On March 15, domestic LED packaging giant Mulinsen was investigated by institutions such as Founder Securities and Cinda Australia Bank. The company's declining operating performance in 2015 has become the focus of institutional and investor attention.
A few days ago, Mulinsen disclosed its 2015 annual report, which showed that Mulinsen’s net profit fell for the first time since its listing in 2015, a far cry from the rapid growth momentum in previous years.
In an exclusive interview with the author a few days ago, Lin Jiliang, executive general manager of Mulinsen, attributed the sharp decline in profits to last year's "price war", R&D investment and the expansion of new production capacity.
Mulinsen, which specializes in LED packaging and application products, was founded in the 1990s. Chairman Sun Qinghuan and the entrepreneurial team worked hard for more than 20 years and finally launched Mulinsen into the capital market in February 2015.
Sun Qinghuan serves as both chairman and general manager of the company. In the eyes of company insiders, he is quite low-key and pragmatic, and has little communication with the outside world, giving people a sense of mystery. Most of the management power of the Mulinsen packaging industry he founded has been handed over to Lin Jiliang.
A few days ago, at the Mulinsen headquarters on Mulinsen Avenue, Xiaolan Town, Zhongshan City, Guangdong, Lin Jiliang had a face-to-face communication with the author before leaving overseas again. He revealed that Mulinsen will increase investment in equipment, research and development in the LED field to further reduce production costs.
Net profit declines
Mulinsen's 2015 annual report shows that in 2015, Mulinsen achieved operating income of 3.88 billion yuan and net profit of 256 million yuan, down 3% and 41.09% year-on-year respectively. This is also the first profit decline for Mulinsen since its listing in February last year. In 2014, Mulinsen achieved revenue of 4.001 billion yuan, a year-on-year increase of 39.25%; net profit reached 435 million yuan, a year-on-year increase of 0.25%. Earlier, Mulinsen's business momentum was even more rapid. From 2011 to 2013, the compound annual growth rate of revenue reached 50.21%, and the compound annual growth rate of net profit reached 98.22%.
This time, that time. The reasons for the decline in Mulinsen's net profit in 2015 have recently become the focus of attention.
Public information shows that in 2015, affected by factors such as the global economy and fierce market competition, LED industry chain prices generally fell by 30% to 50%, and international enterprise product prices also fell by more than 20%.
GGII predicts that more than 20%, a total of about 5,000 related LED companies, will withdraw from the market in 2015. In order to eliminate inventory, some exiting LED companies have sold off their products at low prices. This has impacted the market and formed a vicious cycle.
In this wave, Mulinsen obviously cannot survive alone. In order to maintain market share and maintain stable relationships with major customers and dealers, Mulinsen had to follow the market and start a price war.
"Price wars have to be fought. Who didn't fight a price war last year?" Lin Jiliang looked helpless when talking about the price storm in the LED industry last year. He acknowledged the impact of price wars on net profits, "But if you didn't fight a price war last year, you would be out of the game and even lose your market share."
Three major factors dragging down
In Lin Jiliang's view, last year's profit decline was not entirely due to the price war.
In 2015, Mulinsen increased its R&D investment. The company's R&D investment was 151 million yuan, an increase of 21.95% over the previous year. During the reporting period, Mulinsen has obtained 234 authorized patents, including 12 invention patents, 152 utility model patents and 70 appearance patents.
“Last year we observed the subsequent development and believed that we must strengthen the technological research and development of some products, so we invested relatively heavily in technological transformation and upgrading of research and development.” Lin Jiliang told the author.
In addition, Mulinsen also expanded its production capacity last year. According to its annual report, in 2015 the company decided to relocate Xiaolan's lighting production line to its production base in Xinyu. During the relocation process, the project's production capacity could not be fully released. At the same time, the impact of the relocation lowered the profits of its products, especially lighting products.
In September 2014, Mulinsen signed the "LED Product Production Project Investment Contract" with the Jiangxi Xinyu High-tech Zone Management Committee. The total investment of the project is 2 billion yuan, with an initial investment of 600 million yuan. "Building a factory requires a relatively large investment from the time you invest money to the first order." Lin Jiliang told a reporter from Time Weekly.
Talking about the above three major measures, Lin Jiliang said frankly that the price war is to consolidate the market, the increase in R&D investment is to reserve technology, and the expansion of production capacity is to have a strong production base.
As for how to maintain the company's future performance growth, Mulinsen stated that it will further increase investment, increase the company's production scale and automation, reduce product costs, and strengthen the company's competitive advantages of scale and automation to increase the gross profit margin of the product; at the same time, it will increase investment in research and development to increase the company's comprehensive gross profit margin.
Accelerating industrial transformation
In the opinion of industry insiders, Mulinsen has accelerated its transformation and upgrading since it signed an agreement with the local government of Jiangxi Province in 2014.
In June and September 2014, Mulinsen signed project investment contracts with the Jinggangshan Economic Development Zone Management Committee and Xinyu High-tech Zone respectively.
In order to raise funds, Mulinsen carried out capital operations. The non-public offering of shares did not exceed 83.5 million shares. The net amount of funds raised after deducting issuance expenses did not exceed 2.316 billion yuan. All the funds raised will be used for project construction.
"Through the implementation of the fund-raising project, the company will further consolidate its leading position in the LED packaging business, while accelerating the company's extension in the downstream LED application lighting field and improving the layout of the company's LED industry chain." Mulinsen said.
The author learned that the construction of the first phase of Mulinsen's factory in Xinyu, Jiangxi has been completed, and part of it has been put into use. The first phase of the factory in Ji'an, Jiangxi is under construction.
Talking about the main tasks in 2016, Mulinsen said that the construction of two production bases in Xinyu and Ji'an, Jiangxi will be accelerated to increase the market share of the products.
In the eyes of the outside world, Mulinsen chose the right time to invest in Jiangxi. At the 2016 National Two Sessions, which just concluded not long ago, the Jiangxi Provincial delegation aroused heated discussions among representatives and committee members on the development of the LED industry.
Guo An, deputy to the National People's Congress and mayor of Nanchang, said in an interview with the media that during the "13th Five-Year Plan" period, Jiangxi Province plans to build the "Nanchang Optics Valley" and is committed to building a 100-billion-dollar LED industry.
The latest statistics show that Mulinsen’s current annual production capacity is approximately 203.5 billion LAMP/SMD. While consolidating its production base, Mulinsen has also stepped up its market expansion.
Currently, Mulinsen has more than 20 subsidiaries in major large and medium-sized cities across the country, responsible for sales expansion and customer maintenance in local and surrounding markets.
In the process of the country’s promotion of the “One Belt, One Road” initiative, Mulinsen also responded positively. According to Sun Qinghuan, chairman of Mulinsen, in response to the country’s call for One Belt and One Road, Mulinsen opened a subsidiary in India. The company’s products have now entered Southeast Asia, the Middle East, Africa, Latin America, the United States, Europe and other places.
In the process of Mulinsen’s international expansion, Lin Jiliang was hailed as an important “messenger”. Since 2014, Lin Jiliang has moved to overseas markets, almost circling the earth at a speed of one month, accumulating 240,000 miles in one year, and traveling all over the world.
ANNA