Sat, Apr 14, 2012 - Page 12 News List

LED, solar stocks buoyed by rate hike

Staff Writer, with CNA

Shares of companies specializing in LED and solar energy products remained strong yesterday after the government announced an increase in electricity rates that is expected to prompt greater use of green energy products, dealers said.

However, investors have been advised to stay alert to a possible pullback because many green energy stocks remain unprofitable because of weak prices on the global market, dealers said.

In Taipei trading, shares of LED chipmaker Epistar Corp (晶元光電) rose by the daily maximum of 7 percent to NT$80.20 and shares of LED lighting supplier Everlight Electronics Co (億光電子) also finished 7 percent higher at NT$65.50.

In the solar energy sector, shares of Sino-American Silicon Products Inc (中美晶) were up 6.54 percent at NT$57 and Motech Industries Inc (茂迪) stock rose 2.58 percent to close at NT$49.65.

The benchmark TAIEX ended 1.64 percent higher at 7,788.27 points on the Taiwan Stock Exchange.

“The electricity rate hike has prompted many investors to turn upbeat about higher consumption of energy efficient products such as LED lights and solar panels,” Hua Nan Securities (華南永昌證券) analyst Henry Miao (苗台生) said. “These green energy stocks are riding the wave of the higher electricity rate theme, outperforming the broader market.”

The Ministry of Economic Affairs announced on Thursday that starting on May 15, household electricity rates will increase by an average 16.9 percent, while commercial rates will rise by 30 percent and industrial rates by 35 percent.

“However, I am still worried about the profitability of most LED and solar energy stocks as weak prices are likely to continue to squeeze their bottom lines,” Miao said. “There is uncertainty about when many of them will swing to a profit.”

Miao said any turnaround in the profitability of solar energy stocks would depend on the global market, which has been haunted by slowing economic fundamentals.

“So, I am afraid the current gains in their share prices will be short-lived since the upside is simply driven by the electricity rate hike news,” he said.

On April 1, the government lifted its partial freeze on domestic fuel prices and raised gasoline prices by about 10 percent.

The ministry has estimated that the hikes in fuel prices and electricity rates could drag down domestic economic growth by 0.48 percentage points and push up the consumer price index by 0.83 percent.

“I expect the hikes will cut earnings per share in the local manufacturing sector by about 10 percent in 2012,” Miao said.

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