Epileds Reports Tepid 3Q17 Financial Results

Taiwan-based LED epi-wafer and chip manufacturer Epileds registered a lower revenue in 3Q17 than that in 2Q17 and the revenue fell from a year ago because of seasonality and factory relocation. Epileds is predicted to continue moving factories and purchase infrared (IR) and ultraviolet (UV) LED machines in 4Q17. Epileds will mainly buy used machines and modify them by itself. The revenue in 4Q17 is estimated to be similar to that in 3Q17. Epileds' annual revenue is projected to stay flat, but gross margin will improve, and profit will possibly bounce back. 

(Image: LEDinsdie)

With regard to the outlook of 2018, the firm expected that major revenue contributors will be AlInGaP LED, IR LED and UV LED products. The AlInGaP product's proportion might increase to 50%. As for UV LED, its UVA product shipment growth has been more stable than that of other UV LED segments; therefore, the growth rate of its UVA LED shipment might stay above 10% in 2018. Epileds will also focus on marketing its deep ultraviolet (UVC) LEDs, of which the technical barrier is higher.  

The breakdown of current Epileds revenue is as follows: AlInGaP LED (including red light, yellow light and IR LED) occupied above 40%. UV product takes up about 20%. Green light LED has a share of 15%. Blue light LED takes below 20%. Epileds recently increased proportions of AlInGaP, UV and IR LED supply for the two reasons. First, UV and IR LED products are more profitable. Next, AlInGaP LED is mainly used in niche markets such as automotive, decorative, and horticultural lighting, as well as in surveillance segments. These segments' demand remains stable. 

The revenue grew in the traditional peak season in 2Q17. In addition, the adjustment of product mix took effect, so the 2Q17 gross margin reached 28.6%, setting a new high since late 2012. However, because of listed bad debts, operating expense increased and operation margin appeared lukewarm. In comparison, the operating expense returned to a normal level in 3Q17. Besides, Epileds is moving its factory from Tainan Science-based Industrial Park to Tree Valley Park. Its gross margin in 3Q17 is expected to be influenced.

The factory relocation process is estimated to continue in 4Q17. Epileds will not only move existing production equipment and machines to the new factory, but also buy IR and UV LED manufacturing equipment. The newly-purchased equipment are mostly used machines and Epileds will modify them by itself. Depreciation fee is estimated to only rise with a limit. The revenue in 4Q17 is projected with limited growth considering impacts from the off season, relocation of the production site and equipment upgrade.

Epileds’revenue in September 2017 dropped at NTD 93.77 million (USD 3.09 million), down 15.1% MoM and 9.9% YoY. The revenue in 3Q17 amounted at about NTD 309 million (USD 10.2 million), down 10.8% QoQ and 3.2% YoY. The consolidated revenue of the first three quarters reached NTD 970 million (USD 32.02 million), up 2.36% YoY. The annual revenue is estimated to level off or slightly increase. Earnings per share (EPS) might hit a new high in the past three years. 

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