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Public company info - Tonly Electronics Holdings Ltd. , 01249.HK
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Tonly Electronics Holdings Ltd., 01249.HK - Company Profile
Chairman LIAO Qian
Share Issued (share) 273,000,000
Par Currency Hong Kong Dollar
Par Value 1.0
Industry Consumer Electronics
Corporate Profile Business Summary: The Group is principally involved in the manufacture and sale of audio-visual products and the rendering of research and development services. Performance for the year: For the year ended 31 December 2019 (the “period under review”), the Group recorded a turnover of approximately HK$8,146.6 million, representing a year-on-year growth of 11.6% . Gross profit amounted to approximately HK$1,095.5 million, representing a year on-year growth of 31.7%. Gross profit margin increased by 2.0% from 11.4% in the same period last year to 13.4%, profit attributable to the owners of the parent company during the period under review increased by 20.4% year-on-year to HK$268.7 million. Business Review: For the year ended 31 December 2019 (the “period under review”), the Group recorded a turnover of approximately HK$8,146.6 million, representing a year-on-year growth of 11.6% which was primarily due to the growth in the new audio, smart audio speaker, headphones and ancillary product businesses. Gross profit amounted to approximately HK$1,095.5 million, representing a year on-year growth of 31.7%. Gross profit margin increased by 2.0% from 11.4% in the same period last year to 13.4%, which was attributable to the improvement of production layout and efficiency as well as the decrease in cost of certain raw materials. Benefiting from the increase in turnover and gross profit margin as well as effective cost control, profit attributable to the owners of the parent company during the period under review increased by 20.4% year-on-year to HK$268.7 million. During the period under review, the Group implemented cost reduction and efficiency enhancement measure at all departments and centres in order to enhance inter-department synergy and maximise the productivity of production lines and equipment. The production system personnel were enhanced. An asset shared-management mechanism was established to enhance the reusability of assets and reasonably eliminate obsolete equipment and equipment with outdated technology, which enhanced the utilisation rate of assets. The Group has established subsidiaries in Vietnam to construct its own overseas plant, so as to continuously enhance the overseas supply chain capacity and to extend its vertical integration capability overseas. In order to further improve productivity, the Group also continued to enhance production automation and its digitisation capability. During the period under review, the Group endeavoured to develop its audio product, smart product and ancillary product businesses, among which products including smart speakers, headphones and soundbars grew rapidly. Based on the analysis by product category, the turnover of the Group’s audio products, headphones, video products, IoT related products, ancillary products and other businesses amounted to approximately HK$5,823.9 million, HK$1,055.2 million, HK$211.0 million, HK$128.3 million, HK$786.6 million and HK$141.6 million respectively, representing an increase of 5.1% and 49.7%, a decrease of 46.8% and 20.4%, an increase of 70.1% and 306.7% Respectively During the period under review, benefiting from the rapid growth in the global market of smart products and the advantage of leading product technology and the initial market layout, the smart product business of the Group maintained growth and the proportion of the revenue generated by it to the total turnover increased to 16.3%. Meanwhile, the ancillary product business which is ancillary to the smart product business also benefited from the overall market growth, especially in respect of precision plastic injection, structural parts with new form and speaker units, all of which achieved remarkable results. In addition, with the shipments of Bluetooth headphones of the Group maintaining rapid growth, the Group has achieved large-scale shipments for TWS earphones and enhanced technology development of active noise reduction and voice interaction functions. The Group continued to consolidate its leading position of Bluetooth speakers and enhance its market share of soundbars. PRODUCT RESEARCH AND DEVELOPMENT (R&D) AND INNOVATION The Group has been committed to product R&D and innovation. During the period under review, the Group’s R&D expenses amounted to HK$370.4 million, accounting for 4.5% of its total revenue. The Group has its own R&D bases in Huizhou, Shenzhen and Xi’an. Each R&D base carried out R&D works by regions, focusing on different basic modules, product categories and forward-looking technology. Leveraging on voice technology advantages from domestic and overseas ecological chain, it actively developed and reserved new products and technology. The Group continued to devote more R&D resources to smart products epitomised by smart voice speakers and gradually established the development capability for ancillary products which are ancillary to the smart products. In respect of the smart voice eco-platform, the Group maintained close cooperation with internet enterprises with global mainstream voice platforms and continued development of latest technologies and product coordination on the basis of mainstream voice platforms. The smart audio speaker market continued to grow and gradually developed and diversified various ecological scenes centring this market. With the integration of various human-device interactions such as voice, vision and touch and the perception, comprehension and decision-making ability of AI, a smart home in the 5G era is created. In respect of the transformation of technology and interaction method, smart audio speaker has been gradually transforming from sole-audio interaction to “audio + visual” diversified interaction. Screen-equipped smart speaker jointly developed by the Group and its customers breaks the limitation in respect of audio interaction function and content display and allows smart products to acquire audio and visual abilities. The Group constantly develops diversified smart products and, by leveraging on its extensive experience in professional electro-acoustic design and pioneer advantages in smart speakers, the Group constantly innovates in product development to enhance the overall competitiveness of the Group and capture potential market opportunities. The Group also believes that future voice technologies will not only be limited to smart speaker products, but may also be utilised by various types of products that require voice access. Therefore, in addition to strengthening the R&D and innovation of smart voice speakers, the Group also actively explores and applies ecological ancillary products in respect of cross-field utilisation of smart voice. Apart from outstanding design and R&D, smart products that provide user-friendly experiences also require comprehensive automated testing capabilities. The Group has also established a number of automated test laboratories for smart products to better meet customer needs. During the period under review, the Group has been enhancing its active noise reduction technology and developed various mid– to high-end earphone products with active noise reduction functions. The headphone business has maintained rapid growth. In 2019, TWS master chip manufacturers launched new generation upgraded products specially designed for Android platforms with a view to achieving dual wireless connection. Represented by the projects of Qualcomm, Bestechnic and Airoha, the TWS earphone market has experienced explosive growth. The Group has been constantly expanding the TWS earphone products development team. Combining active noise reduction and voice interaction technology and leveraging on its outstanding electroacoustic capability, the Group’s TWS earphone products have realised largescale shipments. CUSTOMER AND MARKET EXPANSION The Group continues to uphold the philosophy of innovation in R&D, swift customer response, and strict quality control. The Group received high recognition from customers during the process of cooperation with customers towards mutual benefits. The Group has collaborated with many wellknown audio and video brands all over the world for years, and has built a strong customer base. With the rapid growth of the smart voice market, the Group can leverage on its R&D strengths in this field to better serve its customers and capture market growth opportunities together with its customers. In the meantime, the Group will continue to eagerly expand its Internet customer base and strive for more diversified business cooperation opportunities to facilitate speedy development of smart voice Eco platform of internet customers. As global voice eco-platform advances and matures, more brands have launched or will soon launch smart products with audio interaction (including but not limited to smart speakers), and the Group will also leverage on its pioneer advantages in smart voice technologies and the foundation for cooperation in each voice eco-platform to develop a variety of ancillary products in the smart voice ecosystem. PRODUCTION AND SUPPLY CHAIN MANAGEMENT The Group used Huizhou Zhongkai as a core base and moulding centre integrating research, production and sales. After the commencement of operation of the new plant at Phase Two of Second Plant on land parcel No. 41 in March 2019, the externally rented factories and warehouses of the Group gradually moved back to the new plant and certain space was reserved for the production of new products, which were beneficial to the enhancement of overall production management and efficiency and reduced external rental expenses. The Group’s Huizhou Puli Electroacoustic Tongqiao Industrial Park was also put into operation, forming a comprehensive industrial chain integrating carpentry, speaker assembly, high-end wooden boxes, speakers, and plastic injection. At the beginning of 2019, in order to enhance the overseas supply chain capability and to proactively respond to the potential impact of the U.S. tariff on the export of the Group’s products, the Group purchased industrial land of over one hundred thousand square meters in Vietnam to establish its own overseas plant which the Group would strive to commence operation in the second half of 2020. The Group is not only equipped with R&D and production abilities, but also possesses vertical integration capability of the supply chain, which enables the Group to provide customers with speaker units and sophisticated structural parts. With hot sale of smart products continuing throughout the world, the Group’s ancillary business has experienced rapid growth. During the period under review, the Group continuously enhanced its capabilities in speaker units and structural components, especially the structural parts with new form related to precision moulding. Meanwhile, with the explosive growth of TWS earphone products, small forms of structural parts have experienced rapid growth and the Group has been continuously enhancing its developing capability regarding small forms of structural parts. To tackle the labour shortage and salary increase problems in the PRC in a proactive manner, the Group continued to optimise its human resources system and establish overseas productivity. During the period under review, the Group continued to increase the proportion of automated equipment and strengthened the stability of skilled workers to boost its per capita production efficiency steadily. The Group has introduced automated test systems and automated packaging systems to facilitate a streamlined, automated, digitalised and informationised production to improve operational efficiency and quality. The Group is also dedicated to optimising the equipment and management