1. business and industrial
2. company
3. earnings

Results Review, 26 November 2014
Skyworth Digital (751 HK)
Buy (Maintained)
Technology - Hardware & Equipment
Market Cap: USD1,547m
Target Price:
Price:
HKD5.30
HKD4.23
Macro
Risks
Well Positioned For 2H15 Rebound
Growth
Value
Skyworth Digital Holdings (751 HK)
Price Close
Relative to Hang Seng Index (RHS)
4.90
125
4.70
121
4.50
116
4.30
112
4.10
108
3.90
103
3.70
99
3.50
94
3.30
140
90
120
100
80
40
Oct-14
Aug-14
Jun-14
Mar-14
Jan-14
20
Nov-13
Vol m
60

24.3m/3.07m
4.3
25.3
3.49 - 4.79
54
2,837
Wong Wai Sen, Stephen
LSV Asset Management
Alliance Bernstein LP
2H15 rebound seen. At its analyst briefing, management: i) kept its TV
shipment targets for China/Overseas at 9m/3m units, ii) is confident of
achieving a HoH improvement in TV ASP, and iii) expects 4K TVs
product mix to increase further to 20% in 2H. We expect the latter two to
drive further GPM improvement to 19.9%. We also see a 52% YoY jump
in 2H15F recurring NP on a low base effect. Management also shared
that its cloud TV platform now has an active user base of 4.3m (from 2m
in August), which is encouraging but we believe revenue generated from
the platform is still minimal. It has also completed its Nanjing white goods
factory in April, which is capable of manufacturing 6m units of white
appliances. We believe these new businesses will help Skyworth
achieve a more diversified and sustainable growth in the next 3-5 years.
35.9
5.1
5.1

12m
Forecasts and Valuations
Mar-12
Mar-13
Mar-14
Mar-15F
Mar-16F
Total turnover (HKDm)
28,232
37,824
39,480
40,149
43,759
Reported net profit (HKDm)
1,347
1,501
1,254
3,061
1,863
Recurring net profit (HKDm)
1,380
1,539
1,336
1,610
1,863
Recurring net profit growth (%)
26.9
11.5
(13.2)
20.5
15.7
Recurring EPS (HKD)
0.52
0.56
0.48
0.57
0.66
DPS (HKD)
0.16
0.18
0.15
0.23
0.22
Christopher Tse +852 2103 9415
Recurring P/E (x)
8.07
7.52
8.90
7.44
6.43
[email protected]
P/B (x)
1.32
1.16
1.10
0.97
0.88
P/CF (x)
83.2
2.7
3.8
5.1
Share Performance (%)
YTD
Absolute
Relative
(0.9)
(1.5)
1m
2.2
1.6
3m
2.2
9.1
6m
17.5
15.4
9.0
10.1
Shariah compliant
Maintain BUY with a higher HKD5.30 TP (from HKD4.70). We trim our
FY15/16F recurring NP forecasts by 3%/2% but our TP rises as we roll
forward using the same 8x on our new FY16F recurring EPS (5-year
mean forward P/E).
Kong Yong Ng +852 2103 5844
Dividend Yield (%)
[email protected]
na
3.7
4.3
3.6
5.4
5.1
EV/EBITDA (x)
7.38
7.69
8.38
5.22
4.42
Return on average equity (%)
17.3
16.3
12.1
26.5
14.4
Net debt to equity (%)
16.9
27.9
9.5
Our vs consensus EPS (adjusted) (%)
net cash net cash
(0.8)
9.6
Source: Company data, RHB
See important disclosures at the end of this report


2

.
2
0
.
2
0
0
.
3
0
0
Skyworth’s 1H15 recurring NP fell 3% YoY against an 8% YoY revenue .
0
decrease. The decline was well expected as the expiry of China's 0
energy savings subsidy in May 2013 resulted in a high base as TV sales 0
were front loaded into 1H14. We expect recurring NP to rebound 52%
YoY in 2H15 on a low base effect. We trim our FY15/16 recurring NP
forecasts but raise our TP to HKD5.30 (25.3% upside) as we roll forward
to 8x FY16F P/E. Trading at 6x FY16F P/E and offering a 5% dividend.
