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Public company info - Smart-Core Holdings Limited , 02166.HK
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Smart-Core Holdings Limited, 02166.HK - Company Profile
Chairman Tian Weidong
Share Issued (share) 489,000,000
Par Currency U.S. Dollar
Par Value 1.0E-5
Industry Semiconductors
Corporate Profile Business Summary: The Company’s subsidiaries are principally engaged in the trading of electronics components. Performance for the year: The total revenue of the Group for the year ended 31 December 2019 amounted to HK$4,762.8 million (2018: HK$4,935.6 million), representing a decrease of 3.5% as compared with the year ended 31 December 2018. The gross profit of the Group amounted to HK$270.9 million for the year ended 31 December 2019 (2018: HK$234.1 million), representing an increase of 15.7% as compared with the year ended 31 December 2018. The net profit attributable to the owners of the Company for the year ended 31 December 2019 amounted to HK$55.1 million (2018: HK$80.5 million), representing a decrease of 31.6% as compared with the year ended 31 December 2018. Basic earnings per share for the year ended 31 December 2019 was HK10.96 cents (2018: HK16.15 cents). Business Review The Group acquired the Quiksol Group in 2018, expanding the Group’s distribution business by adding independent distribution business to authorised distribution business. Amid the volatile international market in 2019, the global economic growth slowed down significantly and the downward pressure exerted on the major economies surged. The semiconductor market was also affected by the macroeconomic situation, resulting in a decrease in demand. Coupled with other factors such as decline in memory price, the global semiconductor sales have decreased considerably i n 2019. Driven b y favorable factors such a s 5G commercialization in various countries around the world, doubled sales of smart speakers, booming smart wearable market, and promising prospects of semiconductor market including security, auto semiconductors, Internet of Things (“IoT”) and AI applications, the sales of semiconductor chips have been improving in the second half of 2019. Despite the poor general market conditions in 2019, the Group managed to maintain a stable development. The Group’s overall consolidated revenue for the year amounted to HK$4.76 billion, representing a slight decrease of 3.5% as compared with 2018. The independent distribution business achieved a growth while the authorised distribution business posted a decrease, among the authorised business: the annual sales of television products, smart terminals, and communication products showed a year-on-year decrease, sales o f optoelectronic display product slightly increased while the sales of security and optical communication products achieved rapid growth. The Group’s independent distribution business, which was mainly contributed from Quiksol Group, recorded a steady growth in 2019. The business review of each major product line is as follows: Authorised Distribution Television Products The sales of TV System on Chip (“SoC”) chips are one of the core businesses of the Group. In light of the intensified price competition of TV SoC chips in 2019, together with the continual decrease in Dynamic Random Access Memory (“DRAM”) prices since the end of 2018, more customers preferred external DRAM products in the face of high unit price of SoC chips with built-in DRAM storage integration features and price fluctuation of memory. As the unit price of mid-end and low-end TV SoC chips has dropped, the total amount of TV chip orders for the same shipment volume will decrease. Due to the above factors, the sales of the Group’s TV business slightly declined in 2019. In 2019, the accumulative sales of this product line amounted to HK$2,086.2 million, representing a decrease of 6.1% as compared with 2018. Smart Terminals Set-top box is the core of the Group’s smart terminal business. At present, the set-top box market is dominated by Digital Video Broadcasting (“DVB”), Internet Protocol Television (“IPTV”) and Over-The-Top (“OTT”). According to the Ministry of Industry and Information Technology, as of the end of November 2019, the total number of IPTV users reached 294 million with a penetration rate of home users of 65.8%, becoming the major mainstream video transmission channel under National Radio and Television Administration. The number of OTT users nationwide also reached 220 million, outperforming the number of traditional cable TV users. Affected by IPTV and OTT, as of the third quarter of 2019, the total number of cable TV DVB users in China dropped to 212 million, representing a decrease o f approximately 40 million as compared with the peak in 2016. Given the stiff competition of the market, coupled with other factors such as Sino-US trade friction, growth of overseas market is limited, the Group felt the pinch and saw a considerable decline in the sales of set-top box chips in 2019. In 2019, the sales of smart terminal products amounted to HK$537.2 million, representing a decrease of 30.2% as compared with 2018. Optoelectronic Displays The Group’s optoelectronic display product line mainly focuses on the sales of integrated circuit (“IC”) related to displays and screen modules. According to the data for global shipment of personal computer (“PC”) in 2019 from research firms, namely IDC and Gartner, the sales of PC in 2019 experienced a turnaround from decline in the past seven years to growth. The shipment volume of certain enterprises exceeded 260 