Skyworth Group Limited · HKEX:751
Skyworth — 1H2018/19 Earnings Presentation
45 slides from Skyworth's earnings presentation, Nov 27, 2018
Slide 1: 2018/19 Interim Results
2018/19 Interim Results 27 Nov 2018 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: Six months ended 30 Sep results summary
Six months ended 30 Sep (HK$ million) 1H2018/19 1H2017/18 Change Revenue 22,252 21,489 3.6% Gross profit 4,012 3,386 18.5% Gross profit margin 18.0% 15.8% 2.2pp Operating profit (EBIT) 679 (12) 5,758.3% Operating profit margin 3.1% (0.1%) 3.2pp Profit for the year 348 (189) 284.1% Net profit margin
Slide 4: Operating Expenses
Operating Expenses Six months ended 30 Sep 1H 1H Change 2017/18 (% to sales) 2018/19 2017/18 Selling and distribution 9.5% 10.9% (1.4pp) 9.9% General and administration 7.0% 6.2% 0.8pp 6.3% Total expense rate 16.5% 17.1% (0.6pp) 16.2% S&D: Stringent control with reduction G&A: R&D expenses (4.4%
Slide 5: Strong Cash Flow
Strong Cash Flow (HK$ million) Sep 18 Sep 17 Change Mar 18 Change Inventories - Total 6,350 6,770 (6.2%) 6,486 (2.1%) - Finished goods 3,555 3,987 (10.8%) 3,927 (9.5%) Liquid bills receivable - On hand 5,128 4,094 25.3% 6,177 (17.0%) - Discounted to banks# 437 436 0.2% 573 (23.7%) (cash equivalent)
Slide 6: Net Cash
Net Cash (HK$ million) Sep 18 Sep 17 Change Mar 18 Change Borrowings 1. Financial liabilities - for bills discounted# 437 436 0.2% 573 (23.7%) 2. Other loans 7,193 7,245 (0.7%) 8,749 (17.8%) - Current 6,335 5,629 12.5% 7,687 (17.6%) - Non-current 1,295 2,052 (36.9%) 1,635 (20.8%) 3. Panda Bond (1st
Slide 7: Return on equity and turnover ratios
Sep 18 Sep 17 Change Mar 18 Return on equity holders of the 1.3% (2.4%) (3.7pp) 2.9% Company Current ratio (times) 1.4 1.4 - 1.4 AR turnover (days) - excluded bills receivables 77 59 30.5% 57 - with discounted bills 127 106 19.8% 109 - without discounted bills 123 102 20.6% 105 Inventory Turnover (d
Slide 8: Group Revenue Breakdown by Products
Group Revenue Breakdown by Products 1H2018/19 (1H2017/18) Digital Set-top box and LCD White Appliances Modules (000810.SZ) 7.1% (5.9%) * 18.2% (17.8%) Others Overseas TV 19.8% (27.1%) HK$22.25bn 16.9% (8.4%)** 3.6% China TV 38.0% (40.8%) * White Appliances are mainly refrigerators; washing machine
Slide 9: Gross Profit Margins Recovering
Gross Profit Margins Recovering 1H2018/19 1H2017/18 Change 2017/18 Group 18.0% 15.8% 2.2pp 16.7% China Market Overall 19.4% 19.3% 0.1pp 20.5% Overseas Market Overall 14.5% 9.2% 5.3pp 9.4% (China) 19.3% 19.8% 0.5pp 21.8% TV (Overseas) 12.2% 5.9% 6.3pp 6.6% Set-top box & (China) 13.3% 8.4%
Slide 10: Segmental Profit Breakdown
Segmental Profit Breakdown 1H2018/19 (1H2017/18) Diversification of Business to Sustain Growth Property Holding Others 14.5%(222.0%) 51.7% (78.0%) White Appliances HK$751m 6.5% (24.4%) 1,731.7% Digital Set-top box and LCD Module China TV (000810.SZ) -14.1% (-365.8%) 22.1% (70.7%) Overseas TV 19.3%
Slide 11: Segmental Profit/Loss by Operating Segments
Segmental Profit/ Loss by Operating Segments 751 Total 41 +1,731.7% China TV -106 +29.3% -150 Overseas TV 145 +400.0% 29 Digital STB & LCD Modules 166 +472.4% 29 49 +390.0% (HK$m) White Appliances 10 1H2018/19 109 +19.8% Property Holding 91 1H2017/18 388 Others 32 +1,112.5% China TV: Flat in scale
Slide 12: TV Sales in April - September 1H2018
