LED producer upbeat on 2018 revenue growth
> Strong demand from auto industry will help company maintain double-digit increase
KUALA LUMPUR: D&O Green Technologies Bhd expects to continue its double-digit growth in terms of revenue this year, driven by the demand for light emitting diodes (LEDs) in the automotive industry.
Group managing director Tay Kheng Chiong said yesterday the group’s revenue has been growing at an average 15% in the last three years.
“When we shifted from the nonautomotive segment to the automotive segment, our profit margin improved. We expect our earnings to continue to improve,” he told reporters after its EGM.
For the fourth quarter ended Dec 31, 2017, D&O saw its net profit jump 83% to RM6.94 million from RM3.8 million a year ago on lower effective tax rate. The group registered a 3% revenue growth to RM132.53 million compared with RM128.64 million in the previous year’s corresponding quarter thanks to the automotive segment.
For the full year, its net profit almost doubled to RM22.37 million from RM11.27 million, while revenue went up 7.7% from RM430.1 million to RM463.34 million.
Earlier, D&O shareholders approved its proposed acquisition of a 27.95% stake in subsidiary Dominant Opto Technologies Sdn Bhd for RM285.21 million to be satisfied via the issuance of 451.17 million new irredeemable convertible preference shares in D&O. Post acquisition, D&O will hold a 89.8% stake in Dominant.
In recent years, the Dominant group has been gradually exiting from the highly competitive and less profitable LED markets for general lighting and LED television, to focus on its core competency in the automotive segment.
Currently the Dominant group derives more than 90% of its sales from automotive LED lighting. The board believes that the favourable prospects of the group is expected to contribute positively to the future earnings of D&O.
The LEDs of Dominant are sold around the world through a global network of sales and after-sales services office in key automotive markets including China, the US, Japan, Europe, Korea and India. China is seen as a major growth market.
According to Tay, there are only five to eight players in the automotive LED segment today globally, hence it does not see a major threat from other players.The future growth is further supported by rising car sales volume and increasing adoption of LED in exterior lighting and interior display application.
“LED composition in car headlamps is only 3% today and our major customers have forecast that 50% of cars on the road will have LED headlamps by 2021 so there’s a big opportunity to grow globally. We can see the upside opportunity,” said Tay.
Locally, he expects Dominant’s products to expand into Malaysia possibly by year-end via Zhejiang Geely Holding Group Co Ltd’s entry into Proton Holdings Bhd. Geely is an existing customer of Dominant.
Despite a stronger ringgit, Tay said, there is little impact on D&O’s bottom line as Dominant is an original brand manufacturer where it sells directly to markets.
“In Europe, our currency is the euro, and in China, the renminbi. Even with this currency change, you can see the euro or renminbi also strengthen, so net-net it’s a balance.”
Dominant plans to renovate its newly acquired factory building in three phases over the next five years. Upon completion, its production capacity could grow by three times from its current level.