Coocaa 0.7% 14 Coocaa 0.5% 15 Whaley 0.6% 15 Whaley 0.4%

2016/17 Annual Results Updated by 10 Oct 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 Year ended 31 Mar (HK$ million) 2016/17 2015/16 Change Revenue 42,845 42,695 0.4% Gross profit 8,567 9,363 (8.5%) Gross profit margin 20.0% 21.9% (1.9pp) Operating profit (EBIT) 2,339 3,389 (31.0%) Operating profit margin 5.5% 7.9% (2.4pp) Profit for the year 1,529 2,527 (39.5%) Net profit margin 3.6% 5.9% (2.3pp) Attributable to non-controlling interests 219 357 (38.7%) Attributable to owners of the Company 1,310 2,170 (39.6%) (HK$ cents) Basic EPS 44.64 75.89 (41.2%) Diluted EPS 44.14 74.88 (41.1%) Dividend per share 14.6 24.0 (39.2%) Dividend payout (%) 33.6% 32.4% 1.2pp

3 Operating Expenses

Year ended 31 Mar (HK$ million) 1H 2016/17 2015/16 Change (% to sales) 2016/17

Selling and distribution 11.9% 11.1% 0.8pp 11.7%

General and administration 6.7% 6.0% 0.7pp 6.9% Total expense rate 18.6% 17.1% 1.5pp 18.6%  S&D: Raise basic salary and benefits for frontline staff as incentives to mitigate brain drain, input more A&P for OLED TV promotion and secure high-end market positioning. Declined ASP limited revenue growth.  G&A: R&D expenses (3.4% of sales) increased in investing in overseas acquisitions, application software, smart TV users data collection and analysis, developing high-end, smart, energy-saving and health-caring products to sustain market leading position, cope with the consumption upgrade trend as well as to cultivate smart home era.

4 Higher Inventories to Cope with Rising Panel Cost and Tight Supply

(HK$ million) Mar 17 Mar 16 Change Sep 16 Change

Inventories - Total 6,666 5,494 21.3% 6,075 9.7% - Finished goods 3,878 3,509 10.5% 3,676 5.5%

Liquid bills receivable - On hand 6,057 6,945 (12.8%) 4,552 33.1% - Discounted to banks# 420 300 40.0% 463 (9.3%)

(cash equivalent) 6,477 7,245 (10.6%) 5,015 29.2%

Pledged bank deposits 290 493 (41.2%) 595 (51.3%)

Cash and bank balances 4,336 4,621 (6.2%) 4,004 8.3%

Trade receivables 5,671 5,290 7.2% 6,537 (13.2%)

5 Net Cash

(HK$ million) Mar 17 Mar 16 Change Sep 16 Change

Borrowings 1. Financial liabilities - for bills discounted# 420 300 40.0% 463 (9.3%) 2. Other loans 7,572 7,805 (3.0%) 6,484 16.8% - Current 4,979 4,950 (0.6%) 4,229 17.7% - Non-current 3,013 3,155 (4.5%) 2,718 10.9%

Total borrowings (1+2) 7,992 8,105 (1.4%) 6,947 15.0%

Trade payables 4,847 5,027 (3.6%) 5,569 (13.0%)

Bills payable 5,409 5,195 4.1% 5,194 4.1%

Total trade & bills payable 10,256 10,222 0.3% 10,763 (4.7%)

Net assets 16,813 16,700 0.7% 16,991 (1.0%)

6 Mar 17 Mar 16 Change Sep 16 Return on equity holders of the Company 8.5% 14.4% (5.9pp) 10.9% Current ratio (times) 1.4 1.5 (6.7%) 1.5 AR turnover (days) - excluded bills receivables 47 45 4.4% 53 - with discounted bills 105 108 (2.8%) 109 - without discounted bills 102 106 (3.8%) 105 Inventory Turnover (days) - Total 65 55 18.2% 67 - Raw materials 25 19 31.6% 26 - Finished goods 40 35 14.3% 41 AP Turnover (included Bills Payables) (days) 110 106 3.8% 121 Net Debt/Equity Ratio - Exclude discounted bills and foreign Net Cash exchange hedging arrangements Book value per share (HK dollars) 5.53 5.68 (2.6%) 5.68

