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Public company info - Vital Innovations Holdings Limited , 06133.HK
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Vital Innovations Holdings Limited, 06133.HK - Company Profile
Chairman Rong Xiuli
Share Issued (share) 850,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Consumer Electronics
Corporate Profile Business Summary: The Group is principally engaged in mobile telecommunication devices export operations in the PRC. Performance for the year: Revenue decreased from approximately RMB911.4 million for the year ended 31 December 2018 to approximately RMB815.94 million for the year ended 31 December 2018. Net profit of the Company attributable to shareholders amounted to approximately RMB5.574 million for the year ended 31 December 2019. Basic earnings per share for the year ended 31 December 2019 was approximately RMB0.66 cents. Business Review: Vital Innovations Holdings Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) are primarily engaged in the provision of products and services including mobile phones, smartphones and related business which encompassed research and development, design, engineering, material sourcing, supply chain management, logistic, and the services activities to the target markets. The Group’s main business is to service its diverse number of wholesalers and resellers by using its extensive understanding of telecommunication technology, a large network of technological and service provider partners. With the Sino-American trade war in the back drop, the overall worldwide economy took a hit in 2019. In 2019, global smartphone shipments continued to slip. According to the data released by International Data Corporation (IDC) on 4 February 2020, the global smartphone shipments in 2019 was 1.371 billion units, representing a year-on-year decrease of 2.3%, the third consecutive year of decline. The IDC indicated that the decrease was partially due to the slowing transition from feature phones to smartphones for the lower number of shipments and aggravated by the ongoing trade dispute between the U.S. and China and the increasing prices of flagship smartphones. The IDC also reported an increase in Android’s market share from 85.1 percent in 2018 to 86.7 percent in 2019, which was mostly attributed to the increase in new smartphones models, some of which feature 5G connectivity and notable 5G smartphones. In 2019, the Group strove hard to maintain the customer base through innovation and efficiency. The management team adjusted the higher margin policy to high volume, lower gross margin in quoting business opportunities. The overall market was still difficult. However, the Group was still able to deliver approximately 90 percent of last year shipments. The Group worked on improving margins with better and more services in the transactions and tightening control of all operating expenses. The management believes these measures enable the Group to get back on track with more sales volume and minimize the operating losses. The Group’s Hong Kong operation continues to provide software and product upgrade and customer support, and worked closely with support teams in Shenzhen and Beijing to provide the best supply services to its global customer base to ensure that the Group will be able to provide timely service and delivery. The competition was strong in the upper mid-range and high-end segments in 2019 and vendors focused on bringing their latest technology to their consumers to justify the higher prices. The downturn in China market enforced all the Chinese brands to focus their expansion in export, especially in Asian smartphone market. In contrast to China, the Indian market was growing fast and the suppliers started to set up their factories as 21 production facilities for low cost and quick delivery. There are more and more competition as its business model matures and, it is expected that competitors will continue to compete on market shares. The Group strives to improve its market position in providing better services and working with more strategic partners. The Group’s results for the year 2019 was also impacted by the competition caused by the Chinese brands themselves wanting to extend their services and sales reach by setting up their own network in countries outside China. 2019 was a year of searching for repositioning into a more suitable format for the Group in both the segment positioning and strategic direction. The Group was adjusting its strategic position to sharpen its competitiveness. There were possible attempts to explore rebalancing on organizational structure and business model. The Company continues to look for ways for the Group to embrace a world that is having increasing volatility, uncertainty, complexity and ambiguity. With the advent of global unilateralism, Sino-American trade war and Hong Kong’s social events in 2019, challenges were everywhere. As a result, the Group’s trading was adversely affected. Both business environment and demands from customers were changing. The Group’s sales revenue and profit were affected negatively. Despite the adverse, fast-changing environment and challenges, the Company had delivered a result which managed to relief the harmful effect to the business. Sales revenue for 2019 dropped to RMB816 million from RMB911 million, a decrease of approximately 10.4% along with a net loss of RMB5.6 million. The drop in revenue was mainly attributable to the adverse changes in the environment while the drop in earnings is primarily attributable to keen competition in the field globally. Margin is dropping in the course of competition to stay competitive with customers. The Group takes the strategy of staying relevant to the customers at the expense of margin. Prospects: According to the forecast released on 27 February 2020, the world’s smartphone shipments will decrease by 2.3% over 2019 to 1.339 billion units in 2020, representing a decrease in the last forecast in November 2019 (up 1.5% to 1.436 billion units) (Source: IDC). In addition, the outbreak of COVID-19 since the beginning of 2020 has also significantly affected the supply chain of the accessories for smartphones. All suppliers have prepared for the worsening situation for the first half of shipments in 2020. The market participants are looking forward to the second half of 2020, with many market players looking that the introduction of 5G mobile phone will become an important solution to bring back growth. In order to seize the first batch of 5G switching users, domestic mobile phone manufacturers have launched 5G mobile phone price war in advance. 5G mobile phone shipment is expected to be around 100 million units in 2020. Nevertheless, the Group believes that the 4G smartphones will remain in the market for at least for the next two years as the major player, which may continue to pose a challenging operating environment for the Group. It is commonly viewed that the smartphone is being regarded as indispensable, as it is used as more than a phone but a communication and message device, an online payment, a transaction terminal, a small computer. Even though the market has become mature to the point that the fierce competition has seen many global brands disappear, and the better and bigger players dominate the market. The Company has noticed that most of the brands are now moving to supply other electronic devices and services using the smartphones as the interactive terminals. The Company believes that with its extensive relationship and flexible approach, it can take the service approach to enhance its competitive advantages. With 5G, it anticipates there will be improved growth in the smartphone market. The Company will engage with its existing and past customers in developing its new business endeavour. The Company believes there are features and specifications that will allow the Company to differentiate itself from competitions. First of all, with the advent of 5G technology, the foldable phones is one of the fad though this will extend to flexible display and largely replacing a lot of the portables PC and instrumentations, with these the OLED display will be dominant. Within the next two years, all smartphone manufacturers will create their own unique internet of things (IoT)-internet-developers ecosystem or eco-alliances to embrace the new 5G era. Most of the smartphones will have or claim to have AI functionality — and the functions will be used by enterprises to predict and promote business development on the commercial side. As facial recognition becoming the primary (simple) security verification method — and companies will also launch new business models surrounding this functionality together with the photo-imaging technologies; under-screen fingerprint technology will also be a trend for the cheaper phones. A main camera that has 3D and wide-angle/long-focus features will become a standard feature in the flagship models. Some high end smartphones will be equipped with hardware as well as augmented-reality applications that support 3D modelling. 3D and 5G will be the new “killer combo” of the future. (Source: IDC). The Group is working with the above trend in mind and believes smartphone manufacturers will seek to form their own and new brand matrix to please users in a new era. The speed of upgrading mainstream and mid-priced products will accelerate, while new retail platforms will be the focus of their investment in sales terminals. The Group believes that it can work well along such trend as the Group has its own infrastructure to support this change. The Group has started to work with one of the top tier brands in high-end segment to secure the product supply in priority by payment of RMB250 million in advance to suppliers and an indication of the Group’s eagerness to become a sole distributor in some countries based on its strong financial strength and proven sales record to them.

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