Changelight Net Profit Plummets in 1H16 Despite Soaring Revenues

Changelight announced its revenue soared 107.14% to RMB 458.34 million (US $69.08 million) in second half of 2016, but its net profits tumbled, reported China Securities.

The company’s expenditure escalated 54.27% Year-on-Year to RMB 76.04 million during the reporting period, and it posted net profits plummeted 125.36% YoY resulting in a net loss of RMB 6.17 million.

Main financial indicators

Increased sales of blue LED chips, and subsidiaries products and lighting application products resulted in increased revenues, while net losses were mainly caused by expanding blue LEDs leading to lowered gross margins. Rising LED chip R&D costs, also led to uptick in management costs compared to the same period last year.

Lastly, investments in blue and green LEDs resulted in escalating equipment financing and leasing costs, contributing to rising costs compared to last year. Operations during this period led to negative cash flow of RMB 95.33 million, a steep decline of 931.05%, due to expanding productions and acquisition of new materials that escalated operation costs in second half of 2016.

The announcement also indicated for the first half of 2016, LED EPI-wafer gross margins downed 17% to 15.89% YoY, two of the main reasons cited was significant growth in blue LED chip sales in 2016. However, blue and white LED chip gross margins are still much lower than AlInGaP LEDs, and other red, yellow and orange LEDs, which dragged the company’s operation gross margins down. Moreover, the company’s blue LED production capacity has not reached full utilization rates yet, and the company expects to improve blue LED gross margins following the completion of its expansion projects.

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