Skyworth Group Limited · HKEX:751

Skyworth — H1 2013/14 Earnings Presentation

34 slides from Skyworth's earnings presentation, Nov 26, 2013

  1. Slide 1: 2013/14 Interim Results

    2013/14 Interim Results 26 November 2013 1

  2. 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

  3. Slide 3: Strong Top and Bottom Line Growth and Stable Payout

    Strong Top and Bottom Line Growth and Stable Payout Six months ended 30 Sep (HK$ million) 1H2013/14 1H2012/13 Change Turnover 20,022 16,389 22.2% Gross profit 3,833 3,301 16.1% Gross margin 19.1% 20.1% (1.0pp) Operating profit (EBIT) 1,043 830 25.7% Operating margin 5.2% 5.1% 0.1pp Profit for the pe

  4. Slide 4: Stringent Cost Structure

    Stringent Cost Structure Six months ended 30 Sep 1H 1H Change 2012/13 (% to sales) 2013/14 2012/13 Selling and distribution 11.8% 12.7% (0.9pp) 12.0% General and administration 3.8% 3.7% 0.1pp 3.7% 15.6% 16.4% (0.8pp) 15.7% Total expense rate • S&D expenses decreased mainly due to increase in sales

  5. Slide 5: Highly Liquid Position

    Highly Liquid Position Six months ended 30 Sep 1H 1H Change 2012/13 Change (HK$ million) 2013/14 2012/13 Inventories - Total 5,003 4,815 3.9% 5,109 (2.1%) - Finished goods 3,222 2,846 13.2% 3,169 1.7% Liquid bills receivable - On hand 7,556 6,655 13.5% 8,282 (8.8%) - Endorsed to suppliers* 658 1,365

  6. Slide 6: Bank loans replaced Bills to Finance Working Capital

    Bank loans replaced Bills to Finance Working Capital Six months ended 30 Sep 1H 1H Change 2012/13 Change (HK$ million) 2013/14 2012/13 Bank borrowings Financial liabilities - for forex hedging# 152 - - - - Other bank loans 4,088 3,885 5.2% 5,806 (29.6%) - Current 3,897 3,230 20.7% 5,581 (30.2%) - Lo

  7. Slide 7: Higher ROE

    Higher ROE Sep 13 Sep 12 Change Mar 13 Return on equity 13.6% 12.9% 0.7pp 15.1% Current ratio (times) 1.4 1.4 - 1.4 AR turnover (days) - excluded bills receivables 41 39 5.1% 31 - with discounted bills 122 134 (9.0%) 122 - without discounted bills 122 132 (7.6%) 120 Inventory Turnover (days) - Total

  8. Slide 8: Apr – Oct 2013/14 TV Sales Volume

    Apr – Oct 2013/14 TV Sales Volume NEW Target: China TV Volume p 9% 3D Cloud TV will be 32% In Sep 2013 Cloud TV reached 37% of Mix NEW Targeted 2013/14 2012/13 Change (’000 units) 2013/14 YoY Growth (Apr - Oct 13) (Apr – Oct 12) % % Target China TV 4,869 4,665 4% 9,500 9% comprises: - 3D Cloud TV 1

  9. Slide 9: Around 82% Revenue Generated in China Market under Brand

    Around 82% Revenue Generated in China Market under Brand Revenue Breakdown by Products 1H2013/14 (1H2012/13) Overseas TV 8.9% (7.2%) Digital Set-top box China TV 10.8% (11.2%) 68.1% (74.2%) LCD Module 2.5% (1.3%) HK$20.0bn White Appliances 5.6% (2.8%) * ! 22.2% Others 4.1% (3.3%) ** *White Appliance

  10. Slide 10: Gross Profit Margin by Products Group

    Gross Profit Margin by Products Sep 13 Sep 12 Change Mar 13 Group 19.1% 20.1% q 1.0pp 19.6% China TV 19.6% 21.4% " 1.8pp 20.9% Overseas TV 7.1% 4.6% ! 2.5pp 4.2% China set-top box 27.5% 30.0% " 2.5pp 27.8% ODM set-top box 23.5% 18.1% ! 5.4pp 20.4% LCD module (small size) 12.3% 11.2% ! 1.1pp 10.8% W