TV Sales in April - September 1H2018 Volume Revenue 2018 2017 2018 2017 Unit Unit Increase/ HKD HKD Increase/ (‘000) (‘000) (Decrease) Million Million (Decrease) China Market 4,004 3,499 14.4% 8,450 8,764 (3.6%) Overseas Market 3,474 3,855 (9.9%) 4,399 5,820 (24.4%) Total 7,478 7,354 1.7% 12,849 14,
Slide 13: 2017/18 TV Sales Volume
2017/18 TV Sales Volume 4K TV reached 56% in FY18 vs 46% in FY17 2017/18 2016/17 (’000 units) (Apr17-Mar18) (Apr16-Mar17) Change% China TV 7,867 9,339 (16%) comprises: - 4K 4,368.1 4,291.2 2% - Non-4K 3,498.7 5,047.3 (31%) Overseas TV 7,953 6,941 15% Total 15,820 16,280 (3%) Targeted volume achieved
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 1H2018/19 1H2017/18 100% 73% 75% 80% 60% 40% 27% 25% 20% 0% Smart TV (4K) Smart TV (Non 4K) GP Margin 1H2018/19 1H2017/18 2017/18 Blended TV 19.3% 19.8% 21.8% Smart TV (4K) 21.7% 23.7% 25.4% Smart TV (Non 4
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 1H2018/19 1H2017/18 2017/18 Blended TV 2,111 2,505 2,495 Smart TV (4K) 2,920 3,515 3,353 Smart TV (Non 4K) 1,
Slide 16: China TV Revenue Breakdown
China TV Revenue Breakdown 1H2018/19 (1H2017/18) Nationwide Well Built Distribution Channels Strong in Rural Ongoing Reforms to Enhance Customers Loyalty and Suit Diversified Consumer Behaviors Other Electronic Online Shops cover 32.8% (23.7%) 3rd, 4th tier cities to rural 34.6% (37.0%) Skyworth Oth
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 2009 2011 2013 2015 2016 2017 2018E YoY (m units) 51.4 Total 29.4 48.9 54.3 55.0 59.4 53.1 3.3% 13.5% 2018 Jan – Jun China TV demand stable: sales volume 3.6% YoY (online mix reached 44%); Revenue 2.0% YoY (ASP 10.2%YoY) 1H2018 OLED TV sales volume 110.3% YoY
Slide 20: China TV Market Shares
China TV Market Shares Sep 17 – Oct 18 (Domestic Brands Volume 79%) 4K UHD TV (Volume) 4K UHD TV (Revenue) Rank Brand % Rank Brand % 1 Hisense 16.5% 1 Hisense 17.4% 2 Skyworth 15.4% 2 Skyworth 15.2% 3 TCL 12.2% 3 TCL 11.9% 4 Changhong 10.6% 4 Changhong 9.7% 5 Konka 8.5% 5 Sharp 8.2% 6 Sharp 8.3% 6 S
Slide 21: China TV Market Product Mix Size Trending Larger
China TV Market Product Mix Size Trending Larger Size Range Monthly by Volume Size Range Monthly by Revenue (inches”) Jun 17 Dec 17 Mar 18 (inches”) Jun 17 Dec 17 Mar 18 32- 0.0% 0.0% 0.0% 32- 0.0% 0.0% 0.0% 32-36 15.6% 12.8% 13.0% 32-36 5.1% 3.6% 3.9% 37-39 2.5% 2.8% 3.3% 37-39 1.2% 1.2% 1.4% 40-45
Slide 22: Digital Set Top Box (000810.SZ)
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$7.3bn by Nov 2018, Skyworth holds 57.2% 9,000 (Sales HK$ million) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - 2010/11 2011
Slide 23: Set-top box market position
China No.1 in cable operator market for 10 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 strengthe
Slide 24: 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 1H2018/19 1H2017/18 60%
Slide 25: Internationalization – Growth Driver
Internationalization – Growth Driver @CES Las Vegas, IFA Berlin and AWE Shanghai Overseas Production sites in Indonesia, Germany and Africa Branches set up in 20 countries or regions 25
Slide 26: Skyworth Smart TV with Self-developed OS coocaa
Skyworth Smart TV with Self-developed OS “coocaa” Future Smart Large Panel Device and Opened Platform for Big Data Monetisation at Smart Home 26
Slide 27: Big Data Analysis Consumers' Behavior on Skyworth Smart TV
Big Data Analysis Consumers’Behavior on Skyworth Smart TV 27
Slide 28: Coocaa Invested by Baidu, Tencent, iQIYI