Keep BUY.
 Solid 1H15. Skyworth reported a 15% YoY increase in 1H15 net profit.
However, excluding forex and one-off subsidies totalling HKD74m, we
estimate that recurring NP had fallen 3% YoY. Revenue declined 8%
YoY as TV sales dropped 13%, partly offset by +5%/+18% growth in settop boxes / white goods. GPM rose 0.4 ppt YoY to 19.5% as 4K TV
product mix rose to 13% (1H14: 4%) and procurement cost on display
panels decreased, which offset the 18% YoY drop in TV ASPs. Opex to
sales ratio rose 0.8 ppt YoY to -16.4%, but opex decreased 3% YoY due
to effective cost controls. The higher ratio was also offset by a 41% rise
in other income (mainly government grants and interest income).
Skyworth declared an interim dividend of HKD0.095, keeping payout
ratio at 33% (1H14: same).
Source: Bloomberg
Avg Turnover (HKD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (HKD)
Free float (%)
Share outstanding (m)
Shareholders (%)




Powered by EFATM Platform
1
Skyworth Digital (751 HK)
26 November 2014

Stronger balance sheet. As at end 1H15, Skyworth turned to a net cash
position from FY14’s 9.5% net gearing after receiving a CNY990m (HKD1.24bn)
partial payment for the previously announced sale of a piece of land in
Gongming, Shenzhen. Its inventory days stood at 59 days (1H14: 57) while
trade receivables were up slightly to 68 days from 65 days in 1H14.

Gongming land sale to be concluded in 2H15. Skyworth expects to receive
CNY660m (HKD832m), the remainder of the proceeds from the Gongming land
sale in 2H15. It will also book the associated accounting gains in 2H15. On a
pre-tax basis, we believe the gain will amount to HKD1,670m. Management
plans to use the sale proceeds for general working capital.
Figure 1: Interim results
March YE (HKD m)
1H14
2H14
1H15
YoY
2H15F
YoY
FY14
FY15F
Revenue
TV
15,410
14,074
13,436
-13%
14,792
5%
29,484
28,228
PRC
13,632
12,612
11,396
-16%
12,614
0%
26,244
24,010
Overseas
1,778
1,462
2,040
15%
2,178
49%
3,240
4,218
2,162
2,000
2,270
5%
2,215
11%
4,162
4,485
LCD modules
496
363
348
-30%
600
65%
859
948
White goods
1,122
1,410
1,323
18%
2,572
82%
2,532
3,895
Other income
792
1,529
979
24%
1,342
-12%
2,321
2,321
Property holding
40
82
122
205%
150
83%
122
272
Total revenue
20,022
19,458
18,478
-8%
21,671
11%
39,480
40,149
-31,851
-32,235
7,629
7,914
19.3%
19.7%
-16.6%
-16.0%
1,059
1,496
3.7%
Digital set-top boxes
1h/2h split
51%
49%
46%
54%
Cost of revenue
-16,189
-15,662
-14,866
-17,369
3,833
3,796
3,612
GPM
19.1%
19.5%
19.5%
Total opex
-3,117
-3,453
