2016/17 Interim Results
22 Nov 2016
(Updated 13 Jan 2017)
1 1
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 future
events and involve known and unknown risks and
uncertainties which could cause actual results,
performance or events to differ materially from those
expressed or implied in such statements.
2
Stable Gross Margin
Six months ended 30 Sep (HK$ million)
Revenue
1H2016/17
1H2015/16
Change
20,291
19,549
3.8%
4,170
4,023
3.7%
20.6%
20.6%
0.0pp
Operating profit (EBIT)
1,316
1,321
(0.4%)
Operating margin
6.5%
6.8%
(0.3pp)
948
985
(3.8%)
4.7%
5.0%
(0.3pp)
Attributable to non-controlling interests
112
116
(3.4%)
Attributable to owners of the Company
836
869
(3.8%)
Basic EPS
28.83
30.66
(6.0%)
Diluted EPS
28.44
30.20
(5.8%)
9.6
34.4%
9.6
32.2%
0.0%
Gross profit
Gross margin
Profit for the period
Net profit margin
(HK$ cents)
Dividend per share
Dividend payout (%)
2.2pp
3
Operating Expenses
1H
1H
2016/17
2015/16
Selling and distribution
11.7%
General and administration
Total expense rate
Six months ended 30 Sep
(% to sales)
Change
2015/16
11.4%
0.3pp
11.1%
6.9%
5.3%
1.6pp
6.0%
18.6%
16.7%
1.9pp
17.1%
 S&D: Raise basic salary and benefits for frontline staff as incentives, input
more A&P for OLED TV promotion, brand and market shares building.
Revenue growth was weaker than the target.
 G&A: R&D expenses (3.5% of sales) increased in investing in application
software, smart TV users data collection and analysis, developing highend, smart, energy-saving and health-caring products to sustain market
leading position, cope with the consumption upgrade trend as well as to
welcome smart home era.
4
Highly Liquid Position
(HK$ million)
Sep 16
Sep 15
Change
Mar 16
Change
Inventories
- Total
- Finished goods
6,075
3,676
4,623
2,944
31.4%
24.9%
5,494
3,509
10.6%
4.8%
Liquid bills receivable
- On hand
- Endorsed to suppliers*
- Discounted to banks#
4,552
463
4,624
4
387
(1.6%)
(100%)
19.6%
6,945
300
(34.5%)
0.0%
54.3%
(cash equivalent)
5,015
5,015
0.0%
7,245
(30.8%)
595
365
63.0%
493
20.7%
Cash and bank balances
4,418
4,163
6.1%
5,023
(12.0%)
Trade receivables
6,537
6,407
2.0%
5,290
23.6%
Pledged bank deposits
5
Net Cash
(HK$ million)
Sep 16
Sep 15
Change
Mar 16
Change
Bank Borrowings
1. Financial liabilities
- for bills discounted#
2. Other bank loans
- Current
- Non-current
463
6,484
4,229
2,718
387
5,959
3,877
2,469
19.6%
8.8%
9.1%
10.1%
300
7,805
4,950
3,155
54.3%
(16.9%)
(14.6%)
(13.9%)
Bank borrowings (1+2)
6,947
6,346
9.5%
8,105
(14.3%)
Trade payables
- On hand
- Under endorsed bills*
5,569
-
4,799
4
16.0%
(100%)
5,027
-
10.8%
0.0%
5,569
4,803
15.9%
5,027
10.8%
5,194
3,760
38.1%
5,195
0.0%
Total trade & bills payable
10,763
8,563
25.7%
10,222
5.3%
Net assets
16,991
15,446
10.0%
16,700
1.7%
Bills payable
6
Sep 16
Return on equity holders of the
Company
Current ratio (times)
AR turnover (days)
- excluded bills receivables
- with discounted bills
- without discounted bills
Inventory Turnover (days)
- Total
- Raw materials
- Finished goods
AP Turnover (included Bills Payables)
(days)
- with endorsed bills
- without endorsed bills
Net Debt/Equity Ratio
- Exclude discounted bills and
foreign
exchange hedging arrangements
Book value per share (HK dollars)
Sep 15
Change
Mar 16
10.9%
12.5%
(1.6pp)
14.4%
1.5
1.5
0.0%
