Net gains may surge 19%.
According to Maybank Kim Eng, Skyworth is scheduled to report its interim results tomorrow after market close.
Here's more from Maybank Kim Eng:
We expect the company to achieve core net profit of HKD643m, up 19% YoY on the back of revenue growth of 17% YoY to HKD15,275m. Our NP forecasts are in-line with Bloomberg consensus.
Our expectations in 1H results include: 1) Overall shipments are expected to grow 15% YoY (China: +21%, overseas: -1%) while blended ASP is expected to improve 5% YoY, which translates into a strong top-line growth of 21% YoY for its core TV business (accounts for around 85% of total sales);
2) High-end TV represents 45% of Skyworth’s total shipments (cloud TV: 13%, 3D non-cloud TV: 32%), which bodes well for stable margins during the period;
3) Given that the share price of its 5% holdings in Chigo (449, Not rated) fell below the carrying cost of HKD0.211 to HKD0.17 during the period, we expect a non-cash mark to market impairment loss of around HKD20m. The key to watch at the analyst briefing should be the latest TV sales target given that current growth rate is faster than target growth rate of 8%, gross margin outlook underpinned by further optimisation in its product mix as well as inventory status at the company level and the retailers level.
We believe the strong sales performance confirms our view that Skyworth is able to ride on the TV replacement cycle and benefits from the government subsidy on energy-saving products. Thanks to its large rural customer base, market starts to re-rate the counter and the share price has rallied by 47% over the past three months. We will review our recommendation and estimates after the results briefing. We will revisit our BUY recommendation and target price of HKD4.95 post result.
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