Tue, Jan 03, 2006 - Page 10 News List

Brokerage raises expectations on Chi Mei

PANEL MARKET Yuanta Core Pacific Securities lifted its target price for the firm by almost 15 percent, citing better-than-expected sales and cost reduction efforts

By Lisa Wang  /  STAFF REPORTER

Yuanta Core Pacific Securities (元大京華證券), one of the nation's biggest brokerages, raised its target price by nearly 15 percent for Chi Mei Optoelectronics Corp (奇美電子) in expectation of better quarterly results, an analyst said yesterday.

"Chi Mei Optoelectronics' performance beat my expectations," said Eric Lin (林宜正), an analyst with Yuanta Core Pacific.

Better-than-expected sales and cost reduction prompted Lin to raise his forecast for the nation's second-largest liquid-crystal-display (LCD) panel maker's earnings for the fourth quarter and for 2005.

Chi Mei Optoelectronics may earn NT$7.1 billion (US$216 million), or NT$1.39 per share, during the final quarter of last year, outpacing the market consensus of NT$6.5 billion by almost 10 percent, due to steady prices for panels used in slim-screen televisions, Lin said.

The price for the mainstream 32-inch LCD panel for TVs has remained stable at US$565 apiece this month from Dec. 20, while prices for 15-inch panels for computers dropped by the biggest amount, falling 1.4 percent, according to market researcher WitsView.

This would help push up the company's earnings for last year to NT$6.8 billion, from the previous estimate of NT$3.4 billion, he said.

Chi Mei Optoelectronics reported losses in the first two quarters of last year as panel prices plummeted on oversupply, but the firm returned to the black in the third quarter, making NT$3.38 billion, or NT$0.66 a share.

Lin upgraded his six-month target price for the company to NT$55, up 15 percent, from NT$44 set in mid-September and reiterated his "buy" rating.

"Besides, the first quarter looks not as bad as we had thought. Demand for LCD TVs and notebook computers is extending into the current quarter and inventory is healthy," Lin said.

In addition, LCD panel supply in the first quarter will exceed demand by a smaller-than-expected 8.3 percent, as demand for LCD TVs should partly offset new supply, Lin said, adding the panel prices would slide by 5 percent to 7 percent.

"The government's tighter control over Chinese-bound investments will scarcely have any impact on flat panel makers as they did not bank any hope on an opening to save costs as other sectors did," Lin said.

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