1.5
53
109
105
55
112
109
(3.6%)
-2.7%
-3.7%
45
108
106
67
26
41
53
18
34
26.4%
44.4%
20.6%
55
19
35
121
121
104
104
16.3%
16.3%
106
106
Net Cash
5.68
5.40
5.2%
5.68
7
Group Revenue Breakdown by
Products 1H2016/17 (1H2015/16)
Digital Set-top box
14.5% (13.0%)
Overseas TV
22.2% (15.8%)
White Appliances
5.3% (5.8%) *
HK$20.3bn
 3.8%
Others 11.8% (7.9%)**
China TV
46.2% (57.5%)
* White Appliances are mainly refrigerators; washing machines and tablet PC
** Others included rental collection, property development, financial services, air
conditioner, security systems, lighting products and other consumer electronic
products
8
Stable Gross Profit Margins
1H2016/17
1H2015/16
Change
2015/16
Group
20.6%
20.6%
0.0pp
21.9%
China Market Overall
24.2%
23.3%
 0.9pp
23.9%
Overseas Market Overall
12.4%
10.9%
 1.5pp
13.2%
TV (China)
24.5%
23.5%
 1.0pp
24.8%
9.8%
8.9%
 0.9pp
10.1%
Set-top box (China)
17.6%
19.7%
 2.1pp
20.1%
Set-top box (Overseas)
26.7%
20.8%
 5.9pp
22.6%
White Appliances (refrigerator
and washing machine)
22.6%
24.7%
 2.1pp
27.6%
TV (Overseas)
 China TV: Stable margin by ramping up high-end mix to offset rising cost of
panel, more production automation and raise supply chain operational efficiency
 Overseas TV: Growth driver, improving margin by mix and self-brands proportion
 Digital STB (000810.SZ): Blended GPM 21.0%; No.1 profitability in China
 White Appliances: Cost of raw materials trending up, expenses under control
with production base in Nanjing and leverage on TV distribution network
9
Segmental Profit Breakdown 1H2016/17 (1H2015/16)
Diversification of Business to Sustain Growth
Digital Set-top box
22.8% (19.3%)
White Appliances
1.3% (4.3%)
Overseas TV
15.1% (6.0%)
HK$1,160m
 11.7%
Property Holding
9.0%(7.2%)
Others 6.2% (-2.1%)
China TV
45.6% (65.3%)
10
Segmental Profit by Operating Segments
1,160
1,313 (-11.7%)
Total
529 (-38.3%)
China TV
Overseas TV
79
264 (+3.9%)
Digital STB
White Appliances
Property Holding
Others
175
(+121.5%)
858
254
15 (-73.2%)
56
104 (+9.5%)
95
-29
73 (+351.7%)
(HK$m)
1H2016/17
1H2015/16
 China TV: Higher operating expenses while ASP so revenue decline YoY
 Overseas TV: Significant growth in scale
 White Appliances: Included depreciation cost of $40m
11
China TV Revenue Mix Upgrading to High-End
Well Received Star Models Stablalising GP Margin
% of China TV Sales
100%
1H2016/17
1H2015/16
66%
80%
60%
43%
25%
40%
30%
9%
20%
27%
0%
Smart TV (4K)
GP Margin
Smart TV (Non 4K)
Others
1H2016/17
1H2015/16
2015/16
Blended TV
24.5%
23.5%
24.8%
Smart TV (4K)
29.7%
32.5%
31.9%
Smart TV (Non 4K)
15.0%
19.7%
19.2%
Others
12.0%
13.2%
15.9%
4K Smart TV 42% sales volume in 1H2016/17, 46% in Sep 2016
4K OLED HDR TV is the latest product
12
China TV Blended ASP
Lag Behind Panel Cost Fluctuations
Ramping Up New and Star Series Mix in 2H to Stabilize ASP
4,000
ASP (HK$, net of tax and rebate)
2,712
3,000
2,000
1,712
2,979
3,121 3,114
3,051
2,577
2,404
1,961
2,123
1,000
0
07/08
08/09
09/10
ASP
10/11
11/12
12/13
13/14
14/15
15/16 1H16/17
1H2016/17
1H2015/16
2015/16
Smart TV (4K)
3,324
4,433
4,197
Smart TV (Non 4K)
1,359
2,083
1,863
Others
1,012
1,730
1,499
13
China TV Revenue Breakdown 1H2016/17 (1H2015/16)
Nationwide Well Built Distribution Channels Strong in Rural
