LED chip has reached the balance of supply and demand

The LED chip has reached the balance of supply and demand, there may be shipments and gross margin or the future.

2013 chip capacity expansion is limited, and the industry about 20-30% capacity is invalid with the LED lighting capacity, the rapid growth of the domestic LED chip industry has now reached the balance of supply and demand, we expect 2014 LED chip possible shipments and gross margin double up situation. From the point of view of scale advantage, cost advantage and policy support, the competitiveness of leading enterprises is expected to be further improved.

LED packaging industry is expected in the next two years will be industry consolidation, promising professional packaging company.

LED packaging industry pattern is more scattered, we expect the next two years will be integrated. From the integration of the winning manufacturers may be the most suitable for lighting needs, with the size of the advantages, as well as the upstream and downstream cooperation more closely. At present, we are optimistic about the relative advantages of professional packaging enterprises.

LED light source focus on consumer channels and brand building.

LED light source industry, we are optimistic about a certain production scale, production quality, production control, brand building a good stable growth company, the future sales channels will be more diversified.

13-15 EPS is expected to three optical 0.74/0.95/1.18 yuan, the target price of 33.2 yuan (WACC8.9% UBS VCAM discounted cash flow model, based on the 13/14 44.86/34.8), corresponding to PE times; expected Jufei 13-15 EPS 0.61/0.86/1.01 yuan, to get the target price 28.4 yuan (UBS WACC10.2% VCAM cash flow discount model, based on the corresponding 13/14). 46.6/33.0 times PE; Yankon 13-15 EPS forecast of $0.45/0.65/0.86 respectively, get the target price 17 yuan (WACC11.9% UBS VCAM discounted cash flow model, based on the corresponding 13/14 38/26 times), PE.

LED chips and light links most likely to generate large companies. LED industry chain includes chips, packaging, light sources and lamps, etc.. An industry can produce a large company is a prerequisite for the standardization of products, with large-scale production conditions, while the larger demand for the link. From the point of view of the whole industry chain, we believe that the upstream chip and downstream links with the possibility of generating large companies.

2013 chip capacity expansion is limited, mainly to leading manufacturers. 2010-2012 Chinese government to support the LED industry, LED chip industry blind investment phenomenon, and lead to excess supply.

These MOCVD devices have 20-30% capacity is invalid capacity, the country about more than 1 thousand, but the actual production of about 700 units, the main reason lies in the nearly two or three years of technical performance of MOCVD equipment to upgrade quickly, the old second-hand equipment is not competitive; at the same time the price decline is larger, the capacity expansion of leading enterprises still can to get government subsidies, thus leading enterprises will not consider the acquisition of old equipment MOCVD.

After 2013, China's local governments are no longer blindly support all LED chip companies, but focus on a few outstanding key enterprises. Therefore, the entire LED chip industry in 2013 production capacity expansion is very limited, only the leading enterprises in the stage began to seek expansion, and capacity expansion is mainly based on demand. From the listed company information disclosure, 2013 new capacity mainly in the HC semitek, HC semitek 2012 after the listing of the larger capacity expansion; an optoelectronic the issuance of the expansion of the production capacity is expected at the end of 2014.

The LED chip has reached the balance of supply and demand, there may be shipments and gross margin or the future.

2013-2015 LED lighting rapid growth, the new capacity should be quickly digested by the new demand.

Domestic LED chip has reached a balance between supply and demand in the 2013H1, the industry leader in capacity utilization of more than 90%, 2014Q2 is likely to occur LED chip structural shortage.

From the past few years, every year to enhance light efficiency of LED chip 20-25%, LED chip if prices remain unchanged, gross margin is improved, so we expect 2014 LED chip possible shipments and gross margin double up situation.

LED chip segment significantly decreased the competitiveness of small manufacturers. We expect that after 2014 40 MOCVD following small manufacturers survival more difficult, mainly because: 1) affected by the LED iPhone home mobile phone keys, demand and new demand, upstream LED chip demand sapphire demand and supply is tight, only large companies can get the materials for upstream should be guaranteed; 2) local government in 2 and 3 line LED chip manufacturers to support more and more small; 3) threshold LED chip production of high technology, high requirements on product stability, consistency, not dig one or two engineers can do, but require a stable operation of production workers and engineers to do technical backing support, only large companies have the ability to do continuous R & D investment.

LED packaging industry is expected in the next two years will be industry consolidation, promising professional packaging company. Over the past two years, LED packaging companies benefit from LED chip prices fell more obvious. Due to the integration of the LED chip industry is nearing completion, so we expect the LED packaging industry in terms of LED chip price decline will gradually reduce the benefits. Currently LED packaging industry pattern is more messy, 2014-2015 or will be industry consolidation.

We expect the next few years demand mainly from the lighting market, the opportunity to win from the integration of manufacturers may be the most suitable for lighting needs, have the advantage of production scale, and the upstream and downstream chip manufacturers more closely lighting company.

At present, we are optimistic about the relative advantages of professional packaging enterprises. LED light source focus on consumer channels and brand building. LED light source industry scattered over packaging