7 Group Revenue Breakdown by Products 2016/17 (2015/16)

Digital Set-top box and LCD Overseas TV Modules 15.3% (15.7%) 20.9% (14.0%) White Appliances 4.9% (5.5%) * HK$42.8bn Others 10.6% (8.3%)**  0.4% China TV 48.3% (56.5%)

* 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 Gross Profit Margins

2016/17 2015/16 Change 1H2016/17 Group 20.0% 21.9%  1.9pp 20.6% China Market Overall 22.3% 23.9%  1.6pp 24.2% Overseas Market Overall 14.5% 13.2%  1.3pp 12.4% (China) 23.1% 24.8%  1.7pp 24.5% TV (Overseas) 11.8% 10.1%  1.7pp 9.8%

Set-top box & (China) 14.4% 21.1%  6.7pp 17.6% LCD Modules (Overseas) 25.5% 22.6%  2.9pp 26.7% White Appliances (refrigerator 20.0% 27.6% 7.6pp 22.6% and washing machine) 

 China TV: Margin declined due to rising cost of panel and other raw materials  Overseas TV: Growth driver, improving margin by scale, product mix and self- owned brands revenue  Digital STB (000810.SZ): China margin declined due to mix shift and rising cost of raw materials. Stronger high-end overseas market after acquisition.  White Appliances: Higher cost of raw materials weakened margins 9 Segmental Profit Breakdown 2016/17 (2015/16) Diversification of Business to Sustain Growth

Digital Set-top box and LCD Module 23.8% (23.8%) Overseas TV 21.2% (4.8%) White Appliances - 1.7% (5.9%)

HK$2,019m Property Holding  37.2% 9.9%(5.4%)

Others -0.2% (-3.0%) China TV 47.0% (63.1%)

10 Segmental Profit by Operating Segments 2,019 Total (-37.2%) 949 (-53.2%) 3,215 China TV 2,028 428(+177.9%) Overseas TV 154 481 (- 37.1%) Digital STB & LCD Modules 765 - 35 (-118.4%) White Appliances 190 (HK$m) 201 (+15.5%) Property Holding 2016/17 174 - 5 (+94.8%) 2015/16 Others -96

 China TV: Higher operating expenses to avoid further market shares loss  Overseas TV: Significant growth in scale, segmental profit margin 4.8%  White Appliances: Included depreciation cost of $78m 11 2016/17 TV Sales Volume In China 4K Smart TV Reached 46% vs 28% Smart TV 85% vs 70% YoY

2016/17 2015/16 (Apr 16 – (Apr 15 – Change (‘000 units) Mar 17) Mar 16) %

China TV comprises: 9,339 10,036 (7%) - Smart TV (4K) 4,291.2 2,793.8 54% - Smart TV (non-4K) 3,632.1 4,249.3 (15%) - Other Flat TV 1,415.2 2,992.8 (53%) Overseas TV 6,941 4,410 57%

Total 16,280 14,446 13%

12 2017/18 TV Sales Volume Target 4K TV will reach 55% vs 46% YoY 4K TV reached 59% in Sep 17

2017/18 2016/17 YoY Change 2017/18 (’000 units) (Apr – Sep 17) (Apr – Sep 16) Growth % Target Target % China TV comprises: 3,499 4,416 (21%) 10,000 7% - 4K 1,880.2 1,858.0 1% 5,500 28% - Non-4K 1,618.6 2,557.6 (37%) 4,500 (11%) Overseas TV 3,855 3,803 1% 9,000 30%

Total 7,354 8,219 (11%) 19,000 17%

Targeted volume achieved 2017/18 Apr-Sep: China TV 35% Overseas TV 43% Overall 39% Maintained at top tier high-end TV market share in China

