China TV shipments up 27% YoY in Nov – Skyworth reported that salesmomentum continues in Nov with China TV shipments up 27% YoY to 872K units(Oct: +36% YoY to 758K units). The first 8MFY13 shipment increased by 23% YoYto 5.54mn, which is equivalent to 68.4% of its full-year target of 8.1mn units versusthe same ratio of 64% for FY12. Its blended ASP has shown slight improvement andstayed flat at Rmb3,189 in Nov versus a contraction of 4% in October. Blended ASPdeclined by c2% during 8-months in Apr to Nov. The improvement in blended ASPwas mainly attributable to the better product mix of Cloud TVs and the decrease insales of 32-inch TVs, which have a lower margin. Skyworth is currently trading at7.4x FY13E PE and 6.2x FY14E PE. Maintain Buy rating.

More rollout of high-end TVs means better sequential GM in 2HFY13 – Highendproducts, 3D TVs and Cloud TVs reported stronger sales momentum, with 3DTV sales volume up 40% YoY to 252K units, or 29% of total China TV shipments inNov. Cloud TV sales accounted for 22% of Skyworth’s total domestic shipments,slightly stronger than the 20% in Oct on the new marketing campaign of “Cloud TVGo Rural” in early Nov. The group will continue to roll out more new 3D/Cloud TVsfor the peak season during Dec ahead of Chinese New Year, which could enhancethe group’s overall margin. The change in product mix to high-end TVs during thepeak season reinforces our belief of better gross margin at 20.7% in 2HFY13 vs.

20.1% in 1HFY13. This contrasts with growing market expectations of weakermargin in 2HFY13 after the margin slightly missed in 1HFY13.

Strong overseas market sales – Overseas market sales volume was up by 116%YoY to 358K units, a significant improvement from the 2% decline in shipmentvolume in October. Flat Panel TV shipments increased by 168% YoY to 299K units.

Skyworth targets its overseas TV shipments to reach a total of 2.4mn units forFY3/13.

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