Taiwan Ratings Corp (中華信評) yesterday downgraded its long-term corporate rating on Everlight Electronics Co (億光電子), reflecting concerns about the balance sheet of the nation’s biggest LED chip packager over the next one to two years amid negative market conditions.
Taiwan Ratings said it lowered its long-term rating on Everlight to “twBBB+” from “twA-,” with a stable outlook on the long-term rating. At the same time, it affirmed its “twA-2” short-term rating on the company.
“The downgrade reflects our view of the heightened industry risk in the global LED sector and our belief that Everlight’s profitability is unlikely to recover to the previous high over the next one to two years, due to prolonged oversupply from weak demand and increasing competition,” Taiwan Ratings said in a statement.
“This is due to a weak global economy that has lowered LED TV demand as well as still-low demand for LED lighting,” Taiwan Ratings said, adding that industry oversupply by Chinese and South Korean firms would continue to place pressure on the industry.
For the three months through last month, Everlight posted NT$4.31 billion (US$143.8 million) in revenue, up 15.08 percent from the previous three months — but that was still 3.89 percent lower from a year earlier.
Despite the company’s improvements in cost structure and production efficiency, Everlight’s earnings before interest, taxes, depreciation and amortization would likely fall further in the next two years from 14.4 percent in the first quarter, the agency said.