Executives from several listed companies such as Unilumin Technology and Ruifeng Optoelectronics, as well as fund managers from Dacheng Fund, Baoying Fund, and Southern Fund, all believe that the new round of industry mergers and acquisitions is different from the capacity expansion in previous years. This round of mergers and acquisitions is relatively rational, the leading forces are industry leading companies, and the differentiated competition situation is obvious, and the industry will enter the "post-competition era." At the same time, driven by multiple factors such as strong policy support, upstream technological breakthroughs, price declines, and strong market demand, the LED industry has undoubtedly taken off, and the next ten years will be a golden period of development.
Investment and M&A without blind obedience
Last week, the stock prices of companies in the LED industry bucked the trend and soared. 80% of LED companies reported positive semi-annual results, and institutions added 2.3 billion to 16 LED stocks in the second quarter, which may be its catalyst.
Since this year, investment, production expansion, and mergers and acquisitions in the LED industry have been extremely active.
Wanrun Technology acquired Rishang Optoelectronics, Feile Audio acquired Beijing Shen'an, Foshan Lighting acquired Lipao Optoelectronics, Yuanfang Optoelectronics acquired Advanced Optoelectronics, Zhongjing Electronics acquired Founder... Mergers and acquisitions involving the LED industry came one after another. In the first half of this year, a total of 11 mergers and acquisitions were completed, with a total amount of 3.5 billion yuan.
At the same time, Sanan Optoelectronics plans to invest 10 billion to become the world's number one, Huacan Optoelectronics invests 1.18 billion to expand epitaxial wafer production capacity, Nationstar Optoelectronics expects to increase packaging production capacity by 40% in the middle of this year, Qinshang Optoelectronics plans to invest 500 million to expand its main business... There is also endless news about the expansion of LED companies.
This can’t help but recall the LED industry from 2010 to 2011, when companies expanded wildly, which ultimately led to overcapacity and industry downturn in the following years. Will the same mistakes be repeated this time?
"Judging from our recent acquisitions of Rishang Optoelectronics and others, the company is very rational in terms of mergers and acquisitions. First, the company has been based on its old business, packaging, in recent years, and has used this advantage to gradually extend downstream; second, the expansion of the downstream field can further promote the digestion of the company's packaging production capacity. Therefore, current and subsequent mergers and acquisitions are mainly concentrated in the downstream, and the downstream will also be the company's profit growth point in the future." Qing Beijun, financial director of Wanrun Technology, refuted market doubts with actual cases and detailed strategies.
There are many rational acquirers. "First, the company's main business will not be given up, but we insist that company mergers and acquisitions will increase our highlights." said Fang Jibin, secretary-general of the board of directors of Maoshuo Power.
"Many of our companies are now looking for target mergers and acquisitions. If you buy it, can you digest it? This is very worthy of our consideration." Liu Jiao, director of Unilumin Technology, clearly pointed out that Unilumin Technology will not easily carry out mergers and acquisitions, and if it does, it will think repeatedly before the merger and acquisition, why the company acquires the other party, and what value it can bring to the other party. "It is recommended that companies first strengthen themselves before mergers and acquisitions, and then consider becoming bigger."
Liu Jiao gives an example. Unilumin Technology acquired a company, Radioo, mainly because this company has been doing in-depth work in creative display and can strengthen the company's display business.
Takeoff in integration
Looking back at the development history of the LED industry, from the official launch of production in the 1990s to the present, for more than ten years, the industry's homogeneous competition, fierce competition, and lack of innovation capabilities have been hampering the industry's takeoff.
"It is precisely because of homogeneous competition and cruel competition. If we want to survive, we will not be large in scale and can only rely on integration. Industry integration may further accelerate." Before the new round of integration, Alto Electronics Board Secretary Yang Sihua believes that
The root causes of the industry have not been eliminated, and this round of integration will last 3-5 years. However, there is still a lot of space to be explored in terms of market demand and technical space in the LED industry. "The future development prospects of the industry are very good."
"The prospects of LED are very broad, and both midstream packaging companies and downstream application companies can have a path forward." Liu Jiao also agreed.
However, if the proposition that the industry is improving is established, when is the best time to make a layout? The answer is now! Participants agreed that this is the best time for the development of the LED industry, and it is also an opportunity for LED companies to become bigger and stronger. First of all, the policy level is in the stage of strong support from the state. In addition, the demand in the upstream and downstream markets is gradually growing after the concept was popularized in the past few years, and it is time for the industry to take off.
