2013 LED plate investment strategy is more concerned about downstream enterprises

We do not change the long-term growth prospects of LED lighting, the industry is still in the early stages.

We are expected to include growth in 2013 domestic LED lighting strong push factors: 1) the elasticity of demand (demand LED lighting product price decline and growth); 2) technology advances the lighting cost; 3) the government launched more support incentive policies.

LED lighting industry development led to excess supply chain capacity is expected in 2013 is still facing integration.

Since 2009, a large number of investment into China's LED lighting industry supply chain. Although the local LED parts manufacturers product quality and the ability to penetrate the potential market is expanding, but in 2013 the structural integration of the supply chain seems to be difficult to avoid.

Optimistic downstream structural winners

In the context of overcapacity, upstream LED parts manufacturers are seeking vertical integration, but now it is too early to judge their success. We believe that, unless the upstream supply and demand outlook improved, we are still optimistic about the market leader in the downstream market, because they should be able to benefit from the 2013 LED lighting demand to accelerate the growth of the most.

Yankon and photoelectric is our preferred shares

Yankon (buy) and photoelectric (the first time rating to buy) is our preferred shares, the upside was 58%/39%. We believe that its focus on the downstream business model and its leading position in their respective sub markets to achieve a product / channel differentiation. On the contrary, we expect the market share behind FSL (again sold) and honglitronic (the first time rating to sell) of the downlink space were 38%/43%. Our forecast for the sunshine lighting 2012-14 years of earnings remained unchanged, but the same period in earnings forecast down 30%-43%, mainly because the latter LED business development is slower than expected. According to our adjusted earnings and earnings per share growth regression analysis, we will be the sun and FSL's target price were down 14% and 42%.

It is too early to consider the upstream enterprises

Although the competitiveness of domestic LED parts manufacturers has improved, but the patent problem and the establishment of good distribution channels is still the main obstacle to penetrate the overseas market. At the same time, potential market growth, but in 2013 is still not enough to balance the structural overcapacity situation. Therefore, we expect the upstream and mid 2013 corporate earnings will be compressed, to improve the supply and demand in 2014 is expected to resume growth. We first cover and Elec-Tech (an optoelectronic rating is neutral) and HC semitek (sold 38% of the potential downside).