  11. Slide 11: Segmental Profit by Business Segments

    Segmental Profit by Business Segments Total 1169 954 China TV 763 670 Overseas TV -42 1 Digital Settop Box 263 226 LCD Module 96 69 1H2013/14 White Appliances 96 31 1H2012/13 Property Holding 24 20 Others -31 (HK$m) -63 11

  12. Slide 12: China TV Revenue Mix

    China TV Revenue Mix 3D LED TV Upgrading to 4k2k UHD 3D Cloud TV % of China TV Sales 1H2013/14 1H2012/13 80% 70% 60% 48% 50% 37% 29% 34% 40% 25% 23% 30% 20% 10% 0% 3D Cloud TV (including 4k) 3D LED TV 2D LED TV GP Margin 1H2013/14 2012/13 1H2012/13 2011/12 Flat Panel TV 20.1% 21.7% 22.1% 21.9% 3D Cl

  13. Slide 13: China Blended TV ASP Keeps Growing

    China Blended TV ASP Keeps Growing Pricing Power with Premium Brand and Product Innovation ASP (HK$, net of tax and rebate) 3,230 40% 2,979 3,121 3,114 35% 3,000 2,712 + 3.7% 30% 25% 2,000 1,712 1,961 +9.8% 20% 1,283 1,342 1,459 +38.3% +4.8 % 15% +17.3% -0.2% 10% 1,000 +14.5% 5% +8.7% +4.5% +4.6% 0%

  14. Slide 14: Sophisticated Distribution Channels into Rural Market

    Sophisticated Distribution Channels into Rural Market China TV Revenue Breakdown 1H2013/14 (1H2012/13) Direct Sales Skyworth 4.7% (3.9%) Specialty Hypermarket Domestic/ Exports Online Stores in 4.6% (3.9%) Distributors 6.4% (3.8%) 1.8% (3.9%) major cities Large Scale 9.5% (8.2%) Chain Stores 19.9% O

  15. Slide 15: Skyworth Specialty Stores 3,658 located in Major Cities

    Skyworth Specialty Stores 3,658 located in Major Cities (Beijing ) (Shenzhen) 15

  16. Slide 16: China TV Market Shares Oct 2012 – Sep 2013

    China TV Market Shares Oct 2012 – Sep 2013 (Domestic LCD TV 80%) LCD TV (Volume) LCD TV (Revenue) Rank Brand % Rank Brand % 1 Skyworth 17.8% 1 Skyworth 17.1% 2 Hisense 16.2% 2 Hisense 16.4% 3 TCL 15.5% 3 TCL 13.8% 4 Konka 13.2% 4 Konka 10.7% 5 Changhong 11.2% 5 Changhong 9.3% 6 Haier 5.9% 6 Samsung

  17. Slide 17: China LCD TV Market Shares (Sep 2013 YoY)

    China LCD TV Market Shares (Sep 2013 YoY) Skyworth Maintained No.1 Market Shares, Domestic brands 78% LCD TV (Volume) LCD TV (Revenue) Brand Sep Sep Change Brand Sep Sep Change (%pt) (%pt) 2013 2012 2013 2012 1 Skyworth 17.7% 17.3% 0.4% 1 Skyworth 16.6% 17.5% (0.9%) 2 Hisense 16.9% 15.5% 1.4% 2 Hise

  18. Slide 18: Digital Set Top Box Gross Margin Stable

    Digital Set Top Box Gross Margin Stable China Migrating to Digitalisation by 2015, Overseas Grows 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) 4,000.0 3,000.0 2,000.0 1,

  19. Slide 19: Overseas Revenue Geographical Summary

    Overseas Revenue Geographical Summary Skyworth TV Entering Emerging Markets % overseas sales 1H2013/14 1H2012/13 50% 49% 45% 40% 28% 30% 22% 21% 20% 8% 9% 10% 5% 6% 5% 1% 1% 0% America Europe Asia Middle East Australasia Africa n TV - Skyworth Brand sales 9.0% n TV - Product mix migrating to LED T

