Guangdong LED companies have strong development momentum. Is the era of oligarchy coming?

According to reports, LED companies have successively announced their 2014 annual reports. As of April 9, 26 of the 53 domestic A-share LED companies have disclosed their annual reports.

More than 70% of these 26 companies achieved net profit growth last year, and the industry as a whole is maintaining a steady pace and moving forward.

After years of capital integration and reshuffle, the LED industry has become relatively mature, and government subsidies seem to be declining year by year, especially for LED companies in Guangdong Province. However, the industry predicts that the global LED lighting market growth will still exceed 20% in 2015 and will continue to grow at a high speed.

Guangdong companies still lead the way

After channel integration and capital reshuffling throughout the year, 70% of LED companies have seen an increase in net profit compared with last year.

The largest increase in net profit is Huacan Optoelectronics, which has been on the market for more than two years. This LED chip supply giant’s net profit surged 1151.01% last year, turning losses into profits in one fell swoop.

Huacan Optoelectronics achieved operating income of 706 million yuan, operating profit of 11.6032 million yuan, total profit of 107 million yuan, and net profit of 90.9061 million yuan.

Huacan Optoelectronics increased its chip production capacity in 2014 and sales increased significantly. Last year, LED chip production volume increased by 184.92% and sales volume increased by 133.81%.

At the same time, the performance of another LED industry giant, Lianjian Optoelectronics, is also quite eye-catching. Its net profit increased by 723.60% year-on-year. During the reporting period, it achieved revenue of 970 million yuan, an increase of 65.66% over the same period last year, and achieved a net profit of 134 million yuan.

The above-mentioned surge in net profit is the result of consolidated statements. At the beginning of May last year, Timeshare Media was included in the consolidated statements of listed companies, causing Lianjian Optoelectronics' advertising industry revenue to increase to 343.4537 million yuan, an increase of 5938% over the same period last year.

This listed company, whose main businesses are LED display, LED small-pitch TV, LED smart lighting and LED cultural and educational media, is good at "differentiation". With its mid-to-high-end LED display applications, it has formed certain differentiated competitive advantages in advertising media, stage performing arts, government and corporate publicity and other segments.

Unlike Huacan Optoelectronics, which is located in central China, and stands out, LED companies in Guangdong are blooming. Public information shows that the LED industry in Guangdong Province has basically formed a complete industrial chain from substrate materials, epitaxial wafers, chips, packaging to applications.

After years of reshuffles, mergers and reorganizations, there are now 31 LED listed companies in Guangdong, including 17 listed companies with LED as their main business, accounting for 68% of the national listed companies with LED as their main business. The total market value of the province's 31 LED listed companies exceeds 115 billion yuan.

Unilumin Technology, which is located in Shenzhen and specializes in LED displays and LED lighting, also experienced growth in net profit last year, achieving total revenue of 973 million yuan, an increase of 23.8% over the same period last year. The net profit for the whole year was 80.2603 million yuan, a year-on-year increase of 10.90%, of which the net profit attributable to shareholders of listed companies was 60.8589 million yuan, a year-on-year increase of 84.58%.

In addition, Shenzhen Ledman Optoelectronics also experienced growth. In 2014, it achieved revenue of 405 million yuan, an increase of 15.62% over the same period last year, operating profit 29.1822 million yuan, an increase of 247.23% over the same period last year, and net profit attributable to shareholders of listed companies of 27.1012 million yuan, an increase of 55.48% over the same period last year.

At the same time, Guangzhou-based Hongli Optoelectronics’ revenue in 2014 was 1.018 billion yuan, an increase of 38.38% over the same period last year, and the net profit attributable to shareholders of listed companies was 90.1067 million yuan, an increase of 47.62% over the same period last year.

Past tense of large amounts of "compensation"

Every year, a large amount of science and technology support funds are invested in the LED industry. Some leading LED companies form groups to grab scientific research projects and engineering projects in order to obtain special funds for government support.

In terms of obtaining government subsidies, Sanan Optoelectronics is an absolute big player in "subsidizing". Sanan Optoelectronics received a government subsidy of 170 million yuan on March 31 this year.

