Bank of China International held a non-trading roadshow with Tiancai Holdings (3882.HK/HK$2.77, purchase). Company Chairman Deng Rongfang, Investor Relations Director Liu Jie, and Head of Business and Product Planning Xu Chao attended the event. Management said action cameras will continue to grow steadily in the second half of 2015, and new products will be launched. Below is a summary of the non-trading roadshow:
The comprehensive advantages of multiple fields form the company's core competitiveness.
Management believes that Tiancai Holdings' core competitiveness stems from the company's technical advantages and expertise in various fields such as images, cloud platforms, the Internet of Things, and image analysis. This knowledge makes it easy for companies to communicate with customers and provides customers with the technology they need for new products. It's rare for a company to have a technological advantage in so many fields.
Sales of action cameras are expected to increase significantly in the second half of 2015. Tiancai's sports cameras and accessories had a sales ratio of 1:2 in the first half of 2014, clearly showing a seasonal pattern. Management believes there are two main reasons why GoPro sales are showing a seasonal pattern. First, driven by Thanksgiving and Christmas, the peak season for consumer electronics products in Western countries is the fourth quarter of every year. Second, GoPro (GPRO.US/USD 37.49, no rating) generally releases a new model in October, thereby stimulating sales growth in the second half of the year. In October last year, GoPro launched a new entry-level product (GoPro HERO), which led to a significant increase in both GoPro and Tiancai Holdings' sales in the second half of the year. As of mid-2015, GoPro has launched two new products (GoPro Session and GoPro HERO+LCD), and if new products are launched in October (Bank of China International believes this is very likely), then GoPro sales will increase rapidly in the second half of the year.
Shipments of home imaging products more than doubled month-on-month in the second half of 2015. A new web camera built for major customers will go into large-scale production in October. In addition, there are two or three projects in progress. Tiancai Holdings shipped more than 400,000 web cameras in the first half of the year, and management expects to reach at least 1 million units in the second half of the year.
A number of new products were launched in the second half of the year. The smart devices supplied by the company to iON (unmarketed) were launched in the US in mid-2015. iON will launch a variety of products in the second half of the year, which is expected to bring more revenue to Tiancai Holdings. In addition, police cameras created in collaboration with America's largest police camera company will also be put into large-scale production in September. In collaboration with a well-known Chinese internet company, small-scale production of car cameras will begin in October, and trial sales will begin within the year. Management expects smart device sales to be $10-15 million in 2015, and the product's gross profit margin will also be higher than the company average.
Increase production capacity and expand plant area. Management said the company's utilization rate is close to 100% at this stage and plans to increase production capacity by 50% within the year. The company had eight SMT (surface mount process) machines last year, added two in the first half of this year, and will add three more in October. In addition, the company also renovated some office buildings and converted them back into factories. Tiancai's capital expenditure budget for 2015 was HK$50 million, and there will be a slight increase in 2016. The company is considering buying its own plant, but will have to wait for the right time. The Shenzhen plant is currently leased and will expire in 2019.