The upstream and downstream risks of the MO source are flooding Nanda Optoelectronics' "adventure" sprint IPO

[Text / high-tech LED reporter Peng Rongfang reported] Recently, the China Securities Regulatory Commission website pre-disclosed the declaration form of the first prospectus of the GEM of Jiangsu Nanda Optoelectronic Materials Co., Ltd. Nanda Optoelectronics plans to issue 12.57 million shares, with a total issued share capital of 50.27 million shares, which is expected to be listed on the GEM of the Shenzhen Stock Exchange.

According to the prospectus, Nanda Optoelectronics Co., Ltd. is a high-tech enterprise specializing in the research, development, production and sales of high-purity metal organic materials (also known as high-purity metal organic compounds, hereinafter referred to as "MO source"). Methyl gallium, trimethyl indium, trimethyl aluminum and triethyl gallium are among the world's four largest MO source manufacturers.

However, a number of recent financial media have raised many questions about the volatility of Nanda Optoelectronics' performance during the reporting period. At the same time, industry insiders said that the new capacity of their fund-raising investment projects may encounter a profit dilemma.

Nanda Optoelectronics Prospectus shows that during the reporting period, Nanda Optoelectronics' performance has increased significantly. From 2008 to 2010, the company's operating income was 29.48 million yuan, 28.7 million yuan, and 118 million yuan respectively. In 2009 and 2010, the company's operating income growth rates were -2.67% and 310.86%, respectively.

In 2009 and 2010, the company's net profit growth rate after deducting non-recurring gains and losses fluctuated greatly. From 2008 to 2010, the company's net profit after deducting non-recurring gains and losses was 5,651,300 yuan, 6,709,100 yuan and 5,574,490 yuan respectively, with growth rates of 18.72% and 730.88% respectively.

It can be seen that the performance of Nanda Optoelectronics fluctuated greatly during the reporting period, and it is doubtful whether it can maintain stable growth in performance in the future. Although Nanda Optoelectronics stated that the above situation does not mean that the company can maintain the same or similar income and profit growth rate in the future.

Downstream demand is unpredictable

It is understood that the MO source products operated by Nanda Optoelectronics include trimethylgallium, trimethylindium, triethylgallium, trimethylaluminum, ferrocene, triethylsulfonium, carbon tetrachloride and carbon tetrabromide. Among them, trimethylgallium and trimethylindium are the two most important and most used MO sources. According to the data of the prospectus, in the past three years, the sales revenue of the above two businesses accounted for more than 87% of the company's main business income.

The data shows that Nanda Optoelectronics' sales of trimethylgallium have shown rapid growth in the past three years. Among them, from January to September of 2011, Nanda Optoelectronics' sales revenue of trimethylgallium reached 196 million yuan, more than three times the sales revenue of 2010, and its proportion of main business also reached 71.00%.

Nanda Optoelectronics said that in the first three quarters of 2011, MO sources have been out of stock and supply is tight. Among them, the unit price of trimethylgallium increased by 82.51% compared with 2010, and the contribution of unit price increase was 88.49 million yuan, accounting for about 60%. At the same time, sales of trimethylgallium increased to 1.7 times of the full-year sales in 2010, with an increase of 59.75 million yuan, accounting for about 40%.

Trimethylgallium and trimethylindium are the two main sources of MO in the epitaxial production of LEDs. The manufacturer selects one or several MO sources according to the color and brightness of the light and uses them in a specific ratio. Among them, the amount of trimethylgallium is the largest, the proportion is about 80%, and the proportion of trimethylindium is not more than 10%.

According to the data of the High-tech LED Industry Research Institute (GLII), as of the end of November 2011, there were only 300 new MOCVDs in China, but less than one-third of the actual operation, which obviously has the demand for epitaxial growth of raw materials. Great inhibition.

Liu Gang, executive deputy general manager of Tongfang, said: "Because of the insufficient operating rate of MOCVD this year, the price of MO source will definitely drop slightly."

Nanda Optoelectronics said that the company's second line of trimethylgallium synthesis (capacity 3 tons/year) was officially fully produced in April 2011, bringing the annual production capacity of trimethylgallium to 5.5 tons and the monthly average shipment to 616 kg. One of the fund-raising investment projects is the “High-purity Metal Organic Compound Industrialization Project”. After the project is completed and implemented, it will be fully completed by 2015, with an additional MO source capacity of 22.5 tons.

According to industry insiders, if the price of trimethylgallium and trimethylindium fluctuates in the future, it will have a certain impact on the performance of Nanda Optoelectronics. If the market price changes cause the profitability of trimethylgallium to be inferior to trimethylindium, the capacity of trimethylgallium to expand five times will likely suffer.

Shen Guang, vice president of Yaweilang Optoelectronics, said to "High-tech LED": "The price trend of MO source will stabilize in 2012, and there should be no shortage of supply, so the price may drop by about 10 points."

Hard to control raw material costs

It is understood that the raw materials used in the production of MO sources by Nanda Optoelectronics are mainly rare metals such as gallium and indium. Due to the relatively large fluctuations in the price of non-ferrous metals in the world and the unstable nature of the above-mentioned raw materials, Nanda Optoelectronics has taken measures to increase its inventory to cope with price volatility and the risk of out-of-stocks that may be encountered in large-volume purchases. According to the prospectus, as of September 30, 2011, the company's stock of raw materials was 38.15 million yuan.

Nanda Optoelectronics said that after the fundraising project is completed and put into production and the capacity is fully utilized, the demand for new gallium will be about 19 tons per year (about 3.55 tons of raw material gallium per ton of trimethylgallium). If there are insufficient raw materials or sudden price increases in the future, the company's fundraising projects will not be able to put into production normally.

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