Sunlord Electronics (002138.SZ) saw record low in gross margin

   Date:2011-12-20yangliangyu

The consolidated gross margin of Sunlord Electronics fell to 27.2% in 2011 Q3, the lowest level in recent years. It was mostly blamed on surge of raw material silver (USD 40 per ounce) and large-scale investment in equipments causing increased depreciation cost.

In the cost structure of Sunlord Electronics, raw material occupies 70%. With silver paste as the raw material, the gross margin of the company is exceedingly sensitive to the silver price and it changes 1.7% reversely with every 10% change of silver price. Since the end of September 2011, the price of silver has plunged (US$32/ounce at present), favorable to the rise in gross margin of the company in Q4.

Main products of Sunlord Electronics include multilayer chip inductor and wire wound chip inductor. Multilayer chip inductor is mainly applied in situations of high speed signal process. Its downstream industries maintained rapid increase, such as smart phone, data card and WIFI etc. The technological superiority of Sunlord enables it to carry out dislocation competition against its Taiwanese counterparts.

Subsidy towards LED lighting will probably be implemented in China in 2012, which will drive the demand for wire wound chip inductor.

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