Skyworth Group Limited · HKEX:751
Skyworth — FY2016/17 Earnings Presentation
44 slides from Skyworth's earnings presentation, Oct 10, 2017
Slide 1: 2016/17 Annual Results
2016/17 Annual Results Updated by 10 Oct 2017 1 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: Year ended 31 Mar results summary
Year ended 31 Mar (HK$ million) 2016/17 2015/16 Change Revenue 42,845 42,695 0.4% Gross profit 8,567 9,363 (8.5%) Gross profit margin 20.0% 21.9% (1.9pp) Operating profit (EBIT) 2,339 3,389 (31.0%) Operating profit margin 5.5% 7.9% (2.4pp) Profit for the year 1,529 2,527 (39.5%) Net profit margin 3.
Slide 4: Operating Expenses
Operating Expenses Year ended 31 Mar (HK$ million) 1H 2016/17 2015/16 Change (% to sales) 2016/17 Selling and distribution 11.9% 11.1% 0.8pp 11.7% General and administration 6.7% 6.0% 0.7pp 6.9% Total expense rate 18.6% 17.1% 1.5pp 18.6% S&D: Raise basic salary and benefits for frontline staff as
Slide 5: Higher Inventories to Cope with Rising Panel Cost and Tight Supply
Higher Inventories to Cope with Rising Panel Cost and Tight Supply (HK$ million) Mar 17 Mar 16 Change Sep 16 Change Inventories - Total 6,666 5,494 21.3% 6,075 9.7% - Finished goods 3,878 3,509 10.5% 3,676 5.5% Liquid bills receivable - On hand 6,057 6,945 (12.8%) 4,552 33.1% - Discounted to banks#
Slide 6: Net Cash
Net Cash (HK$ million) Mar 17 Mar 16 Change Sep 16 Change Borrowings 1. Financial liabilities - for bills discounted# 420 300 40.0% 463 (9.3%) 2. Other loans 7,572 7,805 (3.0%) 6,484 16.8% - Current 4,979 4,950 (0.6%) 4,229 17.7% - Non-current 3,013 3,155 (4.5%) 2,718 10.9% Total borrowings (1+2) 7,
Slide 7: Financial ratios
Mar 17 Mar 16 Change Sep 16 Return on equity holders of the 8.5% 14.4% (5.9pp) 10.9% Company Current ratio (times) 1.4 1.5 (6.7%) 1.5 AR turnover (days) - excluded bills receivables 47 45 4.4% 53 - with discounted bills 105 108 (2.8%) 109 - without discounted bills 102 106 (3.8%) 105 Inventory Turno
Slide 8: Group Revenue Breakdown by Products 2016/17 (2015/16)
Group Revenue Breakdown by Products 2016/17 (2015/16) Digital Set-top box and LCD Overseas TV Modules 15.3% (15.7%) 20.9% (14.0%) White Appliances 4.9% (5.5%) * HK$42.8bn Others 10.6% (8.3%)** 0.4% China TV 48.3% (56.5%) * White Appliances are mainly refrigerators; washing machines and tablet PC *
Slide 9: Gross Profit Margins
Gross Profit Margins 2016/17 2015/16 Change 1H2016/17 Group 20.0% 21.9% 1.9pp 20.6% China Market Overall 22.3% 23.9% 1.6pp 24.2% Overseas Market Overall 14.5% 13.2% 1.3pp 12.4% (China) 23.1% 24.8% 1.7pp 24.5% TV (Overseas) 11.8% 10.1% 1.7pp 9.8% Set-top box & (China) 14.4% 21.1% 6.7pp 17
Slide 10: Segmental Profit Breakdown 2016/17 (2015/16)
Segmental Profit Breakdown 2016/17 (2015/16) Diversification of Business to Sustain Growth Digital Set-top box and LCD Module 23.8% (23.8%) Overseas TV 21.2% (4.8%) White Appliances - 1.7% (5.9%) HK$2,019m Property Holding 37.2% 9.9%(5.4%) Others -0.2% (-3.0%) China TV 47.0% (63.1%) 10
Slide 11: Segmental Profit by Operating Segments
Segmental Profit by Operating Segments 2,019 Total (-37.2%) 949 (-53.2%) 3,215 China TV 2,028 428(+177.9%) Overseas TV 154 481 (- 37.1%) Digital STB & LCD Modules 765 - 35 (-118.4%) White Appliances 190 (HK$m) 201 (+15.5%) Property Holding 2016/17 174 Others - 5 (+94.8%) 2015/16 -96 China TV: High
Slide 12: 2016/17 TV Sales Volume
2016/17 TV Sales Volume In China 4K Smart TV Reached 46% vs 28% Smart TV 85% vs 70% YoY 2016/17 2015/16 (Apr 16 – (Apr 15 – Change (‘000 units) Mar 17) Mar 16) % China TV 9,339 10,036 (7%) comprises: - Smart TV (4K) 4,291.2 2,793.8 54% - Smart TV (non-4K) 3,632.1 4,249.3 (15%) - Other Flat TV 1,415.
