Mon, Apr 01, 2013 - Page 13 News List

Epistar to profit from rise in demand for LED lighting

APPEALING OPTION:Demand for LED lighting products is steadily rising, driven by price elasticity and increased awareness of rising energy costs, an analyst said

By Helen Ku  /  Staff reporter

As demand for LED lighting products is heating up amid the improving global economy, Epistar Corp (晶電), the nation’s biggest LED chipmaker, is expected to see its gross margin rebound this quarter after posting a record loss last year, a foreign brokerage said.

Due to oversupply in the LED market, which resulted in a drop in product prices, Epistar’s performance fell short of analysts’ expectation last year, JPMorgan Securities said in a note on Tuesday last week.

Because of a decreased utilization rate and continual price decreases, Epistar last quarter posted a net loss of NT$1.11 billion (US$37.18 million) after booking an impairment loss of nearly NT$500 million by shutting down one facility previously owned by its subsidiary Huga Optotech Inc (廣鎵光電).

For the whole of last year, the company’s total net loss amounted to NT$2.33 billion, or a loss per share of NT$1.3, the company said in a filing to the Taiwan Stock Exchange last week.

Last year’s figures indicated the company’s worst performance since it was listed on the stock market.

In 2011, the company reported a net loss of NT$286.23 million, or NT$0.56 per share, company data showed.

On the sidelines of this year’s Taiwan International Lighting Show on Tuesday last week, Epistar chairman Lee Biing-jye (李秉傑) told reporters that the company’s shipments are likely to more than double this year on the back of robust global demand for LED lighting products amid the global economic recovery.

Increasing global demand for LED lighting products might ease the company’s price pressure this year, Lee said, adding that the company’s estimated prices of LED lighting products would fall by between percent 15 and 20 percent this year.

“Contrary to the seasonal trends seen in the prior two years, where Epistar saw its first-quarter sales performance show quarter-on-quarter margin decline, we expect the margin to show a healthy rebound this quarter,” JPMorgan analyst Narci Chang (張恆) said in a note.

Epistar’s management expects to turn around Huga’s profitability by next month.

JPMorgan maintained a positive view on general lighting demand this year and said that Epistar’s general lighting profit could become the company’s biggest earnings driver by the second half of the year.

“Demand for LED lighting products is rising steadily driven by price elasticity and increased awareness of rising energy costs,” Chang said.

JPMorgan lowered its price target for Epistar’s share price from NT$80 to NT$70.

Epistar’s shares closed up 1.32 percent at NT$53.9 in Taipei trading on Friday.

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