-3,037
-15.6%
-17.7%
-16.4%
716
343
575
3.6%
1.8%
3.1%
4.3%
2.7%
Other income
402
571
568
325
973
893
Other gains (losses)
-62
-87
45
1,670
-149
1,715
Finance costs
-83
-80
-85
-57
-163
-142
0
-20
-4
-4
-20
-8
973
727
1,099
1,700
3,954
Gross profit
Opex / sales ratio
Operating profit
OPM
Associates and JV
PBT
Income tax
Effective tax rate
-6%
4,302
13%
19.9%
-3%
-3,381
-2%
-15.6%
-20%
13%
921
2,855
169%
293%
-167
-100
-191
-500
-267
-691
17.2%
13.8%
17.4%
-17.5%
15.7%
17.5%
MI
-87
-92
-84
Net profit
719
535
824
NPM
-119
15%
2,237
3.6%
2.7%
4.5%
Recurring net profit
770
565
750
NPM - recurring
3.8%
2.9%
4.1%
4.0%
1h/2h split
58%
42%
47%
53%
-179
-203
318%
1,254
3,061
3.2%
7.6%
52%
1,336
1,610
3.4%
4.0%
10.3%
-3%
859
Source: Company data, RHB
See important disclosures at the end of this report
2
Skyworth Digital (751 HK)
26 November 2014
Figure 2: Changes to earnings forecast
FY Mar 31 (HKDm)
FY3/15F
FY3/16F
old
new
Chg
old
new
Chg
Revenue
TV
31,463
28,228
-10%
33,737
30,419
-10%
PRC
27,686
24,010
-13%
29,256
25,724
-12%
Overseas
3,777
4,218
12%
4,481
4,695
5%
Digital set-top boxes
4,485
4,485
0%
4,709
4,709
0%
LCD TV panels
1,160
948
-18%
1,450
1,043
-28%
White goods
5,627
3,895
-31%
7,146
4,947
-31%
Other products
2,321
2,321
0%
2,321
2,321
0%
Property holding
128
272
112%
135
320
138%
Total revenue
45,183
40,149
-11%
49,497
43,759
-12%
YoY chg
14.4%
1.7%
9.5%
9.0%
-36,216
-32,235
-39,680
-35,080
8,967
7,914
9,817
8,679
17.5%
3.7%
9.5%
9.7%
Cost of revenue
Gross profit
YoY chg
Gross profit margin
-12%
19.8%
19.7%
19.8%
19.8%
Selling expenses
-5,603
-4,804
-6,088
-5,207
Admin expenses
-1,762
-1,614
-1,881
-1,707
-16.3%
-16.0%
-16.1%
-15.8%
1,603
1,496
1,848
1,765
YoY chg
51.3%
41.3%
15.3%
18.0%
Operating profit margin
3.5%
3.7%
3.7%
4.0%
864
893
982
947
1,681
1,715
12
0
-148
-142
-168
-117
Opex as % of revenue
Operating profit
Other income
Other gains (losses)
Finance costs
JC entities
PBT
Income tax
Effective tax rate
MI
Net profit - reported
YoY chg
NPM - reported
-20
-8
3,979
3,954
-696
-7%
-20
-8
2,654
2,587
-691
-464
-453
17.5%
17.5%
17.5%
17.5%
-242
-203
-279
-272
3,041
3,061
1,911
1,863
142.5%
144.1%
-37.2%
-39.1%
6.7%
7.6%
1,654
1,610
YoY chg
23.8%
NPM - recurring
-1%
1%
-12%
-4%
-3%
-3%
3.9%
4.3%
1,901
1,863
20.5%
14.9%
15.7%
3.7%
4.0%
3.8%
4.3%
China TV
9.0
9.0
0%
9.8
9.8
Overseas TV
3.0
3.3
10%
3.3
3.4
3%
White Goods
2.6
1.8
-31%
3.3
2.3
-31%
Total
12.0
12.3
3%
13.1
13.2
1%
China TV
3,076
2,659
-14%
2,985
2,625
-12%
Overseas TV
1,273
1,294
2%
1,350
1,371
