.2% (10.3%) 4.2% (5.8%) Stores in 18.3% major cities (19.9
Slide 15: Skyworth Specialty Stores
Skyworth Specialty Stores 3,665 located in Major Cities Over 1,000 located in 2nd tier Cities (Shenzhen) (Beijing) 15
Slide 16: Skyworth Strategic Retail Customers and Flagship Stores
Skyworth Strategic Retail Customers in 3rd 4th Tier Cities Skyworth Flagship Stores 1,500 will be opened in Rural 16
Slide 17: Digital Set Top Box (Spin-off Listed Sep 2014)
Digital Set Top Box (創維數字 SZ000810 Spin-off Listed in Sep 2014) No.1 China Cable Operators Market & Exporter, Top 3 in Global Market Market Cap HK$15bn by Nov 2015, Skyworth holds 58.54% Growth Drivers in Operator Service and Operating System, Big Data Monetisation 4,000 (Sales HK$ million) 3,000 2,
Slide 18: Overseas Revenue Geographical Summary
Overseas Revenue Geographical Summary Skyworth Brand Entering Emerging and European Markets TV Acquired Sinoprima in Africa in 2014 & METZ in Germany in 2015 Settop Box Acquired STRONG in Europe in 2015 % overseas sales 1H2015/16 1H2014/15 50% 40% 40% 30% 30% 26% 26% 24% 20% 20% 17% 6% 10% 4% 6% 0%
Slide 19: 2015/16 TV Sales Volume
2015/16 TV Sales Volume Targets: 4K Smart TV 25% Other Smart TV 40% of Mix 4K Smart TV reached 28% in Aug – Oct 2015 2015/16 2014/15 Change 2015/16 Targeted (’000 units) YoY (Apr – Oct 15) (Apr – Oct 14) % Target Growth% China TV 5,229 5,041 4% 10,000 5.7% comprises: - Smart TV (4K) 1,316.0 679.5 94
Slide 20: China TV Market Shares Oct 2014 - Sep 2015
China TV Market Shares Oct 2014 - Sep 2015 (Domestic Brands 80%) LCD TV (Volume) LCD TV (Revenue) Rank Brand % Rank Brand % 1 Skyworth 17.4% 1 Skyworth 16.9% 2 Hisense 16.7% 2 Hisense 16.5% 3 TCL 14.6% 3 TCL 12.9% 4 Konka 13.0% 4 Changhong 10.7% 5 Changhong 12.6% 5 Konka 10.3% 6 Haier 5.5% 6 Samsung
Slide 21: 2015 – 17E China Market TV Sales Volume Forecast
2015 – 17E China Market TV Sales Volume Forecast TV Volume 2015E YoY 2016E YoY 2017E YoY (m units) Total 44.73 0.3% 44.68 0.1% 45.35 1.5% Skyworth China TV sales volume Jan – Sep 2015 11.3% vs Market 3.5% Skyworth market shares gain Jan – Sep 2015 YoY 19.3% 20.8% 3Q2015 market TV sal
Slide 22: National Day Holiday 2015 China TV Market
National Day Holiday 2015 China TV Market Domestic Brands 81.3% Japanese 2.7% Korean 1.0% High-end Products Penetration: 4K 53% Smart 79% 55”+ 34% Curved 4.8% Ultra Light & Slim 2.6% Online 16% Rural 54% OLED TV 0.25% ASP 42” RMB2,220 55” RMB5,638 Size is Growing 55” 8.8% YoY Average 32" 17.7% S
Slide 23: Skyworth & Internet: Smart TV Open Platform coocaa
Skyworth & Internet Largest Smart TV Opened Platform with Self TV OS “coocaa” Strategic Alliances with Tencent, Alibaba, JD, iCNTV, QIY, Voole 23
Slide 24: Skyworth Smart TV Users in China
Skyworth Smart TV Users in China Smart TV installed since 2012 12.8m units Penetration 2015/16 60% (Up to 31 Oct 2015) Conversion Rate Accumulated Activated Users 9.6m 75% Daily Active Users 4.1m 43% Weekly Active Users 5.3m 55% Advertisement Monthly Exposure 125m times 1m times per mo
Slide 25: Smart TV OS, Big Data Research & Monetization, Smart Home
Smart TV OS, Big Data Research & Monetization, Smart Home 25
Slide 26: Monetisation of Big Data Strategies
