Sat, Dec 25, 2010 - Page 11 News List

Epistar growth momentum likely to resume: analyst

By Kevin Chen  /  Staff Reporter

Epistar Corp (晶元光電), the nation’s biggest LED chipmaker, is likely to resume its growth momentum in the first quarter of next year in view of rising component restocking in China and South Korea after experiencing weakening demand and falling prices this quarter, Primasia Securities Co (犇亞證券) said yesterday.

“We forecast the company’s sales to grow by 25 percent to 30 percent year-on-year in 2011,” Primasia said in a client note yesterday.

Average selling prices (ASPs) for LEDs are forecast to face rising pressure after the expanding installation of new metalorganic chemical vapor deposition (MOCVD) equipment by companies next year, as well as a parity between supply and demand in the LED sector, Primasia said.

On average, MOCVD equipment can supply about 380,000 units of LCD TV backlights a year, JPMorgan said in an investment report on Nov. 24.

As the ASP may drop by a range of between 10 percent and 15 percent next year, Epistar is likely to expand its sales of high ASP margin TV and lighting LEDs by between 55 percent to 60 percent next year, from about 40 percent to 45 percent this year, to offset the downward pricing trend, Primasia said in the note.

Rider Chang (張世賢), Epistar’s vice president of finance and accounting, told reporters on Dec. 3 that the LED lighting business accounts for about 20 percent of its sales and LED backlighting makes up 50 percent.

JPMorgan said last month that Epistar is in the process of shifting its focus from TV backlights to lighting applications and is undertaking a fast product mix change in order to sustain its earnings growth.

Primasia yesterday maintained a long-term positive stance on Epistar and suggested investors load up on the company’s shares whenever pulling back occurs, after the Hsinchu-based company announced plans to issue US$280 million of zero-interest overseas convertible bonds over next two years to expand investment in a Chinese joint venture.

In a stock exchange filing on Thursday, Epistar said it would invest an additional US$19.5 million in United LED Shan Dong Corp (冠銓山東光電), a joint venture established in China with United Microelectronics Corp (聯電).

Following the expanded investment, Epistar’s investment in the Chinese joint venture will total US$27.5 million, with its stakeholding increasing to 55 percent from 50 percent, the filing said.

Shares of Epistar edged down 0.97 percent to NT$102 yesterday on the Taiwan Stock Exchange. So far this year, the stock has dropped 15 percent, underperforming the TAIEX’s 8.22 percent rise over the same period, the stock exchange’s data showed.

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