system of its production plant. The Group implemented smart warehouse logistics management based on an industrial intelligence system, to closely integrate all aspects of supply chain, production, and logistics while enhancing the actual production capacity of the Huizhou production base. Prospects: In 2020, Sino-US trade disputes eventually entered a stage of gradual improvement. On 15 January, the PRC and the US signed Phase I Economic and Trade Agreement, which brought a pause to the trade disputes lasting for nearly two years. However, the outbreak of the novel coronavirus epidemic early this year forced numerous enterprises to postpone production after the Chinese New Year holidays. Meanwhile, World Health Organization (WHO) declared on 11 March that the novel coronavirus epidemic has constituted a pandemic, which posed challenges to overall economic development for the first half of the year. The PRC government’s series of epidemic prevention and control measures have effectively controlled the epidemic from spreading. The International Monetary Fund (IMF) anticipated that the economic growth of the PRC in 2020 will be 5.6%. Despite uncertainties in external economic environment, the Group will continue to consolidate and strive to upgrade its position in the new audio market, focus on the development of smart speakers, soundbar and headphone product businesses, as well as strive for more business opportunities and find more new customers. Especially with respect to soundbar products, the Group has completed productivity construction of soundbar integrated production at the Huizhou factory. As to customer structure, the Group has basically secured top soundbar customers around the world, which laid a solid foundation for the Group’s future development of soundbar business. For the video business, the Group will keep on adjusting its resource structure and adopt a small-team and asset-light operation strategy. TWS earphones have become one of the Group’s business units with key breakthrough. With Bluetooth 5.0 technology becoming more popular and gradual removal of headphone jacks from smart phones around the world, TWS earphones have experienced explosive growth in the past year. Basic user needs such as battery life, transmission and price of most TWS products in market are satisfactory while there is still room for improvement regarding functions including sound quality, noise reduction mode, voice assistant and health monitoring. Counterpoint, a third party market analysis agency, predicted 120 million pairs of global TWS earphones shipments in 2019. With both driving force of replacement and new purchase, TWS earphones shipments will surge to 230 million pairs in 2020, representing a year-on-year growth rate of 91.6%. In terms of sound quality, noise reduction technology and voice interaction, the Group has been well equipped with market competitive edges. The Group will keep on advancing its technology and automated production capacity to strive for more competitive integrated advantages and higher industry status in the TWS earphone market in the future. The Group will continue to devote great effort to the development of its smart and ancillary product businesses, in particular smart voice speakers and other voice-related smart products. The Group will continue strengthening its technological advantages in smart voice, while focusing on the form of smart speaker products and cooperating with global major voice recognition platforms to constantly explore more market opportunities. In the meantime, the Group will seek more opportunities for cross-industry applications based on smart voice technology and develop more mainstream ancillary products in the voice ecosystem. As a core partner of the global Internet corporate voice ecosystem, the Group will achieve mutual growth with voice ecosystem development and strive to provide more users with the experience of a new generation of humanmachine interaction. The Group has actively coped with the risks deriving from potential trade tariffs and prepared in advance. After the establishment of the subsidiaries in Vietnam, the Group will strive for completing the construction of overseas self-owned plants as soon as possible and build mature capability of overseas supply chain vertical integration. The Group will continue to enhance its development ability in respect of utilities such as speakers and sophisticated structural parts. The Group also consolidated the moulding and plastic parts manufacturing and electro-acoustic units of its subsidiaries to achieve synergy and reduce production costs. The Group will further implement streamlined management to enhance overall operational efficiency and control overall costs, during which it will adopt a series of measures to improve its administrative efficiency and internal operation process. With the streamlined management and improvement of product testing and assembled infrastructure, the Group will be able to ensure product quality and control production cost. In conclusion, the Group will provide brand companies and customers with outstanding quality products and services by expanding new businesses, exploring new technologies and products, and enhancing its productivity. As the smart and ancillary product business is becoming more mature, the management estimates that businesses such as smart products, soundbars, headphones and ancillary products of the Group will account for an increasing proportion in 2020. Meanwhile, along with the continuous development of smart audio products, more enterprises will enter this field in the future and the market competition will become fiercer. The Group will, as always, keep on looking for opportunities and actively seeking viable business expansion opportunities, which, coupled with its own strengths, will enlarge its business portfolio, enhance the long-term value of the Group, and proactively generate more return for its shareholders.

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