Slide 13: 2017/18 TV Sales Volume Target
2017/18 TV Sales Volume Target 4K TV will reach 55% vs 46% YoY 4K TV reached 59% in Sep 17 2017/18 2016/17 YoY Change 2017/18 (’000 units) (Apr – Sep 17) (Apr – Sep 16) Growth % Target Target % China TV 3,499 4,416 (21%) 10,000 7% comprises: - 4K 1,880.2 1,858.0 1% 5,500 28% - Non-4K 1,618.6 2,557.6
Slide 14: China TV Revenue Mix Upgrading to High-End
China TV Revenue Mix Upgrading to High-End Pushed Star Models to Offset Pressure on GP Margin % of China TV Sales 2016/17 2015/16 100% 80% 68% 60% 49% 25% 33% 40% 7% 18% 20% 0% Smart TV (4K) Smart TV (Non 4K) Others GP Margin 2016/17 2015/16 1H2016/17 Blended TV 23.1% 24.8% 24.5% Smart TV (4K) 28.3%
Slide 15: China TV Blended ASP
China TV Blended ASP Raise Price on New Models and Larger Size Proportion Display Technology Upgrade Era CRT LCD OLED 3,000 ASP (HK$, net of tax and rebate) 2,500 2,000 1,500 1,000 500 - ASP 2016/17 2015/16 1H2016/17 Blended TV 2,217 2,404 2,123 Smart TV (4K) 3,261 4,197 3,324 Smart TV (Non 4K) 1,42
Slide 16: China TV Revenue Breakdown 2016/17 (2015/16)
China TV Revenue Breakdown 2016/17 (2015/16) Nationwide Well Built Distribution Channels Strong in Rural Ongoing Reforms to Enhance Customers Loyalty and Suit Diversified Consumer Behaviors Other Online Electronic 23.6% (20.0%) Shops cover Skyworth 2nd to 3rd tier Community cities 35.8% Stores in ma
Slide 17: O2O Community Stores Synergistic Partner with TMALL
O2O Community Stores Synergistic Partner with TMALL Around 5,000 Stores located in Major to 3rd and 4th Tier Cities Products + Experience + Community Service 17
Slide 18: Strategic Retail Customers and Flagship Stores
Strategic Retail Customers and Flagship Stores in 3rd 4th Tier Cities 18
Slide 19: China TV Market
China TV Market TV Volume 2012 2013 2014 2015 2016 YoY 2017E YoY (m units) Total 44.46 47.79 44.61 46.74 50.89 7.8% 53.01 4.2% 2017E Global 32% panel and 63% TV will be produced in China 1Q17 Panel price started to stablise, ASP trending up. China TV sales volume 13.8% YoY, demand weaker
Slide 20: China TV Market Shares 2016
China TV Market Shares 2016 (Domestic Brands 82%) 4K UHD TV (Volume) 4K UHD TV (Revenue) Rank Brand % Rank Brand % 1 Skyworth 19.2% 1 Hisense 17.9% 2 Hisense 19.0% 2 Skyworth 17.3% 3 TCL 15.4% 3 TCL 12.8% 4 Changhong 10.3% 4 Samsung 11.7% 5 Konka 8.8% 5 Changhong 8.8% 6 Samsung 6.2% 6 Sharp 7.2% 7 S
Slide 21: Digital Set Top Box
Digital Set Top Box 創維數字 (000810.SZ Spin-off Listed in Shenzhen A Share Market in Sep 2014) No.1 in China Operators & Export Market, No. 2 in Global Market Market Cap HK$12bn by June 2017, Skyworth holds 59.4% 7,000 (Sales HK$ million) 6,000 5,000 4,000 3,000 2,000 1,000 - 2010/11 2011/12 2012/13 20
Slide 22: China No.1 in cable operator market
China No.1 in cable operator market for 9 years (peers: 银河，同洲); First tier in telecom IPTV market (peers: Huawei, ZTE); Top 3 in consolidating OTT retail market After speedy growth in 10 years, China product mix is shifting from cable to IPTV and OTT boxes with lower margins. Focus to strengthen
Slide 23: 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 Set-top Box Acquired STRONG MEDIA in Europe in Sep 2015 % overseas sales 2016/17 2015/16 60% 50%
Slide 24: Internationalization – Growth Driver
Internationalization – Growth Driver 2016 Acquired Toshiba TV Plant in Indonesia to Expand in ASEAN Countries 2017 Strategic Partnership with Google to push smart TV in the overseas markets (GoogleTV、 CastTV、Netflix TV) Skyworth Metz OLED 4K HDR TV into European Market 24
Slide 25: Skyworth & Internet
Skyworth & Internet Largest Smart TV Household Entrance with Self TV OS “coocaa” Large Panel and Opened Platform to Distribute Internet Content and Products at Home 25
Slide 26: Coocaa invested by Tencent and Baidu iQIYI
Coocaa (Skyworth holds 72% ) Invested by Tencent in Jun 2017 Given Valuation at RMB$3.9bn Invested by Baidu iQIY in Sep 2016 Given Valuation at RMB$3bn Best Hardware + Best Content + Smartest Memberships Strategic Partners with Synergies to Boost the Numbers of Paid Users, Subscription Revenue per u
