The huge inventory crisis does not seem to have had too much impact on Sanan Optoelectronics (600703.SH) 2011 full-year results.
Yesterday, Sanan Optoelectronics announced that it expects net profit attributable to owners of the parent company to increase by 110% in 2011 compared with the same period of the previous year. Net profit for 2010 was 419 million yuan. Based on this data, Sanan Optoelectronics' net profit will reach 880 million yuan in 2011. In the first three quarters of 2011, Sanan Optoelectronics owned the parent company's net profit of 585 million yuan, which means Sanan Optoelectronics in the fourth quarter of 2011. Or achieve a net profit of 295 million yuan.
“Sanan Optoelectronics still relies on huge government subsidies to survive and develop in 2011.†A person familiar with Sanan Optoelectronics pointed out that Sanan Optoelectronics did not put the current situation of overcapacity in the domestic LED and photovoltaic industries. Slowly investing in it, "So the biggest problem for Sanan Optoelectronics is how to accelerate the expansion of market estuaries to digest the inventory pressure brought about by capacity expansion."
According to the statistics of all the announcements of Sanan Optoelectronics in 2011, the “First Financial Daily†obtained a total of 1,824.7 million yuan of government subsidies in 2011. Of course, the huge subsidies of about 1.8 billion yuan are not fully included in the profit and loss of Sanan Optoelectronics' 2011 earnings, but will be amortized into profit and loss during the project benefit period.
Even so, huge government subsidies should be one of the main reasons for the soaring performance of Sanan Optoelectronics in 2011. In the first three quarters of 2011, Sanan Optoelectronics' net profit was 585 million yuan, and the amount of government subsidies included in the current profit and loss reached 598 million yuan.
At the same time, Sanan Optoelectronics inventories also increased to 933 million yuan in the third quarter of 2011, an increase of 201% compared with 310 million yuan at the end of 2010; inventory turnover in the first three quarters decreased from 2.27 in the same period of 2010 to 1.12. The inventory turnover rate decreased year-on-year, indicating that the company's inventory turnover slowed down, the company's sales capacity declined, and the amount of working capital occupied in inventory will also increase.
The high inventory of Sanan Optoelectronics is also a microcosm of overcapacity in the domestic LED market. Many domestic LED manufacturers, including Dehao Runda (002005.SZ), have slowed down the pace of LED capacity expansion from the second half of 2011, or suspended the purchase of MOCVD (LED epitaxial wafer production equipment).
“Government subsidies will generally be gradually released according to the investment progress of LED enterprises, as well as the arrival of equipment and production.†An LED industry insider pointed out that Dehao Runda did not receive corresponding government subsidies in the fourth quarter of 2011. On the contrary, Sanan Optoelectronics received 4 government subsidies in the fourth quarter of 2011, and the cumulative subsidy amounted to 467 million yuan.
In September 2011, Sanan Optoelectronics invested RMB 2.5 billion in Quanzhou to build a sapphire substrate project, indicating that Sanan Optoelectronics did not slow down the pace of investment expansion due to overcapacity.
Regarding inventory problems and overcapacity in the market, Sanan Optoelectronics did not give any explanation in the 2011 performance forecast. It only indicated that the production conditions of Tianjin Sanan Optoelectronics Co., Ltd., a wholly-owned subsidiary of the company, were further improved, and some equipment of Anhui Sanan Optoelectronics was gradually put into operation. And the production of benefits is the main reason for the company's 2011 net profit growth.
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