During the 2014 annual reporting period, Sanan Optoelectronics received a total of 505 million yuan in government subsidies. At the beginning of the reporting period, the balance of government subsidies was 1.557 billion yuan, and the balance at the end of the period was 1.363 billion yuan, a decrease of 682 million yuan in the current period.

At the same time, Huacan Optoelectronics’s surge in net profit last year was also inseparable from the contribution of government subsidies. During the 2014 reporting period, it received a total of 92.3701 million yuan in government subsidies. In 2013, the amount of this subsidy reached 135 million yuan.

It can be seen that government subsidies are gradually decreasing.

Among the non-operating income of Ruzhouming Technology in 2014, the amount of government subsidies was 10.6592 million yuan. In 2013, the subsidy was 11.1919 million yuan, which was slightly reduced.

According to Zheng Haowen, director of the National High-tech Enterprise Development LED Professional Committee, the phenomenon of large government subsidies invested in the LED industry may no longer exist in the future.

Zheng Haowen told reporters that at present, China's LED companies have formed a leading cluster, the market is relatively mature, and the form of subsidies will only become narrower in the future.

However, the current government mainly provides technology-based subsidies to LED companies, which involve research and development. Technology-based subsidies cause many problems. "If companies want to survive, subsidies are not enough, but they cannot rely on subsidies to develop." The development of the LED industry has become increasingly mature, and price comparisons in major industries are clear. Enterprises compete for scale and channel development.

The reporter found that industrial chain liabilities are also prominent among listed companies.

The balance of accounts receivable of Lianjian Optoelectronics increased from 269.5 million yuan at the end of December 2013 to 425 million yuan, "the total balance of accounts receivable is relatively large."

Lianjian Optoelectronics said that in order to maintain the stability of long-term cooperative relationships with core and key customers, it has given them longer credit periods. At the same time, the company has also given relatively loose credit policies to some new large customers, which to a certain extent has extended the collection cycle of accounts receivable.

Changfang Lighting, an LED company located in Shenzhen, had accounts receivable of 144 million yuan in 2014, but its net profit attributable to shareholders of the listed company was only 50.6731 million yuan.

In addition, when Unilumin Technology’s net profit attributable to shareholders of listed companies was only more than 60 million yuan, its accounts receivable reached 239 million yuan.

The era of LED oligopoly

After years of capital intervention and market development, the industry expects that the global LED lighting market will still grow by more than 20% in 2015, and traditional lighting giants will further accelerate industry reshuffle and integration.

The above-mentioned LED giants all achieved good results last year and continue to dominate the world.

The annual report shows that Sanan Optoelectronics achieved sales revenue of 4.58 billion yuan, net profit of 1.510 billion yuan, and net profit attributable to shareholders of listed companies of 1.462 billion yuan.

Compared with the same period last year, the sales revenue of this company, which mainly sells LED chips, increased by 22.71% last year. The revenue of its main chips and LED products reached 4.214 billion yuan, with a gross profit margin of 41.06%, an increase of 8.62%.

At the same time, Mulinsen, which landed in the capital market on February 17 this year, had revenue of 4.002 billion yuan last year, an increase of 39.25%. Operating profit reached 506 million yuan, an increase of 1.47%.

Neither Sanxiong Aurora nor Opple Lighting has an IPO, but their self-reported performance last year was also relatively good.

Sanxiong Aurora’s chairman Zhang Yutao said that Sanxiong Aurora’s LED products doubled in 2014 compared to 2013, with sales accounting for more than 50% of the entire company. Especially in the second half of the year, LED sales accounted for 70%, and the overall performance continued to maintain double-digit rapid growth.

Opple Lighting is said to have more than 6,000 sales outlets and more than 3,500 specialty stores across the country. In recent years, it has embraced e-commerce and created a sales myth of 94.43 million yuan on "Double 11" in 2014.

In the opinion of industry insiders, the LED industry received a large amount of policy and financial support from the country in the early years, with low entry barriers and rapid development. This led to the entry of a large amount of capital and overcapacity in the industry. After the release of production capacity in 2012 and 2013, the LED industry is still experiencing intensified reshuffles.