Blessed by the booming liquid-crystal-display (LCD) panel market, Merrill Lynch upgraded Novatek Microelectronics Corp (聯詠科技), Taiwan's largest maker of LCD driver ICs, from "neutral" to "buy" in its report released yesterday.
"We made the recommendation to investors as we see more upside potential from Novatek's LCD TV and handset driver IC businesses," said Jonah Cheng (程正樺), an analyst at Merrill Lynch Taiwan.
For the LCD TV sector, as panel makers start to use "double-scan" technology -- a technology that needs gate driver ICs to send signals from both sides of the panel -- for 37-inch or above size LCD TV panels, this will increase the usage of LCD driver ICs by more than 20 percent, Cheng said.
For the handset sector, Merrill Lynch's channel check indicates that Novatek's key new handset display driver ICs have gotten approval from some tier-1 handset brands like Motorola, the report said.
The shipment volume of Novatek handset TFT driver ICs is estimated to surpass 1 million units per month in the fourth quarter of the year, and contribute 6 percent of revenue for the company next year, the US investment bank said.
Merrill Lynch further raised its target share price for Novatek to NT$200, a 31 percent increase from the current share price, and earnings-per-share (EPS) targets to NT$11.4 and NT$14.7, respectively, from NT$10.9 and NT$12.0 for this year and the next.
Shares of Novatek gained NT$3.5 to close at NT$152 on the Taiwan Stock Exchange.
Novatek is a member of United Microelectronics Corp (聯電), the world's second largest made-to-order chipmaker.
It enjoyed strong shipments of LCD driver ICs for the large-size panel segment in the first half of this year, as market demand increases.
According to a report conducted by the government-backed Industrial Economics and Knowledge Center, the large-size panel-use LCD driver IC market is expected to see stable growth, mainly driven by strong demand for LCD monitor applications. The research institute forecast monthly shipments of monitor-use driver ICs may grow to 140 million units this quarter, up from 85 million units a year ago.
Boosted by strong market demand, Novatek saw sales grew by 30.19 percent to a peak of NT$2.12 billion last month from a year ago, and sales in the first seven months jumped 30.36 percent to NT$13.42 billion from the same period last year.
The increasing shipments may also help Novatek outpace NEC Corp to become the world's second largest large-sized LCD TV driver supplier after South Korea's Samsung Co, according to a Chinese-language report.
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