Ongoing Reforms to Enhance Customers Loyalty and Suit Diversified
Consumer Behaviors
Other
Electronic
Shops cover
3rd tier cities
to rural 34.6%
(34.0%)
Online
17.6%
(17.2%)
Others
4.6% (3.1%)
Hypermarket
4.1% (3.7%)
Commercial
1.8 (1.0%)
Skyworth
Community
Stores in
major cities
10.1% (11.0%)
Large Scale
Chain Stores
27.2%
(30.0%)
 One layer from our 40 branches, 216 sales offices to 20,000+ retail customers
 Other electronic shops and Skyworth community stores highest profitability
 Large scale chain stores sustains market shares and brand building
14
O2O Community Stores Synergistic Partner with TMALL
3,060 located in Major Cities
Around 2,000 located in 3rd and 4th tier Cities
15
Strategic Retail Customers
in 3rd 4th Tier Cities
Flagship Stores 1,500 will be
opened in the Rural
16
2016/17 TV Sales Volume
Targets: 4K Smart TV 44% Total Smart TV 79% of Mix
4K Smart TV reached 53% in January 2017
(’000 units)
China TV
2016/17
2015/16
(Apr16 –
Jan17)
(Apr15 –
Jan16)
Change
%
2016/17
Target
Targeted
YoY
Growth
%
8,430
8,995
(6%)
11,000
9.6%
- Smart TV (4K)
3,851.0
2,474.1
56%
4,850
74%
- Smart TV (non-4K)
3,261.6
3,783.3
(14%)
3,850
(9%)
- Other Flat TV
1,317.6
2,737.7
(52%)
2,300
(23%)
5,992
3,714
61%
6,000
36.1%
14,422
12,709
13%
17,000
17.7%
comprises:
Overseas TV
Total
Targeted volume achieved Apr 16-Jan 17: China TV 77% Overseas TV 100% Overall 85%
Target to maintain No.1 TV market share in China at 20% in 2016
17
Digital Set Top Box 創維數字 (000810.SZ Spin-off Listed in Sep 2014)
No.1 China Cable Operators Market & Exporter, Top 3 in Global Market
Market Cap HK$20bn by Oct 2016, Skyworth holds 59.4%
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
(Sales HK$ million)
2010/11
Total
3,696
China
2,676
Overseas 1,020
2011/12
3,270
1,953
1,317
2012/13
3,906
1,898
2,008
2013/14
4,162
2,297
1,865
2014/15
5,019
2,876
2,143
2015/16
6,685
3,990
2,695
1H2015/16 1H2016/17
2,535
2,934
1,716
1,851
819
1,083

Growth drivers in overseas markets, IPTV boxes in China, cable operators servicing
streams, OTT box user data monetisation and VR gaming box


2015 sales volume : 69% cable operators digital boxes 25% retail OTT boxes
2015 No.1 market shares in both cable 15.7% and high definition cable boxes 16.7% in
China (peers: 浪潮, 银河, 九联, 九洲, 海信)


2015 cable operators clients 406 in China, 85% were HD boxes
Overseas top 3 market share with Technicolor and Pace, sales in 95 countries and
regions. Major overseas markets are Asia, Europe, India, Africa and South America
Source : Guideline Research 格蘭研究 (Mar 2016)
18
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
1H2016/17
% overseas sales
1H2015/16
60%
50%
44% 40%
40%
30%
24%
30%
20%
14%
20%
9%
6%
10%
4%
9%
0%
America
Europe
Asia
Middle East
Africa
 TV – Self-owned brands revenue 19.5%, ramping up to 50% by 2020
 TV – Product mix is upgrading to 4K, smart and large size TV
19
Internationalization – Growth Driver
Acquired Toshiba TV Plant in
Indonesia to Expand in
ASEAN Countries
Skyworth Metz OLED 4K HDR TV
into European Market
20
China TV Market Shares Oct 2015 – Sep 2016 (Domestic Brands 77%)
All TV (Volume)
All TV (Revenue)
Rank
Brand
%
Rank
Brand
%
1
Skyworth
17.7%
1
Skyworth
17.3%
2
Hisense
15.9%
2
Hisense
16.8%
3
4
TCL
Changhong
13.6%
11.6%
3
4
TCL
Changhong
12.7%
10.3%
5
6
7
8
9
10
Konka
11.3%
