On February 14, Dehao Runda released its "2017 Annual Results Express." The report revealed that in 2017, the company generated operating income of 4.203 billion yuan, representing a 3.79% year-on-year increase. However, the net profit attributable to shareholders of listed companies was -8.96 billion yuan, marking a staggering 2926.29% decline compared to the previous year.
According to the company's announcement, the primary reasons for the significant loss were related to poor fourth-quarter performance, the impact of the renminbi's appreciation on exports, and substantial exchange losses. Additionally, the company recorded impairment provisions for fixed assets worth 180 million yuan, inventory losses totaling 190 million yuan, depreciation reserves of 700 million yuan, and bad debt reserves of 150 million yuan.
Despite these challenges, other LED chip manufacturers, such as Huacan Optoelectronics, Ganzhao Optoelectronics, and Sanan Optoelectronics, reported varying degrees of growth in their net profits. These companies managed to improve their financial performance through increased production capacity, better cost management, and strategic business adjustments.
Huacan Optoelectronics, for example, saw significant growth in 2017 due to expanded LED chip production, which led to higher sales and improved efficiency. The company also invested heavily in research and development, shifting its product mix toward high-end chips and benefiting from economies of scale. This shift helped reduce costs and improve gross margins throughout the year. Additionally, the successful transition of blue crystal technology from 2-inch to 4-inch substrates contributed to the company’s overall performance.
In 2017, Huacan Optoelectronics reported a net profit of between 470 million and 534 million yuan, reflecting an increase of 76% to 100%. Meanwhile, Ganzhao Optoelectronics achieved impressive results after restructuring, with a net profit ranging from 200 million to 214 million yuan, a year-on-year increase of 313.37% to 342.31%.
Ganzhao attributed its success to a focused business strategy, including increased revenue from its LED chip operations and improved production efficiency, which reduced per-unit costs and boosted gross profit margins.
Comparing these results highlights growing concerns about Dehao Runda’s performance in the LED sector. Founded in Zhuhai in May 1996, the company initially operated in household appliances before going public on the Shenzhen Stock Exchange in June 2004. It entered the LED industry in 2009 and has since worked to build a complete LED supply chain, covering everything from epitaxial wafers to packaging and applications.
In 2017, Dehao Runda planned to acquire a 13.7% stake in Sanken Semiconductor for 300 million yuan, aiming to enhance control over the company and advance its LED flip chip projects. It also proposed acquiring certain LED lighting manufacturing assets through a share issuance and cash payment, though this move remains under review.
Despite these strategic moves, Dehao Runda continues to face significant losses. This may be linked to the failure of several fundraising projects to meet expectations. Since 2010, the company has raised a total of 6.435 billion yuan through four refinancing efforts. For instance, the 2010 LED industrialization project was expected to generate an average annual sales income of 1.806 billion yuan and an average annual net profit of 2.0944 billion yuan. Similarly, the 2012 LED epitaxial wafer project was projected to yield an annual after-tax profit of 1.587 billion yuan.
However, since 2012, Dehao Runda’s net profit has remained low, with only 162 million yuan in 2012 and 31.72 million yuan in 2016. The fundraising projects have not met their projected goals, raising questions about the company’s long-term viability in the competitive LED market.
With the rapid growth of companies like Huacan, Ganzhao, and Sanan, as well as emerging players like Jucan Optoelectronics, Dehao Runda faces unprecedented pressure in the LED sector. Its future will depend on how effectively it can adapt and revitalize its operations.
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