Slide 27: Skyworth Smart TV Users in China
Skyworth Smart TV Users in China Additional 8m – 10m Smart TV Households Entrance in 2017 Penetration in Internet TV installed since 2012 24.35m units >90% 2017/18 (Up to 31 August 2017) Conversion Rate Smart TV Daily Active Users 9.50m 41% Smart TV Weekly Active Users 11.97m 49% China Marke
Slide 28: Monetisation of Smart TV Users
Monetisation of Smart TV Users 2017/18 Revenue Target HK$300m HK$50m in 2015/16 HK$166m in 2016/17 2016/17 Content 63% Ad 28% 2017/18 Content 40% Ad 30% Content Advertising Apps Store (RMB160bn market) E-commerce: Shopping/ Health Gaming Travel Education Care/ Music/ KTV (RMB100bn market) 28
Slide 29: Paid Content Market Estimates in China
Paid Content Market Estimates in China Content Potential Smart TV Content Annual Revenue Content Activated Paid ARPU Split to TV Revenue Households Users (RMB) Platforms (RMB) (RMB) 2015 40m 3% 200 120m 30m 2016 69m 5% 250 684m 171m 2017E 105m 7% 350 2.14bn 535m 2018E 143m 10% 500 6.23bn 1.56bn Sour
Slide 30: 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% 30
Slide 31: coocaa Shopping, Sports and Health, Gaming
coocaa Shopping coocaa Sports and Health Gaming on Big Panel Alliances with Geek Box, Ministation (Tencent) 31
Slide 32: 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 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 32
Slide 33: Appendices
Appendices TV Technology Leader (34 - 36) Land and Recurrent Rental Income in Shenzhen (37) Production Capacity and Chain Management (38) Global OTT TV & Video Revenue Forecasts by Region (39) 16Q1 – 17Q2 China Internet Brands Sales Volume and Market Shares (40) LCD TV Replacement Demand
Slide 34: TV Technology Leader
TV Technology Leader Global Technology & Industrial Design Standard AR TV – Gaming and Education Apps Wallpaper OLED TV 34
Slide 35: National Technology Top Award; OLED 4K HDR TV
National Technology Top Award to bring up DTMB as international and industry Globally first OLED 4K HDR standard for terrestrial digitalisation TV launched in 2016 Strategic panel supply from LGD and BOE 35
Slide 36: Smart Home
Smart Home New 4colours 4K Ultra Slim LED TV Series 36
Slide 37: Land and Recurrent Rental Income in Shenzhen
Land and Recurrent Rental Income in Shenzhen Qianhai Nanshan Shiyan 37
Slide 38: Production Capacity and Chain Management
Production Capacity 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 2017/18 (19.5m units ) Shiyan, Shenzhen 10m units Guangzhou 6m units Lishui, Na
Slide 39: Global OTT TV & Video Revenue Forecasts
Source: Digital TV Research (Jul 2016) 39
Slide 40: China Internet Brands Sales Volume and Market Shares
16Q1 – 17Q2 China Internet Brands Sales Volume and Market Shares 17Q1 Market Shares Decline QoQ Due to Cash Flow Difficulty, Rising Cost and Shortage of Raw Materials (Unit: K, %) Source: Sigmaintell (May 2017) 40
Slide 41: LCD TV Replacement Demand in China
LCD TV Replacement Demand in China 66% Penetration at the end of 2016 First Generation LCD started in 2004 > 10 years old Demand sustains, given low TV penetration rate, lower TV price, increasing affordability and new Urban TV technology eg. Smart, OLED Rural TV penetration penetration (1.6 TV /hou
Slide 42: China Settop Box Product Mix
China Settop Box Product Mix 2018 OTT Box 16m units, IPTV Box 45m, Cable Box 16m OTT Box IPTV Box Cable Box Source: Guideline Research 格蘭研究 (Mar 2017) 42
Slide 43: 2016-2022 Global Settop Box Sales Volume
2016-2022 Global Settop Box Sales Volume 3.40 (m units） 334 337 331 3.30 326 321 3.20 315 3.10 308 3.00 296 2.90 2.80 2.70 2015年 2016年 2017年 2018年 2019年 2020年 2021年 2022年 Source: Grand View Research (2016) 43
Slide 44: Vision
Vision To create a globally prominent brand of consumer electronic products ir@skyworth.com.hk http://investor.skyworth.com