The LED sector is expected to experience a tough year next year in the face of continuously falling product prices, a leading LED entrepreneur said on Saturday.
Lee Biing-jye (李秉傑), chairman of Espistar Corp (晶電), a major local LED component manufacturer, said Chinese LED firms are cutting product prices to boost shipments.
DOWNWARD TREND
Lee said that because of this, the LED sector would face a downward trend in overall product prices at a time when demand for LED components is slowing.
He said he expects the LED business to encounter challenges in the coming year, because even though demand for LED bulbs is on the rise, it is unlikely to help manufacturers fight the challenges of cutthroat price competition.
PICK-UP IN 2014
Lee said the LED sector is expected to generate next year’s sales that will stay at a level similar to this year, adding that a pick-up in sales will not be seen until 2014.
In the first half of this year, Epistar incurred NT$674 million (US$23 million) in net loss, or NT$0.16 per share, compared with NT$1.07 billion in net profit, or NT$1.25 per share, recorded over the same period of last year.
During the six-month period, Epistar posted NT$10.10 billion in sales, down from NT$12.71 billion recorded a year earlier. Last year, the company’s sales stood at NT$22.65 billion.
SHARE SWAP
Meanwhile, Epistar’s directors of board held a meeting on Friday to approve a proposal for the company to acquire Huga Optotech Inc (廣鎵光電), another local LED firm, through a share swap, to expand its production capacity.
On Aug. 9, Epistar announced to raise its holdings in Huga to 100 percent from the existing 48 percent by providing Epistar shareholders 4.85 Huga shares for each of Epistar common share.
Huga will become a fully-owned LED chip unit of Epistar and after that the company will be delisted from the local stock market.
Lee said Epistar is planning to strengthen Huga’s management and improve its production technology and yield rate to boost the company’s bottom line.
EXPECTATIONS
He said that with Epistar presence, Huga is expected to break even in the third quarter of next year. In the first half of this year, Huga incurred about NT$844 million in net loss.
JPMorgan said that due to the acquisition, Epistar will have to shoulder Huga’s losses, adding that as a result, it has lowered its forecast of Epistar’s earnings per share by 30 percent and 24 percent this year and next year, respectively, to NT$0.8 and NT$3.1. For 2014, Epistar’s EPS could stand at NT$4.
RESEARCH NOTE
In a research note, the brokerage said it has also cut a target price on Epistar shares to NT$85 from NT$90.
However, JPMorgan said that it remains positive toward Epistar’s bottom line in the long run and reiterated an “overweight” recommendation on the stock.
Shares of Epistar closed down 0.32 percent at NT$62.60 on the Taiwan Stock Exchange on Friday.
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