Haier
7.0%
Philips
5.0%
Samsung
4.6%
Sharp
3.4%
PPTV
1.2%
4K UHD TV (Volume)
5
6
7
8
9
10
Samsung
9.9%
Konka
9.0%
Sharp
6.2%
Sony
4.4%
Haier
4.2%
Philips
3.4%
4K UHD TV (Revenue)
1
Skyworth
20.9%
1
Skyworth
18.6%
2
3
Hisense
TCL
19.3%
15.5%
2
3
Hisense
Samsung
18.5%
12.9%
4
Changhong
12.3%
4
TCL
12.9%
Konka
10.3%
5
Changhong
10.2%
5
Samsung
7.3%
6
Konka
7.6%
6
Sharp
4.9%
7
Sharp
7.5%
7
Sony
2.9%
8
Sony
5.2%
8
Source: AVC Sep 2016 Offline Extrapolated sales data (1,505 cities; 6,700 retail terminals)
21
China Market TV Sales Volume Forecast
TV
Volume
(m units)
2012
2013
2014
2015
YoY
2016E
YoY
Total
44.46
47.79
44.61
46.74
 4.8%
50.56
 7.1%
 China TV sales volume Jan – Aug 2016  6.8% reached 30.5m units
 National Day Holiday Oct 2016 average TV size  1.8” YoY reached 48.8”
 50” 3% 55”  3.6% 65”  1.2% vs Labour Holiday May 2016
 Mix 32”11% 39/40”12% 42/43”12% 48/49”12% 50”9% 55”31% 65” 6%
 2016E 4K 47% Smart 84% 55”+ 31% HDR 7.9% S-Slim 3.6% Curved 4.7%
 1H2016 market TV sales volume  6.9% revenue  4.0% YoY
 1H2016 market shares: Traditional TV brands 75% Online brands 16% Foreign
brands 9%
 Consumers’ Considerations when buying a TV: 36% Trend
21% Design 19% Price 11% After-sales services
Source: AVC (July, Oct 2016)
25% Brand
22
Skyworth & Internet
Largest Smart TV Household Entrance with Self TV OS “coocaa”
Strategic Alliances with QIY, Tencent, Alibaba, iCNTV, Voole, JD
23
Skyworth Smart TV Users in China
Additional 8m – 10m Smart TV Households Entrance in 2016
Internet TV installed since 2012
21.33m units
(Up to 31 Jan 2017)
Penetration 2016/17
85%
Conversion Rate
Smart TV Daily Active Users
7.86m
37% 
Smart TV Weekly Active Users
9.91m
46% 
Turn-on TV Ad Daily Exposure
18m times

Daily Duration spent on Content
192 min

Gaming Daily Active Users
640k
1m (1,000 games)
24
Monetisation of Smart TV Users on Opened Platform
HK$50m in 2015/16
HK$100m in 2016/17
1H2016/17 Achieved Over HK$50m: 75% Content 22% Ad
Content
E-commerce:
Shopping/ Health
Care/ Music/ KTV
Advertising
(RMB160bn market)
Gaming
(RMB100bn market)
Travel
Apps Store
Education
25
Coocaa (non-profitable entity yet)
Invested by QIY in Sep 2016 Given RMB$3bn at Valuation
Best Hardware + Best Content + Smartest Memberships
Paid Users Numbers and Membership Renewal Rate
Increased Speedily in Sep and Oct 2016
TV Households Getting Used to Pay for Content
26
Coocaa Alliances Top Tier Content Providers (QIY and Tencent)
Offering the Best Experience to Skyworth Smart TV Users
coocaa
Total
Users
Content
Paid
Users
Total
Content
Revenue
2015
16m
600k
RMB24m
2016E
24m
1.5m
RMB60m
2017E
32m
3.5m
RMB150m
(No. of episodes)
Movie
Drama
Variety
Shows
Cartoons
Sports
Document
ary
MTV
Hollywood
Movies
Cinema
QIY
10,000
3,000
1,500
2,500
90,000
45,000
60,000
3,000
2,000
Tencent
8,900
4,500
3,000
3,000
30,000
2,000
2,500
1,616
4,122
LeTV
1,393
875
1,102
812
1,013
338
1,047
735
200
27
Advertising on Big Panel Revenue Breakdown
Coocaa Highest CPM in the Market
Ad before or
during Content
12%
Turn On TV
Loading Ad
(Static ) 56%
Turn On TV
Content Ad
(Dynamic) 12%
Others 8%
Front Page Block
Ad 12%
28
coocaa Online Education
For different age segments
coocaa Travel
Abundant demand in domestic
and global travel link up with
content on TV
Top 5 Paid Education
Apps
1.
