Largan Precision Co (大立光), Taiwan’s largest handset camera lens maker, saw its fourth-quarter gross margin inch down from the third quarter as the rising New Taiwan dollar ate into profitability.
Gross margin edged down to 45.84 percent in the last quarter of last year, from 47.14 percent in the earlier three months, according to the company’s statistics.
Chief financial officer Charles Chiu (邱東泉) told an investor conference yesterday that the marginal drop was due to the NT dollar’s rise against the greenback, causing Largan to incur currency exchange losses of NT$310 million (US$10.68 million).
The company, which counts HTC Corp (宏達電) and Apple Inc among its clients, reported a net income of NT$1.1 billion in the fourth quarter, or NT$8.29 earnings per share. In the third quarter, net income was NT$1.2 billion or NT$9.22 per share.
For the whole of last year, revenue hit a record NT$12.4 billion, up 51 percent from NT$8.2 billion in 2009. Net income also hit a record NT$4 billion, up 63 percent from 2009, which translates to NT$30.16 in earnings per share. Gross margin was 47 percent last year.
Speaking on future prospects, Largan chairman Tony Chen (陳世卿) said: “Smartphones and tablets will drive lens demand.”
The rising adoption of smartphones will push up lens resolutions, while tablets will use dual cameras — one at the front and the other at the rear, which would benefit Largan in terms of sales and shipments, the firm said.
In the fourth quarter, lenses 5 megapixels (MP) and above accounted for 60 percent of Largan’s total shipments, while 3MP lenses and 2MP lenses each contributed 20 percent.
The company is conducting research and development for 8MP lenses and above, but the uptake would depend on the adoption by mainstream brands, the firm said.
Meanwhile, Largan has earmarked NT$1.5 billion in capital spending this year, up from NT$400 million last year, according to Chiu.
The rise in spending will include NT$600 million for construction of a new production site in Taichung, which will begin construction this quarter and was expected to be ready for mass production in the second half of next year, he added.
Chen said revenue in the first quarter would be down from the fourth quarter amid the backdrop of low seasonality and fewer working days during the Lunar New Year holiday, but he added that the decline would be less than 18 percent.
Goldman Sachs yesterday raised its rating on Largan to “buy” from “neutral,” and expected Largan’s 12-month target price to hit NT$1,130.
This compares with Largan’s shares that closed up 2.8 percent to NT$817 on the Taiwan Stock Exchange yesterday.
“Largan is expected to benefit from three structural tailwinds in leveraging the strong smartphone and tablet growth,” the Goldman Sachs report said.
These factors include Largan’s continued lens content upgrade, especially when Apple launches iPhone 5 probably this summer, as it may use Largan’s 5MP lenses, the report added.
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