2%
White Goods
2,164
2,164
0%
2,164
2,164
0%
Blended TV
2,629
2,297
-13%
2,571
2,300
-11%
China TV
20.4%
20.7%
19.9%
20.2%
Overseas TV
8.0%
10.1%
8.5%
11.0%
White Goods
22.0%
21.3%
24.0%
23.0%
Net profit - recurring
-3%
-2%
Key assumptions
Shipment volume (m)
0%
ASP (HKD)
GPM
Source: RHB
See important disclosures at the end of this report
3
Skyworth Digital (751 HK)
26 November 2014
Figure 3: Detailed P&L and key assumptions
FYE March 31 (HKDm)
FY15F
FY16F
23,648
30,212
29,484
28,228
30,419
21,920
27,104
26,244
24,010
25,724
1,728
3,108
3,240
4,218
4,695
3,365
3,906
4,162
4,485
4,709
LCD modules
285
535
859
948
1,043
White goods
469
1,691
2,532
3,895
4,947
Others
383
1,397
2,321
2,321
2,321
82
83
122
272
320
28,232
37,824
39,480
40,149
43,759
TV
PRC
Overseas
Digital set-top boxes
Property holding
Total revenue
FY12
FY13
FY14
YoY change
16.0%
34.0%
4.4%
1.7%
9.0%
Cost of revenue
(22,181)
(30,418)
(31,851)
(32,235)
(35,080)
8,679
Gross profit
6,051
7,406
7,629
7,914
YoY change
29.8%
22.4%
3.0%
3.7%
9.7%
GPM
21.4%
19.6%
19.3%
19.7%
19.8%
Total opex
(4,677)
(5,942)
(6,570)
(6,418)
(6,914)
-16.6%
-15.7%
-16.6%
-16.0%
-15.8%
Operating profit
1,374
1,464
1,059
1,496
1,765
YoY change
23.5%
6.6%
-27.7%
41.3%
18.0%
Opex / sales ratio
4.9%
3.9%
2.7%
3.7%
4.0%
Other income
OPM
485
651
973
893
947
Other gains (losses)
(41)
(46)
(149)
(177)
(133)
(163)
Finance costs
JC entities
PBT
Income tax
30
1,671
(10)
1,926
(20)
1,700
1,715
(142)
(8)
3,954
(117)
(8)
2,587
(308)
(332)
(267)
(691)
(453)
Effective tax rate
-18.4%
-17.2%
-15.7%
-17.5%
-17.5%
Reported net profit
1,347
1,501
1,254
3,061
1,863
14.7%
11.4%
-16.5%
144.1%
-39.1%
4.8%
4.0%
3.2%
7.6%
4.3%
1,380
1,539
1,336
1,610
1,863
26.9%
11.5%
-13.2%
20.5%
15.7%
4.9%
4.1%
3.4%
4.0%
4.3%
China TV
7.02
8.70
8.60
9.03
9.80
Overseas TV
2.23
2.72
2.75
3.26
3.42
White goods
0.26
0.73
1.17
1.80
2.29
MI
(16)
YoY change
NPM - reported
Recurring net profit
YoY change
NPM - recurring
(93)
(179)
(203)
(272)
Key assumptions
Shipments (million)
ASP (HKD)
China TV
3,121
3,114
3,051
2,659
2,625
Overseas TV
776
1,142
1,179
1,294
1,371
White goods
1,804
2,316
2,164
2,164
2,164
Gross margins
China TV
21.8%
20.9%
20.1%
20.7%
20.2%
Overseas TV
6.1%
4.2%
7.2%
10.1%
11.0%
White goods
12.0%
14.2%
21.9%
21.3%
23.0%
8.5%
Shipment growth (YoY)
China TV
9.7%
23.9%
-1.2%
5.0%
Overseas TV
39.5%
22.2%
1.0%
18.6%
5.0%
White goods
n.a.
180.8%
60.3%
53.8%
27.0%
ASP growth (YoY)
China TV
n.a.
-0.2%
-2.0%
-12.8%
-1.3%
Overseas TV
n.a.
47.2%
3.2%
9.7%
6.0%
White goods
n.a.