2.
3.
4.
5.
果果乐园
义方快乐学堂
才智小天地
百映生活学苑
乐学名师课堂
29
coocaa Shopping
coocaa Sports and Health
Gaming on Big Panel
Alliances with Geek Box,
Ministation (Tencent)
30
Appendices
 TV Technology Leader (32 - 33)
 OLED 4K HDR TV in CES (34)
 2015/16 TV Sales Volume (35)
 Production Capacity and Chain Management (36)
 Global OTT TV & Video Revenue Forecasts by Region (37)
 LCD TV Replacement Demand in China (38)
 New Digital STB Demand in China (39)
31
TV Technology Leader
OLED + 4K HDR
AR TV – Gaming and
Education Apps
32
Globally First OLED 4K HDR TV
from Skyworth
Partnering to Produce and
Sponsor Singing Contest
Program on Beijing TV
33
Skyworth OLED 4K HDR TV in CES Jan 2016
Global
Technology & Industrial
Design Standards
34
2015/16 TV Sales Volume
4K Smart TV 28% Total Smart TV 70% of Mix
No.1 LCD TV market share in China  1.4pp at 21.4% in 2015
(‘000 units)
China TV
2015/16
2014/15
Change%
10,036
9,459
6%
- Smart TV (4K)
2,793.8
1,385.5
102%
- Smart TV (non-4K)
4,249.3
3,435.1
24%
- Other Flat TV
2,992.8
4,638.1
(35%)
4,410
3,715
19%
14,446
13,174
10%
comprises:
Overseas TV
Total
35
Vertical Integration 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 2016/17 (17m units )
Shiyan, Shenzhen
9m units
Guangzhou
4m units
Lishui, Nanjing
Inner Mongolia
3m units
1m units
Logistics investments in regional
logistic centers in Chengdu, Jiangxi and Nanjing
Downstream inventory and logistics
management
36
Source: Digital TV Research (Jul 2016)
37
LCD TV Replacement Demand in China
>200m units CRT TV Remained at the end of 2015
LCD started in 2004 > 10 years old
Urban CRT TV
77m remained
(1.6 TV /household)
Growth sustains, given
56% LCD TV penetration
rate (310m units installed) &
increasing affordability
TV Demand
Rural CRT TV
126m remained
(1.2 TV /household)
• 75% Replacement
Digitalisation
2015 - 20
• 15% More TV/ household
• 10% New TV (properties
•
and new family)
Urbanisation
New Properties
•
Public Housing 5 - 7m units/ year
built in 2012 - 14
Source: AVC Ltd. TV (Jan 2016), Chinese Statistics Yearbook (State Statistics Bureau)
38
New Digital STB Demand
in China
Satellite STB
 Potential households increase
by 50m a year
 Existing > 26.5m households
penetration
 Rural > 200m households to be
covered
IPTV + OTT Box
 Skyworth covered 26 provinces
and 203 1st tier cities in 2015
 Households grew 36% in 2015,
reached 46m
Terrestrial STB
 By 2015, digital terrestrial
receiver has to built in all
domestic TVs
2012-17 Digital STB Total Sales
Volume in China
100
92.16 92.03
83.01
75.2
80
68.35
60 59.21
40
2012 2013 2014 2015 2016E 2017E
(m Units)
Source: Guideline Research 格蘭研究 (Mar 2016)
39
Vision
To create a globally
prominent
brand of consumer
electronic products
[email protected]
http://investor.skyworth.com