Skyworth Group ("Skyworth" or the "Company") announced its unaudited 2019 annual results.
The Company’s domestic TV sales volume reached 9.0 million units in 2019, up 2.6% YoY, outperforming the overall industry by 4.6 ppts. However, sales value declined 15.8% YoY to RMB19,555 million due to decreased panel price and intensified price war. Overseas TV sales volume increased 4.0% YoY and sales value decreased 19.2% to RMB5,907 million. However, The Company delivered rapid revenue growth from internet-based content, up 50.2% YoY to RMB826 million, beating the Company’s target. Besides, revenue of digital set-top boxes & LCD modules and white appliances increased 31.3% YoY and 20.2% YoY, respectively, becoming the Company’s main growth driver. Gross margin improved by 1.6 ppts YoY to 20.1%, thanks to improvement in domestic TV gross margin and overseas digital set-box gross margin. S&D expenses to sales ratio rose by 0.6 ppts YoY due to the launch of new incentive system. The Company did not declare any final dividend since the management intends to preserve cash for further development.
The TV industry experienced intensified competition and tough price war in 2019 with internet entrants. The Company’s domestic TV business was a making loss despite sales volume growth. However, digital set-box and internet-based content became a driving engine and the Company still recorded double-digit percentage net profit growth. The Company’s manufacturing and sales were negatively impacted by the COVID-19 outbreak in Jan.-Feb. 2020 but operations are been gradually resuming. In 2020, we expect challenging operating environment for both the domestic and overseas markets with a weak macro economy. Skyworth is a leading TV manufacturer in China, and targets to develop multimedia, smart systems, smart appliances, and create synergies. We stay cautiously positive on the Company and we are likely to raise investment rating to “Accumulate” considering its attractive valuation with high quality assets. We will revise earnings forecasts and TP in the next Company Report.