Leyard VGM Gives In-depth Analysis of 2013 Financial Performance
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Li Nannan, Leyard Secretary of the Board and Deputy General Manager, discussed the company’s fiscal 2013 financial performance in depth during an interview with social network service website for investors, Xueqiu, on April 8th.

Revenue growth fastest in LED small pitch TV display sector

Revenue for LED small pitch TV displays was RMB 254 million (US $40.9 million) in 2014, up 66 percent YoY, making it the company’s fastest growing business sector. Overseas sales accounted for 21 percent of overall revenue, with RMB 52 million from small pitch TV displays.

LED small pitch TV displays have more advantages over their traditional digital lighting processing (DLP) counterparts, said Li. LED TV displays have higher stability, brighter luminance, higher resolution, higher clarity, a better smart control system, and advanced method of operation. The company focused on R&D for three years, starting in 2010. Not only is Leyard the earliest company to start R&D in this area, it is also the earliest to apply for patents. Around the second half of 2013, interest in LED small pitch TV displays picked up among related manufacturers who then began to invest in R&D. Leyard however has remained the  leader in this technology, with over 70 percent in global market share. The company has already entered into the testing phase for 1mm displays and mass production for 1.2mm.

Leyard holds a clear advantage over competitors as the company was the earliest Chinese manufacturer to begin R&D and sales for LED small pitch TV displays. “We can use our IP rights to protect ourselves as more and more international companies enter into the market. The process for the products to move from the testing laboratories into mass production, and then into  many client applications still requires time to test. The market has gradually begun accepting LED small pitch TV displays, which will inevitably cause our market share to drop but also boost our volume of sales,” said Li.

Although first quarter is historically a slack season for the LED industry, “Leyard experienced growth in orders for March compared to the same month in 2013,” stated Li. “1Q14 orders for small pitch TV displays, similarly, had a clear increase compared to the same period a year ago.”

The company has recently moved production of their LED small pitch TV displays to their new production line established last year in the Yizhuang area in Beijing. The factory’s production capacity is three times larger than the current capacity for the company’s Shenzhen factory, which is 800kk per day. This will effectively guarantee the company’s supplying capability to meet the booming market demand.

Development of LED lighting business to continue

Leyard’s LED lighting business had a revenue of RMB 24 million in 2013, up 52 percent YoY. Profit margin was 37 percent, growth of 5.5 percent from last year. The company’s s main LED lighting business is in architectural construction lighting, but is currently expanding into the indoor lighting market. Market position is in the commercial lighting area at present.

Leyard’s target is to become a global leader in LED applications. As the company has already secured a top position in the display sector, they have now set their sights on the LED application field. The company plans to increase investment in their lighting sector for further development in this area.

Leyard acquired Guangdong Kamtat Lighting last year to increase their strength in the lighting sector. The business model for LED lighting and displays is vastly different. “Kamtat Lighting’s main line of business is in LED lighting design and installation. Companies that have lighting and installation credentials are a rarity in China. We think highly of their lighting credentials, team, brand, and experience. The coordinated effect in client resources and online sales service between us and Kamtat Lighting is quite evident. We have established a great partnership with Kamtat Lighting for LED display and lighting production and together will promote municipal lighting solutions,” said Li.

When responding to Xueqiu’s question regarding the company’s operational cash flow and net profit being less than ideal recently, Li remarked: “This is in part due to our main business being in construction projects, which accounts for 90 percent of our total revenue. We do not receive payment until the product is released, and the buyer has completed system installation and testing. In terms of the contract with our buyers, we receive 30 percent of funding through advanced payment, 30 percent as payment on delivery, 35 percent for testing, and 5 percent for quality guarantee fund. Some of the LED products are part of a government invested infrastructure project and require a longer evaluation period. Internal government assessment protocols and other factors have led to a slow recovery of funds, which subsequently resulted in less than optimal cash flows and net profits.”

Leyard’s financial results for fiscal 2015:

•Full year revenue reached RMB 778 million, up 37 percent YoY
•Full year operating profit ratio was RMB 71 million, 20 percent increase YoY
•Full year net profit distributed to stockholders was RMB 80 million, growth of 38 percent YoY
•Full year EBT was RMB 72 million, up 34 percent YoY
•EPS was RBM 0.53, 30 percent growth YoY
•4Q13 revenue reached RMB 338 million, increase of 92 percent QoQ, a new single quarter record high.
•Full Year product profit margin reached 35.57 percent, the first time the company reached 35 percent since being market listed, a growth of 1.14 percent YoY

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