million units. Since the PC shipments have bottomed out, the demand for display products will also increased. As for liquid crystal display (“LCD”) displays, with the investments from Chinese panel manufacturers, sluggish demand and oversupply in the market, the competition in panel modules remained fierce and the prices significantly decreased. However, as certain manufacturers planned to gradually shut down or adjust their existing production lines to optimize their product portfolio financial structure, the excess supply and demand of panels will alleviate in 2020 and the market share of Chinese panel manufacturers will further increase. In 2019, the optoelectronic display business of the Group showed healthy development. The sales of optoelectronic displays amounted to HK$531.7 million, representing an increase of 6.5% as compared with 2018. Memory Products With the development of big data, cloud computing and IoT and the improvement of product intelligence, memory chips play a much more important role in the entire industry chain, accounting for approximately one-third of the whole industry. The sales of memory chips in 2019 have fallen sharply after hitting its peak in 2018. According to Gartner, a research firm, the overall sales of memory chips in 2019 decreased by 31.5% year-on-year due to the continued decline in prices of non-volatile memory technology (“NAND”) flash and DRAM. Against such backdrop, the sales performance of the Group’s memory products also showed a substantial decline in 2019. The accumulative sales of memory products amounted to HK$493.2 million, representing a decrease of 22.7% as compared with 2018. Others Others mainly comprise communication products, optical communication, security products and other product lines. Sales of this business unit recorded year-on-year decrease by 11.1% as compared with the corresponding period in 2018. Although sales of optical communication and security products started to increase gradually in 2019 and were benefited from growth in industry scale to achieve rapid growth in short term, the aggregated volume was insignificant and did not bring significant impact to growth of sales of the Company as a whole. However, communication products were affected by decrease in market price of MCP memory chips, the result of the whole product line showed significant drop. Independent Distribution The Group’s independent distribution business was mainly contributed from Quiksol Group and the revenue from independent distribution amounted to HK$463.0 million representing an increase of over 500% as compared with 2018, as the Group acquired Quiksol Group in October 2018. In 2019, due to the worldwide substantial price reduction of over 50% of memory products, one of the Group’s core businesses, together with the wait-and-see attitudes of the customers, the turnover has declined in the first half of 2019. In the second half of 2019, the price reduction of memory products has become more stable and customers began to place more orders rather than remaining hesitant. Meanwhile, in view of the central processing unit (“CPU”) shortages and price increment, the management also adjusted its strategy to focus on the CPU requirements of the PC and server industries, resulting in a significant increase in turnover in the second half of the year. Prospects: In 2019, the sales of global semiconductor industry plunged. However, in light of the signs of improvement from the data of the second half of 2019, analysts and market participants are optimistic about the development of the semiconductor industry in 2020. Nevertheless, due to the outbreak of the novel coronavirus at the end of 2019, the market outlook has been clouded by uncertainties. The outlook of the Group, especially its business directions, is as follows: Authorised Distribution Television Products Despite the year-on-year decline in TV sales in China in 2019, thanks to various favorable factors including the strong replacement demand for old TVs and the gradual downward price adjustments of high-end organic light-emitting diode (“OLED”) and Quantum Dot Light Emitting Diodes (“QLED”) quantum dots TVs for penetrating into mid-end and low-end market, it is generally believed that the TV shipments in China will break out from its decreasing trend and return to mild growth in 2020. At CES2020, major TV manufacturers around the world launched their new products, demonstrating the acceleration of maturation and innovation of 8K technology, continuous diversification of screens, and applications of computer visual and voice recognition technology in TVs. It is expected that 5G+4K/8K+AI+IoT will become the highlight of TV technology development in 2020 and beyond. TVs will no longer be the traditional video displays in the living room in the future. Many manufacturers are committed to developing TV screens as interactive accesses for the entire smart home application systems, thereby paving a path for the TV industry towards highquality development. As a result, the large scale and slowdown in growth rate of the entire industry will not hinder its development prospects. By maintaining the sales of the Group’s TV SoC chips at a high level, the Group will focus on expanding new applications and new markets and developing upstream and downstream technologies in the future to gain a cluster advantage. Smart Terminals According to the “White Paper on Ecology of Large-screen TV in China in 2020”《( 2020中國電視大屏生態白皮書》), with the popularization of network and intellectualization, the connections between traditional cable TV DVB set-top boxes and OTT will be strengthened. It is expected that large-screen TVs and smart set-top boxes will become essential accesses for application systems in living rooms, covering e-commerce, education and medical care and providing more valuable value-added services. 