  20. Slide 20: LCD TV Average Size Trending Large

    National Day Holiday China LCD TV Sales Volume Flat Growth High-end products Penetrating 4K 5% 3D Smart TV 56% Size is Growing 50”+ > 28% 100% 2% 8% 4% 14% 70"+ 80% 21% 60"-­‐69" 26% LCD TV Average Size Trending Large 51"-­‐59" 60% 50 28% 46"-­‐50" 40 41.3" 41.4" 42.0" 43.2" 23% 40"-­‐45" 40% 5% 30

  21. Slide 21: Differentiated Product Mix – High End & Integrated with Internet

    Differentiated Product Mix – High End & Integrated with Internet Cloud TV (4K2K UHD TV 39” – 84”, Tanci Android, FPR 3D, ultra slim border) l2K content is upscalable to 4K; full color spectrum - DCI 107% NTSC 117%; HDMI (No distortion of transmission) lSelf-developed OS “Tianci” ; Multi-screens &

  22. Slide 22: Well Prepared TV OS

    Consumer Well Prepared Content – Applications, Experience Consumer base - Gesture & and Cloud Voice Services Remote Industrial Control Innovative Design and Sales Energy Strategies Efficiency Branding & Logistics Distribution Display & Sales Network - Broadband Technology & services Upstream TV Grow

  23. Slide 23: 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

  24. Slide 24: Appendices

    Appendices Ø 2013 – 2014 China Market TV Sales Volume Forecast Ø 2012/13 TV Sales Volume Ø LCD TV Replacement Stages in China Ø Production Capacity and Strategic Alliances Ø Penetration of Digital Cable STB in China Ø New Digital STB Products in China Ø Global STB Demand Ø Certificates and A

  25. Slide 25: 2013 - 2014 China Market TV Sales Volume Forecast

    2013 - 2014 China Market TV Sales Volume Forecast TV Volume 2013E 2012 YoY (m units) LCD 40.68 38.07 p 7% PDP 2.5 2.8 " 11% CRT 0.98 1.03 " 5% Total 44.16 41.90 p 5% v 2014E China TV sales volume " 2% to 45.6m units v 2014E 12% sales volume go thru online channels v 2014E 46”+ TV reach 38% in v

  26. Slide 26: 2012/13 TV Sales Volume

    2012/13 TV Sales Volume China TV Mix: 18% Cloud TV 30% 3D LED TV 48%2D LED TV In March 2013 Cloud TV reached 22% of Mix 2012/13 Targeted Change (’000 units) 2012/13 2011/12 Volume % Target Achieved% China TV 8,705 7,024 24% 8,100 107% comprises: - Cloud TV 1,594.8 0.0 n/a 1,800 89% - 3D LED TV 2,635

  27. Slide 27: The Overlay of TV Upgrade and Replacement (2012 – 2018E Boom)

    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)

  28. Slide 28: 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 2013/14 (14m units) Shiyan, Shenzhen 10m units (one-off land disposal of Gongming old p

  29. Slide 29: 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 35m units in 2013E 600 (m) units 507 490 500 457 473 420 437 390 400 364 235

  30. Slide 30: 2012-17 Digital STB Total Sales Volume in China

    New Digital STB Products in China 2012-17 Digital STB Total Sales Satellite STB Volume in China v Potential households 100 increase by 50m a year 92.16 92.03 v Existing > 26.5m 83.01 households penetration 75.2 80 v Rural > 200m households to be covered 68.35 60 59.21 IPTV, OTT Box v Sales 13m u

  31. Slide 31: 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

  32. Slide 32: Awards and Certificates

    Awards and Certificates Forbes 2013 Asia's Fabulous 50 32

  33. Slide 33: National Certificate: Full Colour Spectrum 4K

    National Certificate: Full Colour Spectrum 4K u 3 colors replaced 2 colors u DCI 107% u NTSC 117% CVIA Innovation Awards for Full Color Spectrum 4K 33

  34. Slide 34: Vision

    Vision To create a globally prominent brand of consumer electronic products ir@skyworth.com.hk investor.skyworth.com

Skyworth Group — H1 2013/14 Earnings Presentation on 6ix