LED: From TV to Lighting; Upgrade Epistar and Everlight to Overweight（2010年5月）

Investment conclusion: We upgrade Epistar and Everlight to Overweight to reflect the faster LED lighting adoption, which helps mitigate our prior concerns of intense competition in the display backlight space hurting profitability. We believe the market is underestimating the speed of LED lighting take-off and the meaningful contribution in 2010 onward. Of the two stocks, we prefer Everlight – more product offerings from components (packaged LEDs) to light module/engine should bring ample revenue upside in the long term, 2010-12e ROE should recover to the previous peak of 20-22%, market expectations are low and the stock is attractively valued at 12x 2010e P/E.