Monetisation of Big Data Strategies 7+ Revenue Streams (HK50m in 2015/16) E-commerce: Shopping/ Content Advertising Health Care (RMB17bn 影视(2000) (RMB160bn market) market)/ Music/ KTV Gaming Travel Apps Store Education (RMB100bn market) 26
Slide 27: Advertising Revenue Breakdown
Advertising Revenue Breakdown Ad before or Highest CPM in the market during Content 12% Turn On TV Loading Ad Turn On TV Content Ad (Static ) 56% (Dynamic) 12% Others 8% Front Page Block Ad 12% 27
Slide 28: Advertising Income by Provinces and Products
Advertising Income by Provinces 1. Guangdong 2. Shangdong 3. Jiansu 4. Hebei 5. Hubei Advertising Income by Products 1. Auto 2. Smart electronic product 3. Servicing 4. Beverage 5. Household electronic product 28
Slide 29: coocaa Shopping Mall, Suppliers, Top 10 Education Apps
coocaa Shopping Mall 沙发购 Suppliers Top 10 Education Apps 1. 义方快乐学堂 2. 贝瓦儿歌 3. 才智小天地 4. 我的小尼克学堂 5. 口袋故事听听 6. 百映生活学苑 7. 乐学名师课堂 coocaa Travel Agents Partners 8. 南方分级阅读 9. 果果乐园 10. 童乐客厅幼教 29
Slide 30: Internationalization
Internationalization Strategic Alliance with Toshiba on White Appliances in China and Japan Markets 2015-19 China Soccer Team Skyworth Metz into Official Sponsor European Market 30
Slide 31: Appendices
Appendices coocaa TV & OTT Box 4K Curved OLED TV in CES & Industrial Design Awards & Certificates 2013/14 & 2014/15 TV Sales Volume Production Capacity and Strategic Alliances LCD TV Replacement Cycle and Stages in China Market Penetration of Digital Cable STB in China New Digital ST
Slide 32: Quality, Young and Creative Best Seller Online TV Brand
Quality, Young and Creative Best Seller Online TV Brand 32
Slide 33: 2014 Top 3 Most Popular OTT box in China
2014 Top 3 Most Popular OTT box in China 33
Slide 34: Skyworth 4K Curved OLED TV in CES Jan 2015
Skyworth 4K Curved OLED TV in CES Jan 2015 Global Technology & Industrial Design Standards 34
Slide 35: 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 2015/16 (15m units) Shiyan, Shenzhen 11m units Guangzhou 3m units Inner Mongolia 1m uni
Slide 36: 2014/15 TV Sales Volume
2014/15 TV Sales Volume 4K Smart TV 15% Other Smart TV 36% of Mix 4K Smart TV reached 20% in Jan 2015 2014/15 2013/14 (’000 units) Change% (Apr 14 – Mar 15) (Apr 13 – Mar 14) China TV 9,459 8,601 10% comprises: - 4K Smart TV 1,385.5 648.0 114% - Smart TV 3,435.1 2,422.8 42% - Other Flat TV 4,638.1 5
Slide 37: 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% 37
Slide 38: 14cores 64bits Processor, 4 Colours 4K, MEMC, E-Local Dimming
14cores 64bits Processor, 4 Colours 4K, MEMC, E-Local Dimming 38
Slide 39: 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 51% LCD TV penetration rate (260m units installed) & increasing affordability Urban CRT TV Rural CRT TV 100m remained 150m remained (1.6 TV /household) (1.2 TV /household) TV Deman
Slide 40: 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 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) Digital STB Penetration 80%, HD STB 20% ONLY Growth Drivers – Higher Penetration + Upgrade to HD + Internet Services 600 (m) units 507 490 500 457 473 420 437 390 400 364 235 241 300 230 215 22
Slide 42: 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 43: Global Settop Box Stable Demand
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