13 China TV Revenue Mix Upgrading to High-End Pushed Star Models to Offset Pressure on GP Margin

% of China TV Sales 2016/17 2015/16 100% 80% 68% 60% 49% 25% 33% 40% 18% 20% 7% 0% Smart TV (4K) Smart TV (Non 4K) Others

GP Margin 2016/17 2015/16 1H2016/17 Blended TV 23.1% 24.8% 24.5% Smart TV (4K) 28.3% 31.9% 29.7% Smart TV (Non 4K) 12.7% 19.2% 15.0% Others 10.3% 15.9% 12.0%

4K Smart TV 46% sales volume in 2016/17, 55% in May 2017 4K OLED HDR TV is the latest product and put under Smart TV (4K) category 14 China TV Blended ASP Raise Price on New Models and Larger Size Proportion Display Technology Upgrade Era CRT LCD OLED

3,000 ASP (HK$, net of tax and rebate) 2,500 2,000 1,500 1,000 500 -

ASP 2016/17 2015/16 1H2016/17 Blended TV 2,217 2,404 2,123 Smart TV (4K) 3,261 4,197 3,324 Smart TV (Non 4K) 1,424 1,863 1,359 Others 1,084 1,499 1,012 15 China TV Revenue Breakdown 2016/17 (2015/16) Nationwide Well Built Distribution Channels Strong in Rural Ongoing Reforms to Enhance Customers Loyalty and Suit Diversified Consumer Behaviors

Other Online Electronic 23.6% (20.0%) Shops cover Skyworth 2nd to 3rd tier Community cities 35.8% Stores in major (33.0%) cities 7.8% (10.6%) Others 4.5% (4.1%) Large Scale Commercial Chain Stores Hypermarket 1.6 (0.6%) 4.2% (4.9%) 22.5% (26.8%)

 One layer from our 36 branches, 208 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 16 O2O Community Stores Synergistic Partner with TMALL Around 5,000 Stores located in Major to 3rd and 4th Tier Cities Products + Experience + Community Service

17 Strategic Retail Customers and Flagship Stores in 3rd 4th Tier Cities

18 China TV Market TV Volume 2012 2013 2014 2015 2016 YoY 2017E YoY (m units)

Total 44.46 47.79 44.61 46.74 50.89  7.8% 53.01  4.2%

 2017E  Global 32% panel and 63% TV will be produced in China  1Q17 Panel price started to stablise, ASP trending up. China TV sales volume  13.8% YoY, demand weaker than expected  2017E China TV sales revenue  5.1%, raise selling price, more high-end mix and consumption demand upgrade  China TV average size  2015 44.5”, 2016 46.5”, 2017E 48.4”  2017E vs 2016: 55” 3pp 65”  2.3pp 32”  2.2pp 39”/40”  4.9pp  Mix 32”15% 39/40”8% 42/43”15% 48/49”12% 50”10% 55”28% 65” 6%  2017E Technology 4K 56% HDR 19%; Ultra-slim, Borderless or Curved design  2016 market shares: Traditional TV brands 67% Internet brands 19% Foreign brands 14% ; 1Q17 Internet brands market shares declined. Source: AVC (Jan 2017) , Sigmaintell (May 2017) 19

China TV Market Shares 2016 (Domestic Brands 82%)

4K UHD TV (Volume) 4K UHD TV (Revenue)

Rank Brand % Rank Brand %

1 Skyworth 19.2% 1 Hisense 17.9% 2 Hisense 19.0% 2 Skyworth 17.3% 3 TCL 15.4% 3 TCL 12.8% 4 Changhong 10.3% 4 Samsung 11.7% 5 Konka 8.8% 5 Changhong 8.8% 6 Samsung 6.2% 6 Sharp 7.2% 7 Sharp 4.5% 7 Konka 6.7% 8 LeTV 3.5% 8 Sony 4.8% 9 Sony 2.9% 9 LeTV 3.4% 10 Philips 2.0% 10 LG 2.6% 11 LG 1.7% 11 Philips 1.7% 11 Xiaomi 1.7% 12 Xiaomi 1.6% 13 Haier 1.4% 13 Haier 1.2% 14 coocaa 0.7% 14 coocaa 0.5% 15 Whaley 0.6% 15 Whaley 0.4%

