Surging LED Demands Boost Epistar 2014 Earnings

Epistar released first fiscal quarter results for this year on May 7, 2014. The company noted a net operating profit of NT $319 million (US $10.6 million) and profit margin of 15.23 percent. However, impact from two financial evaluations that recognized losses of NT $1.32 billion resulted in Epistar after tax deficit of NT $841 million and EPS of negative NT $0.91. 

The company’s first quarter performance was good despite the conventional slack season. Consolidated revenue reached NT $6.24 billion, up 2.39 percent QoQ and growth of 44.33 percent YoY. Gross margin was NT $950 million. Profit margin increased from 13.1 percent last quarter to 15.23 percent in 1Q14, YoY growth of 6.26 percent. 

Rebounding market demands drove up 1Q14 revenue, said Zhang Shixian, Deputy General Manager of Epistar. Despite the conventional slack season, Epistar’s LED business showed good performance. However, negative financial liability ratings for two overseas convertible bonds lead to a deficit after tax of NT $1.32 billion. This accounting loss will not impact operating cash flow. By excluding this non-business factor, Epistar’s LED business after tax surplus reached NT $470 million with EPS of NT $0.5.  

Epistar’s subsidiary Huga Optotech also saw a turnaround in 1Q14, with profits reaching NT $40 million. Improvements to operating size and yield rates are anticipated to boost performance in 2Q14.  

Production utilization rate reached 80 percent in 1Q14 and more than 90 percent by April, said Zhang. Client demands in 2Q14 are estimated to strengthen from 1Q14. Moreover, orders are anticipated to be full all the way until June. Orders for blue light and AlInGaP products are already at max levels. Epistar production expansion and outsourcing plans are already underway this year to meet client demands. New production capacity expansions are estimated to begin in 3Q14.  

The new wave of LED demands encompasses backlight, lighting, automotive, signboards, and other end applications, said Zhang. The company’s LED business took off in 4Q13 and has shown good performance for three consecutive quarters up to 2Q14, which has been uncommon in the past. 

This large surge in demand is estimated to drive up Epistar’s LED lighting product revenue proportions to 30 percent this year. Revenue proportions reached around 10 to 20 percent in 1Q14 and 30 percent in 2Q14. It is anticipated that product revenue share in 3Q14 will surpass 30 percent. 

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