LED lighting leaders see strong first-half performance; race to 10 billion begins
Leading LED lighting companies across the upstream, midstream, and downstream—including NVC Lighting, Yankon Lighting, Foshan Lighting, OPPLE Lighting, San'an Optoelectronics, HC SemiTek, and Hongli Group—reported strong performance in the first half of 2016. Against the backdrop of further proliferation of LED lighting and accelerating industry consolidation, this reflects a trend where the strong get stronger.
As one of the leading midstream LED packaging companies, MLS Co., Ltd. also announced on August 26 that it plans to invest 5.5 billion yuan in an LED lighting project at the Zhejiang Yiwu Industrial Park, which is expected to be completed and reach production by 2022, with annual operating revenue projected to reach 10 billion yuan at that time. This shows that the "race to 10 billion" among the leaders is also intensifying.
Excessive competition in the LED sector is improving
NVC Lighting's profit forecast reveals that in the first half of 2016, NVC Lighting's net profit increased approximately 3.7 times year-on-year, mainly due to strengthened cost control leading to a significant increase in gross margin, as well as reduced promotional and marketing expenses. However, due to the ongoing transition to LED lighting and several events related to former CEO Wu Changjiang, NVC Lighting may still book a relatively large amount of provisions in its 2016 results.
Sunshine Lighting's half-year report shows that in the first half of 2016, Sunshine Lighting achieved operating revenue of 2.126 billion yuan, a year-on-year increase of 11.92%; net profit of 218 million yuan, a year-on-year increase of 22%. Among them, LED product revenue was 1.74 billion yuan, a year-on-year increase of 39.7%, accounting for 82.78% of revenue. The performance improvement benefited from increased investment in innovation and the market. After setting up companies in the United States and Australia, Sunshine Lighting invested in establishing companies in Germany and France, and explored new markets in Africa and Oceania. In the second half of this year, Sunshine Lighting will continue to strengthen automation and smart manufacturing, exploring the "Internet+" model in the lighting industry.
According to Foshan Lighting's half-year report, in the first half of this year, Foshan Lighting's operating revenue was 1.756 billion yuan, a year-on-year increase of 15.17%; net profit was 200 million yuan, a year-on-year increase of 106.4%. Among them, LED lighting sales revenue was 1.06 billion yuan, a year-on-year increase of 42.3%; overseas sales revenue was 580 million yuan, a year-on-year increase of 26%. This was mainly due to the expansion of product lines (establishment of a new electrical business division) and sales channels (vigorous development of new channels such as specialty stores, engineering, and e-commerce), while strengthening R&D, implementing automation transformation, and strict cost control, improving efficiency.
Opple Lighting, another leading lighting company, has just been listed on the Shanghai Stock Exchange. Its half-year report shows that in the first half of 2016, Opple Lighting's total operating revenue was approximately 2.234 billion yuan, a year-on-year increase of 22.65%; net profit was 183 million yuan, a year-on-year increase of 33.58%. This was mainly due to continuous growth in product sales, along with the ongoing launch of new products, as well as production optimization and scaling that led to a decrease in product costs, driving gross margin growth.
Judging from the leading LED chip companies in the upstream of LED lighting, their performance also improved in the first half of this year.
Sanan Optoelectronics achieved operating revenue of 2.778 billion yuan in the first half of 2016, up 21.25% year-on-year; net profit of 966 million yuan, up 6.89% year-on-year. Currently, Sanan Optoelectronics owns 276 MOCVD devices, 256 of which have been put into production. As LED applications further penetrate into various fields and chip demand continues to grow, Sanan Optoelectronics keeps optimizing its product structure and enhancing profitability. Its wholly-owned subsidiary Anrui Optoelectronics, engaged in the automotive lighting business, is growing rapidly. At the same time, Sanan Optoelectronics will invest together with partners including the National Integrated Circuit Industry Investment Fund to jointly establish the Fujian Anxin Industrial Investment Fund, accelerating expansion through mergers and acquisitions.
Another leading LED chip company, HC SemiTek, achieved total operating revenue of 613 million yuan in the first half of this year, up 41.16% year-on-year; net profit of 53.17 million yuan, up 323% year-on-year. In the first half of the year, market demand for LED chips continued to grow. HC SemiTek's LED chip sales volume increased 98.24% year-on-year, and the acquisition of Lanjing Technology added substrate wafer sales revenue, resulting in a substantial increase in revenue. HC SemiTek stated that LED chip prices began to rebound from the bottom in the second quarter, and customer enthusiasm for sales collections has improved significantly, indicating that the situation of excessive market competition has improved.
The race to 10 billion kicks off
Listed LED packaging leaders in the midstream of the LED lighting industry also performed well in the first half of this year.
Hongli Zhihui achieved total operating revenue of 990 million yuan in the first half of this year, up 43.34% year-on-year; net profit of 138 million yuan, up 141.6% year-on-year. The main reason is that in the first half of 2016, with continued favorable market demand for LED lighting, Hongli's business scale in LED automotive lighting, LED brackets, and LED packaging continued to develop. At the same time, in the first half of the year, Hongli transferred 15.05% of its equity in associated subsidiary Xinquan Optoelectronics, and government subsidies received increased, contributing to higher profits.
Refond Optoelectronics performed well in the first half of the year, with net profit expected to grow 0%-24.67% year-on-year, reaching RMB 21.6578 million to 27 million. This is because in the first half of 2016, Refond's wholly-owned subsidiary Linglong Optoelectronics, acquired last year, was included in the consolidated statements, allowing Refond to expand from large-size LED packaging products to small and medium-size LED packaging products.
Another LED packaging leader, Mulinsen, achieved operating revenue of RMB 2.087 billion in the first half of 2016, up 4.31% year-on-year; net profit of RMB 153 million, down 34.13% year-on-year. Mulinsen stated that after the general decline in LED industry chain prices in 2015, LED product prices are gradually stabilizing in the first half of this year, but gross margins still differ year-on-year. At the same time, industry consolidation continues, and Mulinsen is accelerating related acquisitions, currently promoting the acquisition of Osram's lighting business.
On August 25, Mulinsen's board of directors approved the "proposal for signing an investment agreement with Zhejiang Yiwu Industrial Park for an LED lighting project," planning to invest RMB 5.5 billion to build an approximately 600-mu LED lighting project in Yiwu Industrial Park, expecting to achieve annual operating revenue of over RMB 10 billion and annual tax payment of over RMB 600 million after completion and operation. The plan is to complete construction and start production within two years, and reach full production by the end of December 2022, thereby accelerating expansion into the downstream LED lighting sector.
Coincidentally, this year NVC Lighting and its major shareholder Elec-Tech also set a target, hoping that the operating revenue of "Big NVC" (NVC Lighting and related assets) will reach the 10-billion-yuan target this year. Obviously, the 10-billion-yuan race among LED lighting industry leaders has begun, and a new round of kingship competition will be staged.
Comparing the performance in the first half of 2016 with that of 2015, last year saw performance divergence among the aforementioned LED lighting industry leaders in terminal lighting, midstream packaging, upstream chips, and other fields, with some happy and some worried; in the first half of this year, most of these LED leaders achieved double growth in sales revenue and net profit. It can thus be inferred that in the process of popularization and consolidation of the LED lighting industry, the situation of excessive competition has eased, and the bottoming and rebound of LED chip prices in the second quarter of this year is a side confirmation, which further reinforces the trend of the strong becoming stronger among leading enterprises.