Source: AVC April 2017 (1,505 cities; 6,700 retail terminals) 20 Digital Set Top Box 創維數字 (000810.SZ Spin-off Listed in Shenzhen A Share Market in Sep 2014) No.1 in China Operators & Export Market, No. 2 in Global Market Market Cap HK$12bn by June 2017, Skyworth holds 59.4% 7,000 (Sales HK$ million) 6,000 5,000 4,000 3,000 2,000 1,000 - 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 Total 3,696 3,270 3,906 4,162 5,019 6,685 6,554 China 2,676 1,953 1,898 2,297 2,876 3,990 4,110 Overseas 1,020 1,317 2,008 1,865 2,143 2,695 2,444

21  China No.1 in cable operator market for 9 years (peers: 银河，同洲); First tier in telecom IPTV market (peers: Huawei, ZTE); Top 3 in consolidating OTT retail market  After speedy growth in 10 years, China product mix is shifting from cable to IPTV and OTT boxes with lower margins. Focus to strengthen efficiency and management, more stringent cost and expenses control  Overseas No.2 market share after Arris, competing with Technicolor, sales in 95 countries and regions. Highlighted markets are Europe and North America high- end operators, strengthening India, Africa and South America emerging markets Source : Guideline Research 格蘭研究 (Mar 2017), SNL Kagan (Feb 2017) 22 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

% overseas sales 2016/17 2015/16 60%

50% 44% 45% 40%

30% 18% 20% 16% 20% 14% 13%13% 9% 8% 10%

0% America Europe Asia Middle East Africa

 TV – Skyworth brand revenue 18.9%, ramping up to 50% by 2020  TV – Product mix is upgrading to 4K, smart and large size TV 23 Internationalization – Growth Driver

2016 Acquired Toshiba TV Plant in Indonesia to Expand in ASEAN Countries

2017 Strategic Partnership with Google to push smart TV in the overseas markets (GoogleTV、 CastTV、Netflix TV)

Skyworth Metz OLED 4K HDR TV into European Market 24 Skyworth & Internet Largest Smart TV Household Entrance with Self TV OS “coocaa” Large Panel and Opened Platform to Distribute Internet Content and Products at Home

25 Coocaa (Skyworth holds 72% ) Invested by Tencent in Jun 2017 Given Valuation at RMB$3.9bn Invested by Baidu iQIY in Sep 2016 Given Valuation at RMB$3bn Best Hardware + Best Content + Smartest Memberships Strategic Partners with Synergies to Boost the Numbers of Paid Users, Subscription Revenue per user, Membership Conversion and Renewal Rate

26 Skyworth Smart TV Users in China Additional 8m – 10m Smart TV Households Entrance in 2017

Penetration in Internet TV installed since 2012 24.35m units >90% 2017/18 (Up to 31 August 2017) Conversion Rate

Smart TV Daily Active Users 9.50m 41% 

Smart TV Weekly Active Users 11.97m 49% 

China Market in 2017E

Smart TV Installed Base 165m units 28% 

Smart TV Activated Households > 100m > 300m people 

Turn-on TV Ad CPM 50 70 (2018E)

Potential Turn-on TV Ad Market RMB1.3bn RMB2.8bn (2018E) 22m (2015) 75m (2016) Content Members >100m (2017E) (Only 5% members paid)

Source: AVC, CITICS (Mar 2017) 27

Monetisation of Smart TV Users 2017/18 Revenue Target HK$300m HK$50m in 2015/16 HK$166m in 2016/17 2016/17 Content 63% Ad 28% 2017/18 Content 40% Ad 30%

Content Advertising Apps Store (RMB160bn market)

E-commerce: Gaming Shopping/ Health Education (RMB100bn market) Travel Care/ Music/ KTV 28 Paid Content Market Estimates in China

