LED lighting demand picks up rapidly, pushing the industry into a new cycle

The demand for LED rebounded rapidly in 2013, and Taiwan's LED industry packaging started before chips, showing strong demand. This round of rising LED lighting orders has been confirmed, the profitability of enterprises has gradually stabilized, and production has been expanded one after another. We believe that the increase in lighting demand is the main driving force for this round of industrial recovery, we expect that the compound growth rate of LED lighting demand will reach 59 in the next three years, and LED lighting is expected to push the industry into a new round of cycle. The new supply is limited, and the demand for lighting will multiply to expand the market space: the expansion of LED industry capacity has come to an end since 2011, and the new supply in the short-term market is limited. Judging from the market space, the market size of general lighting is about 400 billion RMB, and the corresponding LED consumption is more than ten times of the current LED demand, and the market space will multiply. Combined with the current penetration rate of LED lighting, we believe that the development speed of domestic LED lighting will be significantly faster than the level. Policy escort to accelerate the popularization of LED lighting. At present, countries and regions have generally launched plans to eliminate incandescent lamps, and Europe, America, Japan and China all plan to eliminate incandescent lamps in 2-Incandescent lamps will be completely eliminated within 3 years. In addition, in addition to the road map for the elimination of incandescent lamps at the national level, national subsidies and local government LED lighting promotion plans have also been launched. We expect that the introduction of energy-saving lighting subsidy policy and the active promotion of local governments will accelerate the popularization of LED lighting products. Follow the smile curve and be optimistic about upstream and downstream application enterprises. LED industry is a blue ocean market with huge space. Judging from the combing of the industrial chain, we are optimistic about upstream chip enterprises and downstream lighting application enterprises. As the demand for LED lighting has just started, the upstream chip enterprises have greater flexibility in performance; In the field of lighting, because the terminal products are customer-oriented, relevant enterprises have customer and channel resources, and the profit margin is higher, we believe that the future investment opportunities are greater. Investment strategy: we believe that the market is still in the initial stage of starting. The current stock price trend comes from the market demand expansion expectation and valuation repair. The future stock price driving force will come from the gradual confirmation of performance, focus on the upstream Sanan Optoelectronics, Dehao Runda, optimistic about the channel-dominant sunshine lighting, it is recommended to pay attention to the large-size backlight breakthrough Ruifeng optoelectronics and jufei Optoelectronics. Risk tips: 1. Risk of LED demand fluctuation; 2. The risk of LED product price falling continuously; 3. The risk of relying on continuous refinancing in the middle and upper reaches; 4. There may be risks of continuous industry integration and reshuffle in the middle and lower reaches.