Everlight Raises CapEx to Expand Production

After Epistar and FOREPI’s merger earlier this month, Everlight is also showing a rarely ambitious side, according to a China Post report. The company has decided to expand capital expenditure (CapEx) from less than NT $ 1.0 billion (US $ 30 million) to NT $1.5 billion to NT $ 1.7 billion. The move highlights the LED industry’s high growth.

It was only last quarter that Everlight was impacted by Polysilicon Group reduced capital, a Taiwanese solar company that the LED manufacturer has invested in. Analysts project Everlight might want to clear away all losses. These analysts project Everlight’s consolidated capital loss is expected to be about NT $600 million. However, analysts are speculating gain on disposal of Epistar stocks will cushion the blow from Polysilicon Group, and reduce impact in 2Q14.

In the past Everlight’s CapEx has been less than NT $800 million, and has mostly relied on improving manufacturing process to expand production capacity. Due to better market demands this year, the company’s CapEx originally set at NT $800 million to NT $1.0 billion are already higher than historical average. Due to better market conditions, this year’s CapEx has been raised to by nearly 70 percent to NT $ 1.5 billion to NT $1.7 billion. The company estimates adding 500 million LED pcs to production capacity, which will bring annual production capacity to 4.0 billion Pcs.

Financial analysts noted due to high market demands in various market sectors, Everlight’s average utilization rate in 1Q14 was about 85 percent. The utilization rate was further raised to 90 percent in 2Q14. Therefore profit margin in a single quarter will exceed 1Q14. In terms of oversea revenue, the company did not lose much from currency exchange rates.

Looking into 3Q14, LED lighting demands are much stronger than backlight. Since the end of China’s Labor Day holidays in early May 2014, the TV backlight market has entered an adjustment phase. The industry is still readjusting in June to July 2014, and will not start stock up preparations ahead of China’s National Holiday week in early October till next month. As a result, Everlight’s major growth momentum will rely on LED lighting in 3Q14.

The Taiwanese company’s surging revenue will mostly come from German lighting subsidiary WOFI, which will be entering peak season in August to September, said financial analysts. Everlight’s revenue will have an opportunity to triple from NT $100 million to NT$ 300 million during this period, in addition new streetlight bids will be initiated during second half of 2014. Moreover, lighting revenue will be driven up as traditional consumer electronic market’s peak season arrives in 3Q14.

Everlight’s lighting products claimed 19 percent revenue share in 1Q14, while backlight 27 percent. In 2Q14, lighting revenue share will dip slightly to 16 percent, while backlight is expected to stay at 27 percent, projected analysts. In 3Q14, LED lighting revenue share is expected to rebound.

The Taiwanese LED lighting manufacturer recently announced revenue for June 2014 was up 33.83 percent to NT $2.53 billion. Accumulated revenue for 2Q14 reached NT $7.69 billion, bringing consolidated revenue for first half of 2014 to NT $13.92 billion, or a Year-on-Year increase of 27.47 percent. 

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