On February 14, Dehao Runda released its "2017 Annual Results Express." According to the report, the company achieved an operating income of 4.203 billion yuan, marking a 3.79% year-on-year increase. However, the net profit attributable to shareholders of listed companies was -8.96 billion yuan, representing a staggering 2926.29% decline compared to the previous year.
The company attributed the sharp drop in profits to several factors. During the fourth quarter, operations fell short of expectations, and the appreciation of the Chinese yuan negatively impacted exports, resulting in significant foreign exchange losses. Additionally, the firm recorded impairment provisions for fixed assets amounting to 180 million yuan, inventory write-downs of 190 million yuan, depreciation reserves of 700 million yuan, and bad debt provisions 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. This contrast has raised concerns about Dehao Runda’s performance in the industry.
Huacan Optoelectronics, for example, saw a significant increase in profitability in 2017 due to expanded LED chip production capacity, which boosted both production and sales. The company also invested heavily in R&D, shifting its product structure toward higher-end chips and benefiting from economies of scale that helped reduce chip costs. Furthermore, the company's customer base became more focused on large, high-quality clients, contributing to a substantial rise in gross profit margins throughout the year. Additionally, the successful transition of blue crystal technology from 2-inch to 4-inch substrates played a key role in its success.
In 2017, Huacan Optoelectronics reported a net profit of between 470 million and 534 million yuan, reflecting a growth of 76% to 100% compared to the previous year.
Ganzhao Optoelectronics also performed well, with a net profit of 200 million to 214 million yuan, representing a year-on-year increase of 313.37% to 342.31%. The company attributed this improvement to its focus on core business strategies, increased LED chip production, and a stronger market share. These efforts led to lower unit costs and higher gross margins.
Comparing Dehao Runda’s results with those of its peers highlights growing concerns about its performance in the LED sector. Founded in Zhuhai in May 1996, the company initially operated in household appliances before listing on the Shenzhen Stock Exchange in June 2004. It entered the LED industry in 2009 and has since aimed 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 strengthen its control over the company and advance its LED flip chip projects. It also proposed to purchase certain LED lighting manufacturing assets through a mix of equity and cash, though the deal remains pending.
Despite these strategic moves, the company continues to struggle financially. This may be linked to the underperformance of several fundraising projects initiated since 2010. Between 2010 and 2012, Dehao Runda conducted four refinancing rounds totaling 6.435 billion yuan. The expected returns from these projects were far below projections, with only a modest net profit of 162 million yuan in 2012 and a peak of 31.72 million yuan in 2016.
As competitors like Huacan, Ganzhao, and Sanan continue to grow rapidly, and new players like Jucan Optoelectronics enter the market, Dehao Runda faces increasing pressure in the LED industry. Its ability to turn around its performance will be critical in maintaining relevance in this competitive landscape.
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