Coocaa (Skyworth holds 56.8%) Invested by Baidu (11%) Given Valuation at RMB10bn in Mar 2018 Tencent (6.9%) Given Valuation at RMB3.9bn in Jun 2017 iQIYi (4.1%) Given Valuation at RMB3bn in Sep 2016 Best Smart TV + Best Entertainment + AI in Smart Home Synergies to Transform the Living Room Economy
Slide 29: TV with AI functions integrated with coocaa OS
TV with AI functions integrated with coocaa OS and Duer OS Content Push Based on Users Category Accurate Recognition and Instant Enquiry Solving Smart Home Assistant – Interactive AI Function 29
Slide 30: Monetisation of Skyworth Smart TV Users
Monetisation of Skyworth Smart TV Users 2018/19 Revenue Target HK$500m vs HK$342m in 2017 HK$50m in 2015/16 HK$166m in 2016/17 2016/17 Content 63% Ad 28% 2017/18 Content 46% Ad 39% Content Advertising Apps Store (RMB160bn market) E-commerce: Shopping/ Health Gaming Travel Education Care/ Music/ KTV
Slide 31: Skyworth Smart TV Users in China
Skyworth Smart TV Users in China Additional 8m – 10m Smart TV Household Every Year Internet TV installed since 2012 32.05m units (Oct 2018) Transformation Rate Smart TV Monthly Active Users 18.41m 57% Smart TV Monthly Activated Users 627k Penetration > 90% 2017/18 Coocaa Monetisation Revenue fro
Slide 32: 2018 Chinese New Year Red Pockets Snatch Activity
2018 Chinese New Year “Red Pockets Snatch” Activity To Induce Transformation and Explore New Advertising Pattern 32
Slide 33: 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 34: 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% 34
Slide 35: coocaa Shopping, Sports and Health, Gaming
coocaa Shopping coocaa Sports and Health Gaming on Big Panel Alliances with Geek Box, Ministation (Tencent) 35
Slide 36: 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 36
Slide 37: Appendices
Appendices Land and Recurrent Rental Income in Shenzhen (38) Brand Valuation (39) Integrated Chain Management and Production Capacity (40) LCD TV Replacement Demand in China (41) Global OTT TV & Video Revenue Forecasts by Region (42) China Settop Box Product Mix (43) 2016 -2022 Global
Slide 38: Assets and Recurrent Rental Income in Shenzhen
Assets and Recurrent Rental Income in Shenzhen Nanshan Qianhai Shiyan 38
Slide 39: Brand Valuation in China
Brand Valuation in China Achieved RMB100bn in 2017 Headquarter & Smart Production Base in GZ Development Zone 39
Slide 40: Integrated Chain Management and Production Capacity
Integrated Chain Management and Production Capacity Upstream Strong and Cost Efficient Supply Chain Management Strategic partnerships with LG Display, Innolux and BOE Investments in LGD 8.5G LCD Panel fab & module fab in Guangzhou TV Production Capacity 2018/19 (19.5m units ) Shiyan, Shenzhen 10m un
Slide 41: LCD TV Replacement Demand in China
LCD TV Replacement Demand in China 75% Penetration at the end of 2017 First Generation LCD launched in 2004 Demand sustains, given low TV penetration rate, lower TV price, increasing affordability and new Urban TV technology eg. Smart, OLED Rural TV penetration penetration (1.8 TV /household) (1.3 T
Slide 42: Global OTT TV & Video Revenue Forecasts by Region
Source: Digital TV Research (Jul 2016) 42
Slide 43: 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) 43
Slide 44: 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) 44
Slide 45: Vision
Vision To create a globally prominent brand of consumer electronic products ir@skyworth.com.hk http://investor.skyworth.com