Content Potential Smart TV Content Annual Revenue Content Activated Paid ARPU Split to TV Revenue Households Users (RMB) Platforms (RMB) (RMB) 2015 40m 3% 200 120m 30m

2016 69m 5% 250 684m 171m

2017E 105m 7% 350 2.14bn 535m

2018E 143m 10% 500 6.23bn 1.56bn

Source: AVC, CITICS (Mar 2017) 29

Advertising on Big Panel Revenue Breakdown Coocaa Highest CPM in the Market Ad before or during Content Turn On TV 12% Loading Ad (Static ) 56% Turn On TV Content Ad (Dynamic) 12%

Others 8%

Front Page Block Ad 12%

30 coocaa Shopping coocaa Sports and Health

Gaming on Big Panel Alliances with Geek Box, Ministation (Tencent)

31 coocaa Online Education coocaa Travel For different age segments Abundant demand in domestic and global travel link up with content on TV

Paid Education Apps 1. 果果乐园 2. 义方快乐学堂 3. 才智小天地 4. 百映生活学苑 5. 乐学名师课堂

Appendices

 TV Technology Leader (34 - 36)  Land and Recurrent Rental Income in Shenzhen (37)  Production Capacity and Chain Management (38)  Global OTT TV & Video Revenue Forecasts by Region (39)  16Q1 – 17Q2 China Internet Brands Sales Volume and Market Shares (40)  LCD TV Replacement Demand in China (41)  China Settop Box Product Mix (42)  2016 -2022 Global Settop Box Sales Volume (43)

33 TV Technology Leader

Global Technology & Industrial Design Standard

AR TV – Gaming and Education Apps Wallpaper OLED TV

34 National Technology Top Award to bring up DTMB as international and industry Globally first OLED 4K HDR standard for terrestrial digitalisation TV launched in 2016 Strategic panel supply from LGD and BOE

35 Smart Home

New 4colours 4K Ultra Slim LED TV Series

36 Land and Recurrent Rental Income in Shenzhen

Qianhai

Nanshan Shiyan 37 Production Capacity 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 2017/18 (19.5m units )

Shiyan, Shenzhen 10m units Guangzhou 6m units Lishui, Nanjing 2.5m units Inner Mongolia 1m units

Logistics investments in regional logistic centers in Chengdu, Jiangxi and Nanjing

Downstream inventory and logistics management 38 Source: Digital TV Research (Jul 2016) 39 16Q1 – 17Q2 China Internet Brands Sales Volume and Market Shares 17Q1 Market Shares Decline QoQ Due to Cash Flow Difficulty, Rising Cost and Shortage of Raw Materials

(Unit: K, %)

Source: Sigmaintell (May 2017) 40

LCD TV Replacement Demand in China 66% Penetration at the end of 2016 First Generation LCD started in 2004 > 10 years old

Demand sustains, given low TV penetration rate, lower TV price, increasing affordability and new Urban TV technology eg. Smart, OLED Rural TV penetration penetration (1.6 TV /household) (1.2 TV /household) TV Demand

• 75% Replacement • 15% More TV/ household Digitalisation • 10% New TV (properties Urbanisation 2015 - 20 • and new family) New Properties

• Middle Class and Consumption Upgrade

Source: AVC Ltd. TV (Jan 2017), Chinese Statistics Yearbook (State Statistics Bureau) 41 China Settop Box Product Mix 2018 OTT Box 16m units, IPTV Box 45m, Cable Box 16m

OTT Box IPTV Box Cable Box

Source: Guideline Research 格蘭研究 (Mar 2017) 42 2016-2022 Global Settop Box Sales Volume

3.40 (m units） 334 337 331 3.30 326 321 3.20 315 3.10 308 3.00 296 2.90 2.80 2.70 2015年 2016年 2017年 2018年 2019年 2020年 2021年 2022年

Source: Grand View Research (2016) 43 Vision To create a globally prominent brand of consumer electronic products

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