June 02, 2020

LED reproduces expansion tide funds chain tension

LED reproduces the expansion tide On September 12, Xiamen Cinda announced that it plans to raise funds not to exceed RMB 700 million to invest in LED business. The reporter noted that this is not the first listed company to increase its LED production capacity in the near future. First, it is necessary to continue to make LED even if Furi Electronics has been increased. After that, National Star Optoelectronics will raise funds to make LED chips.

Less than half the month, there are three companies in the LED industry expansion, but a brokerage researcher told reporters that although the overall situation of LED in the upper and middle reaches this year is still good, the industry as a whole compared to previous years, obviously warmer, but the situation of excess capacity and Not eliminated, especially upstream.

700 million plus code LED

According to the Xiamen Cinda announcement, the company plans to issue no more than 80 million shares in non-public offerings. The initial price of the issue is 9.72 yuan per share, a discount of 14% from the closing price before the suspension, and no more than 700 million yuan is raised to invest in an LED packaging new project in Anxi, Xiamen. LED application product expansion project, RFID product design and production line expansion project. Anxi LED packaging new construction project is the focus of this investment, with a total investment of 430 million yuan, of which 3.9 billion yuan of capital investment; Xiamen Xinda LED LED expansion projects and RFID projects will each invested 150 million yuan.

Anxi LED package new project will have six packaging production lines, in addition to the construction of LED packaging plant, research and development test center, storage center. During the construction period of 24 months, it is estimated that the average total profit after reaching production will reach 44.601 million yuan. Cinda LED's LED expansion project plans to build 4 new lighting application lines. The project construction period is also 24 months.

The company stated that the construction of the above-mentioned project is conducive to expanding the scale of production of the company’s electronic information business segment’s advantageous products, increasing the market share and market competitiveness of related products, promoting the development of the company’s electronic information business, and promoting the company’s “high-tech leading one of the two wings”. Develop strategies to optimize the company's overall profitability and sustainable development capabilities.

Although Xiamen Xinda is full of confidence, the market does not buy it. The company's stock price opened lower on the 12th, with the largest intraday drop of more than 6%. Although the closing price rebounded, it still fell 4.77% throughout the day.

LED industry reproduces the expansion tide

The continued expansion of the LED industry is not the "exclusive action" of Xiamen Xinda.

Recently, National Star Optoelectronics also issued a plan for additional issuance, seeking to raise funds not exceeding 630 million yuan, and investing in the National Star Semiconductor Epitaxial Chip Project (Phase II) and supplementing liquidity. It is worth noting that the second-phase plan that Guoxing Optoelectronics has thrown is urgently formulated when it is not yet in production.

At the beginning of September, Furi Electronics’ acquisition of Mai Rui Optoelectronics, the main business of LED display business, was rejected at the shareholders’ meeting. Even so, yesterday’s Furi Electronics chose to modify the program and continue to insist on acquiring Marion Optoelectronics.

In half a month, three listed companies have plans to raise funds and expand LED. The expansion of LED production capacity is looming. Recall that from 2010 to 2012, under the dual stimulation of low market thresholds and subsidies, funds continued to flow into the LED industry, resulting in a substantial increase in excess capacity.

In this regard, brokerage researcher said that although this year, LED industry chain as a whole has been warmer than in previous years, but the situation of excess capacity has not been eliminated, especially upstream.

Industry cold wave capital chain tension
According to China's LED net research report, China's LED industry as a whole shows a state of excess capacity, due to the lack of upstream core technology, many companies get together in the low-end areas such as packaging, applications, product homogeneity, coupled with the recovery of European and American markets Slowness, declining purchasing power, and slower growth in domestic demand caused the gross margin of the overall industry to decline, and the competitive environment was deteriorating.

It is undeniable that Xiamen Xinda intends to invest in LED in this reverse market, and there is also a large market risk after capacity expansion.

In response, Xiamen Xinda admits that the construction period of the RFID product design and production line expansion project invested by the raised funds will be completed in 2 years. After the project reaches production, it will form an annual output of more than 200 million RFID electronic tags of various types and more than 10,000 units. New capacity for reading and writing equipment.

Although the market prospects for this fundraising investment project are very broad, but RFID and other products as a new type of product, the market acceptance needs a process. If the company's market is ineffective, it may cause the market risk caused by capacity expansion.

It is worth noting that according to our reporter’s understanding, Xiamen Xinda has a tight capital chain and a high debt-to-equity ratio. According to the company's financial information, at the end of 2010, the end of 2011, the end of 2012, and June 30, 2013, the company's (parent company's) debt ratio reached 77.09%, 83.17%, 85.33%, and 88.88%, respectively. The company's (merger) asset-liability ratio reached 69.97%, 75.77%, 78.26% and 86.40%, respectively, and the asset-liability ratio showed a gradual upward trend.

What worries the market is that as of June 30, 2013, the company’s debt balance was 7.874 billion yuan and the interest-bearing debt balance was 4.208 billion yuan.

In addition to the high debt ratio, Xiamen Cinda's profitability is also average. According to financial information, Xiamen Xinda's net profit has been hovering between 50 million and 80 million yuan for the past three years. Under the situation of overcapacity in the industry, the company has spent 700 million yuan to invest in building LED projects. Is it worth discussing?

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