28.4%
-6.6%
0.0%
0.0%
Source: Company data
See important disclosures at the end of this report
4
Skyworth Digital (751 HK)
26 November 2014
Figure 4: 5-year forward P/E band
9.00
8.00
[email protected]
Share Price (HKD)
7.00
6.00
[email protected]
5.00
[email protected]
4.00
[email protected]
3.00
2.00
[email protected]
1.00
0.00
Nov-09
Jun-10
Jan-11
Aug-11
Mar-12
Oct-12
May-13
Dec-13
Jul-14
Source: Bloomberg
Figure 5: Peer comparison I
3-mth
P/E FY
P/E FY
avg t/o
Mar15F
Mar14 (x)
(USDm)
(x)
P/E FY
Mar16F
(x)
EPS
FY15F
YoY
EPS
FY16F
YoY
7.4
6.4
19.6
15.7
5.3
1.4
4.4
5.1
0.9
19.2
11.2
N/A
71.7
N/A
N/A
9.7
2.6
0.9
17.6
14.5
13.4
21.3
16.6
0.9
0.5
0.6
4.2
4.0
14.8
10.7
16.5
36.3
11.0
1.1
4.9
2.8
2.0
1.4
Ticker
Price
Mkt cap
(USDm)
HK-listed
Skyworth Digital
751 HK
4.23
1,547
3.2
8.9
Tcl Multimedia T*
1070 HK
2.99
514
0.8
(16.9)
Haier Electronic
1169 HK
20.90
7,235
7.9
20.0
Company
Average
China-listed
Hisense Elec-A
600060 CH 11.41
3-Yr EPS
Div yld Div yld FY P/B FY
CAGR PEG (x) FY Mar14 Mar15F
Mar15F
(%)
(%)
(%)
(x)
2,433
68.8
9.4
10.1
9.1
(6.6)
10.3
4.2
2.2
3.2
2.2
Sichuan Chang-A 600839 CH
5.11
3,844
60.0
46.5
N/A
45.2
N/A
N/A
17.8
n.a.
0.4
0.2
1.7
Konka Group-A
6.21
991
15.0
165.6
N/A
N/A
N/A
N/A
N/A
n.a.
0.2
N/A
N/A
73.8
10.1
27.2
(6.6)
10.3
11.0
2.2
1.3
1.2
1.5
000016 CH
Average
Source: Bloomberg, RHB (note: peer figures are based on FY Dec 13/14/15)
Figure 6: Peer comparison II
Rev FY
Mar14
(USDm)
Rev FY
Mar15F
(USDm)
Rev FY
Mar16F
(USDm)
NP FY
Mar14
(USDm)
NP FY
Mar15F
(USDm)
NP FY
GPM FY
Mar16F GPM FY Mar15F
(USDm) Mar14 (%)
(%)
GPM FY
NPM FY
Mar16F NPM FY Mar15F
(%)
Mar14 (%)
(%)
NPM FY
Mar16F
(%)
Symbol
HK-listed
Company
751 HK
Skyworth Digital
5,088
5,823
6,378
172
213
245
19.3
19.8
19.8
3.4
3.7
3.8
1070 HK
Tcl Multimedia T
5,090
4,223
4,394
-30
27
47
13.7
16.4
16.2
-0.6
0.6
1.1
1169 HK
Haier Electronic
10,174
11,563
13,209
333
400
482
14.7
14.5
14.6
3.3
3.5
3.7
15.9
16.9
16.9
2.0
2.6
2.9
5.0
Average
China-listed
600060 CH Hisense Elec-A
4624
4750
5231
258
235
260
17.6
17.2
17.2
5.6
5.0
600839 CH Sichuan Chang-A
9514
9657
10337
84
-31
64
15.9
14.7
15.5
0.9
-0.3
0.6
000016 CH Konka Group-A
3249
N/A
N/A
7
N/A
N/A
16.4
N/A
N/A
0.2
N/A
N/A
16.6
16.0
16.4
2.2
2.3
2.8
Average
Source: Bloomberg, RHB (note: peer figures are based on FY Dec 13/14/15)
See important disclosures at the end of this report
5
Skyworth Digital (751 HK)
26 November 2014
Financial Exhibits
Profit & Loss (HKDm)
Mar-12
Mar-13
Mar-14
Mar-15F
Total turnover
28,232
37,824
39,480
40,149
Mar-16F
43,759
Cost of sales
(22,181)
(30,418)
(31,851)
(32,235)
(35,080)
Gross profit
6,051
7,406
7,629
7,914
8,679
(906)
(1,388)
(1,645)
(1,614)
(1,707)
Selling expenses
(3,771)
(4,554)
(4,925)
(4,804)
(5,207)
Operating profit
1,374
1,464
1,059
1,496
1,765
Operating EBITDA
1,602
1,766
1,455
2,077
2,469
Gen & admin expenses
Depreciation of fixed assets
Operating EBIT
Net income from investments