5G will empower more 4K/8K ultra-high definition video applications, thereby adding another favorable factor for the development of the set-top box industry. According to a report issued by ZION, a market research firm, it is expected that the market size o f 4K ultra-high definition set-top boxes will reach approximately US$ 3.091 billion by 2024, representing a compound annual growth rate of approximately 32.8% from 2018 to 2024. Driven by the high per capita income and popularization of 4K TV, North America and China will become the major markets for 4K set-top boxes. As a result, along with the product technology upgrades, the integrated circuits and other electronic components used in 4K ultra-high definition smart set-top boxes will maintain a good market prospect in forthcoming years. By focusing on the new applications of AI on smart terminals, the Group will look for more business opportunities in such fields. Memory Products According to a memory industry report issued by UBS in January 2020, the price reduction cycle of DRAM in terms of capacity will come to an end in the first half of 2020 and start to pick up in the second half of 2020. In addition, owing to the application of 3D high-stacking technology, NAND flash memory will enjoy cost reduction. However, as the major NAND original manufacturers will adopt a conservative approach on their capital expenditure and slow down the growth of production capacity in 2020, a better or tightening market supply and demand balances may be achieved and the flash memory prices may stop falling. With the rapid growth of data volume and product intellectualization, data storage applications will be more widely used and the importance of memory chips to the electronics industry will further increase. Therefore, the Group will continue to invest resources to expand its business scale and actively explore new business opportunities, including setting up and operating a new storage solutions company for such segment to establish its presence. Optoelectronic Displays With the upcoming events in 2020, coupled with the buoyant development of innovative application markets in Industrial IoT, smart automobiles, smart manufacturing, remote education and remote medical care, the global demand for display panels will continue to grow in 2020 and achieve a balance between the overall supply and demand. As for LCD displays, it is estimated that the shipment volume of medium and large screens (i.e. over 23.6 inches) will account for 50% of the total shipment volume in 2020. With the popularization of large screens, the market share of 4K/5K/8K high-resolution displays will further increase. By providing leading technological solutions and chips for displays and screens, the Group will enjoy bright prospects at the time of market recovery and domination by domestic panel manufacturers. Others The Group’s strategic on Others is to develop certain products into a meaningful product lines. In 2020, the Group’s communication products will continue to focus on business opportunities o f electronic components o f cellular data module. It will also concern application opportunities of cellular data module in different product lines, in combination with the Company’s data and software services. Meanwhile, as governments, enterprises and consumers around the world raise their awareness on securities, they become more willing to pay for security systems, driving continuous growth of the demand for security products. The Group will also extend its effort on expanding security field to diversify its business and increase market shares. For fields of other products, the Group has also started plotting gradually, for example, industrial control and medical industry will hopefully generate new values in 2020. Independent Distribution Surrounded by uncertainties of the Sino-US trade war, the Group is committed to improve the Group’s services and the Group’s ability of securing orders from overseas markets and look for potential opportunities. Meanwhile, the supply of memory and CPU, the Group’s core products, remains tight. Driven by rebounding demand, it is expected that such segment will continue to make contributions to the Group. On the whole in 2020, the Group will continue to focus on expanding and enhancing its existing authorized distribution business, investing more resources in new business segments which have achieved breakthroughs, and consolidating and expanding its market share. The Group will also continue to develop and invest in its independent distribution and technology value-added businesses to improve the return on investment. By investing in technology and research and development, and adhering to intellectual property rights standards to strengthen the construction of intellectual property rights management system, the Group is committed to building up its core competitiveness. The Group will also identify, approach and evaluate investments and targets for acquisition and merger in the capital market to take action when the right opportunity arises. Looking ahead, while maintaining the stable operation of the Group, the Group will boost the development of the Group’s business, with an aim to create greater return and long-term value for the Shareholders.

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