The semi-annual reports of many LED companies show that after the LED lighting market resumed growth in 2013, affected by factors such as the incandescent lamp phase-out plans in the United States, the European Union, China and other major countries and regions taking effect in batches, cost reductions driving terminal price declines, etc., the LED lighting market capacity will be significantly expanded and will be fully launched and achieve sustained growth. The next 3-4 years will be the golden development period in which the penetration rate of the LED lighting market will increase the fastest. At the same time, the rapid growth of lighting applications will also lead to an improvement in the supply and demand relationship of packaging components for lighting applications. Authoritative organizations predict that the output value of my country's LED lighting industry will increase by 58% in 2014, reaching 180 billion yuan.
However, during the period of industry consolidation and great development, the gap between enterprises has become increasingly obvious. At this time, how can investors choose outstanding targets among the more than 50 LED companies in the A-share market?
In this regard, Liu Jiao revealed that when she joined Unilumin Technology two years ago, she entered with the idea of an investor. Two years later, reflecting on her investment ideas, she still believes that the following points should be followed when choosing an LED company: first, look at the technology, whether the company has technical reserves, and if so, whether it is preparing for the current bloody battle in the Red Sea or for the next peak; second, look at who its industry benchmark is, such as If it is a small company in China, forget it; third, look at whether the company has long-term plans and ambitions to take root in this industry, and whether it has a ten-year or even century-long plan; fourth, look at whether the team is full of vitality; fifth, look at whether the corporate governance structure and its internal control system can support its development for three to five years.
In Yang Sihua's view, corporate value is to create value. It is important to see whether the company's market positioning is accurate, its gross profit margin, and cash flow. "As long as you choose a company that creates value and focus on where the real value lies, you will eventually be recognized by the market."
Actively lay out the LED industry
With the arrival of the traditional LED peak season, the backlight market has returned to stable growth, lighting penetration has increased quarter by quarter, LED lighting companies have grown rapidly in shipments, scale effects will gradually be reflected, and high-quality LED lighting companies have entered a stage of stable profitability, changing the past situation of increasing revenue without increasing profits. As the prices of LED lighting products fall, traditional lighting brands take advantage of their channel advantages to fully explore the LED market. Companies lacking core competitiveness begin to experience obvious profit pressure, and the speed of market concentration is also increasing.
Wang Wenxiang, manager of Dacheng Jingfu Closed Fund, believes that he is currently optimistic about the LED lighting industry and recommends actively deploying the LED industry. First of all, with the improvement of cost performance, the trend of LED lighting replacing energy-saving lamps and incandescent lamps is clear. The current penetration rate is 15% and is expected to enter a stage of rapid growth. Secondly, the LED lighting industry space is very large, with a global scale of 300 billion yuan.
Wang Wenxiang believes that from an investment perspective, upstream chips and downstream channels have higher barriers and have higher investment value; midstream packaging has relatively fierce price competition due to low entry barriers. In the future, expansion into the engineering and lighting fields through mergers and acquisitions will be a focus. The industry will enter a period of high prosperity in the second half of the year, and the chip segment and downstream brand manufacturers with scale and channel advantages will demonstrate high growth.
Zhang Xiaoren, manager of Baoying Hongli Income Fund, analyzed that the LED industry boom started in the fourth quarter of 2013. On the one hand, TV/NB shipments have stabilized and LED backlight demand has bottomed out; on the other hand, LED lighting demand has increased since the fourth quarter of 2013. The superposition of these two factors has created an inflection point in LED demand.
Zhang Xiaoren believes that LED lighting will truly bring strong demand and huge space to the LED industry in the future. In 2013, the lighting output value of mainland China was 450 billion, and it is expected to reach nearly 700 billion in 2015. However, the penetration rate of LED lighting at the end of 2013 was less than 20%. Up to now, the penetration rate of LED lighting is estimated to be only about 30%. There is huge room for the future.
Against the background of the rapid development of the LED lighting industry, Baoying Fund Zhang Xiaoren believes that companies with both "channel + manufacturing" capabilities will be the ultimate powerhouse.
In terms of channels, channels are the foundation of the lighting industry. Regardless of traditional lighting or LED lighting, only by having channels can you have scale and pricing power, and thus have the possibility of growing bigger. At present, in China's hardware circulation, home monopoly, commercial lighting and other market segments, there are very few companies with national channel advantages. There are only a few companies such as Opple Lighting, NVC Lighting, Foshan Lighting, Feile Audio, and Sanxiong Aurora.
In terms of manufacturing capacity, LED lighting has an obvious trend of integrating light sources and lamps. Since LED is a point light source, lighting design forms are diverse and a large number of new products are constantly updated. The product update cycle has been greatly accelerated from the previous 3-5 years of traditional lighting to 1-2 quarters. Frequent product updates and cost reduction through large-scale procurement have made the design and manufacturing capabilities of enterprises in the industry the core competitiveness. In other words, LED lighting requires lighting manufacturers to have design and manufacturing capabilities, and the barriers are much higher than in the traditional lighting era.
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