Other recurring income
Interest expense
Exceptional income - net
Pre-tax profit
Taxation
Minority interests
(228)
1,374
(302)
1,464
(396)
1,059
30
(10)
(20)
485
651
973
(177)
(133)
(163)
(41)
(46)
(149)
1,671
1,926
1,700
(581)
1,496
(704)
1,765
(8)
(8)
893
947
(142)
(117)
1,715
-
3,954
2,587
(308)
(332)
(267)
(691)
(16)
(93)
(179)
(203)
(453)
(272)
Profit after tax & minorities
1,347
1,501
1,254
3,061
1,863
Reported net profit
1,347
1,501
1,254
3,061
1,863
Recurring net profit
1,380
1,539
1,336
1,610
1,863
Mar-12
Mar-13
Mar-14
Mar-15F
Mar-16F
1,374
1,464
1,059
1,496
1,765
228
302
396
581
704
2,548
982
(497)
Source: Company data, RHB
Cash flow (HKDm)
Operating profit
Depreciation & amortisation
Change in working capital
(1,828)
(2,606)
Other operating cash flow
654
722
Operating cash flow
428
(118)
Interest received
Interest paid
Dividends received
Tax paid
Cash flow from operations
Capex
Other investing cash flow
Cash flow from investing activities
Dividends paid
Proceeds from issue of shares
Increase in debt
Other financing cash flow
Cash flow from financing activities
Cash at beginning of period
Total cash generated
Forex effects
Implied cash at end of period
959
835
831
4,962
3,894
2,804
54
65
63
104
116
(143)
(110)
(137)
(142)
(117)
39
23
(244)
(409)
134
(720)
(456)
(549)
(1,077)
8
(455)
(691)
(453)
4,441
3,165
2,349
(1,915)
(1,900)
(1,600)
1,830
379
(1,680)
(1,176)
(698)
(3,595)
(70)
(1,608)
(199)
(177)
(489)
(492)
(562)
23
13
857
1,522
6
(7)
687
1,351
2,524
170
166
(153)
(1,944)
(485)
(2,921)
(8)
289
(273)
2,164
2,301
3,023
3,197
(355)
104
693
174
468
90
33
29
2,259
2,301
3,023
-
-
3,197
3,665
Source: Company data, RHB
See important disclosures at the end of this report
6
Skyworth Digital (751 HK)
26 November 2014
Financial Exhibits
Balance Sheet (HKDm)
Mar-12
Mar-13
Mar-14
Mar-15F
Mar-16F
Total cash and equivalents
3,018
2,949
4,620
4,794
5,262
Inventories
3,151
5,109
4,188
5,211
5,286
Accounts receivable
3,512
6,213
5,787
8,800
8,992
Other current assets
9,259
10,362
11,585
7,392
7,985
Total current assets
18,940
24,633
26,180
26,196
27,525
794
993
1,231
836
836
2,328
3,192
4,583
5,902
6,798
Total investments
Tangible fixed assets
Total other assets
Total non-current assets
Total assets
162
245
150
245
245
3,284
4,430
5,964
6,983
7,880
35,405
22,224
29,063
32,144
33,180
Short-term debt
3,568
5,581
5,156
3,212
3,501
Accounts payable
7,107
9,586
9,241
11,481
11,533
Other current liabilities
1,446
2,511
5,104
4,123
4,434
12,121
17,678
19,501
18,816
19,468
Total long-term debt
715
225
547
547
547
Other liabilities
720
924
748
772
772
1,435
1,149
1,295
1,319
1,319
13,556
18,827
20,796
20,135
20,787
269
280
283
283
283
Retained earnings reserve
5,971
7,136
7,845
9,339
10,640
Other reserves
2,229
2,553
2,694
2,694
2,694
Shareholders' equity
8,469
9,969
10,822
12,316
13,617
Total current liabilities
Total non-current liabilities
Total liabilities
Share capital
Minority interests
Total equity
Total liabilities & equity
199
267
526
729
1,000
8,668
10,236
11,348
13,045
14,618
22,224
29,063
32,144
33,180
35,405
Mar-16F
Source: Company data, RHB
Key Ratios (HKD)
Mar-12
Mar-13
Mar-14
Mar-15F
Revenue growth (%)
16.0
34.0
4.4
1.7
9.0
Operating profit growth (%)
23.5
6.6
(27.7)
41.3
18.0
Net profit growth (%)
14.7
11.4
(16.5)
144.1
(39.1)
EPS growth (%)
11.4
7.3
(18.7)
142.2
(39.1)
Bv per share growth (%)
16.2
13.4
5.7
12.9
10.6
Operating margin (%)
4.9
3.9
2.7
3.7
4.0
Net profit margin (%)
4.8
4.0
3.2
7.6
4.3
Return on average assets (%)
6.6
5.9
4.1
9.4
5.4
Return on average equity (%)
17.3
16.3
12.1
26.5
14.4
Net debt to equity (%)
16.9
27.9
9.5
(7.9)
(8.3)
DPS
0.16
0.18
0.15
0.23
0.22
Recurrent cash flow per share
0.05
(0.20)
1.58
1.12
0.83
Source: Company data, RHB
See important disclosures at the end of this report
7
Skyworth Digital (751 HK)
26 November 2014
SWOT Analysis
 Strong research and development capabilities
 Highly
competitive
market puts
downward
pressure on
ASPs and
margins
 Strong distribution network and brand name in China
and around the world
 Diversification
of revenue
stream through
white goods
and
monetisation of
its cloud TV
platform
 Development of
its own internet
TV operating
system could
lock in users
 As a hardware manufacturer with a large distribution
network, it is hard for the company to cut prices to
compete with online exclusive brands
P/E (x) vs EPS growth
P/BV (x) vs ROAE
26%
8
116%
7
94%
1
23%
6
72%
1
19%
5
50%
1
15%
4
28%
1
11%
3
6%
2
-16%
0
8%
4%
0%
P/E (x) (lhs)
EPS growth (rhs)
Source: Company data, RHB
Jan-13
Jan-16
0
Jan-15
-60%
Jan-14
0
Jan-13
-38%
Jan-12
1
0
P/B (x) (lhs)
Jan-16
30%
1
Jan-15
2
138%
Jan-14
160%
9
Jan-12
10
Return on average equity (rhs)
Source: Company data, RHB
Company Profile
Skyworth is one of the leading TV manufacturers in China and globally with an annual capacity of 14m units. The company has over
3,500 specialty stores in China located across major cities such as Shenzhen and Beijing, along with over 20,000 retail partners.
See important disclosures at the end of this report
8
Skyworth Digital (751 HK)
26 November 2014
Recommendation Chart
Price Close
4.70
5.90
6.24
6.03
7.05
7.05
Recommendations & Target Price
5.65
10.00
na
11.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
Buy
2.00
Nov-09
Neutral
Mar-11
Sell
Trading Buy
Jun-12
Take Prof it
Not Rated
Sep-13
Source: RHB, Bloomberg
Date
Recommendation
2014-08-07
Buy
Target Price Price
4.70
3.92
2014-07-09
Buy
4.70
3.87
2014-06-25
Buy
4.70
3.67
2014-05-28
Buy
4.70
3.67
2014-02-11
Buy
5.90
4.07
2014-01-08
Buy
6.03
4.03
2013-12-09
Buy
6.03
4.36
2013-11-27
Buy
6.03
4.55
2013-11-04
Buy
6.24
3.89
2013-08-09
Buy
7.05
4.42
Source : RHB, Bloomberg
See important disclosures at the end of this report
9
RHB Guide to Investment Ratings
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