Daiwa Securities yesterday said it had cut its target price for Media-Tek Inc (聯發科), one of Taiwan’s leading chip designers, amid uncertainty over global demand.
It lowered its target price for the stock to NT$348.00, from NT$378, as MediaTek’s bottom line had been affected by the fall in the average selling price (ASP) of second-generation (2G) mobile phone chips.
However, Daiwa maintained its “outperform” rating for the stock.
It said MediaTek was still worth following and that when the decline in mobile phone chip prices moderates, its profitability could improve.
Investors should also pay attention as to whether MediaTek could grab a bigger slice of the smartphone chip market to offset the impact from the fall in 2G cellphone chip prices, Daiwa said.
Daiwa forecast that the ASP of 2G mobile phone chips would fall 21 percent year-on-year next year, while the ASP of 3G and smartphone chips would rise 29 percent.
Mobile phone chips account for about 70 percent of MediaTek’s total revenue, and China is its largest buyer.
There had been concerns earlier in the year that MediaTek might be vulnerable to cutthroat pricing competition in China, but analysts said it had been focusing on upgrading its mobile phone chips and providing a wider range of products to woo buyers.
Daiwa said it expected earnings per share of NT$12.77, NT$19.99 and NT$26.17 for this year, next year and in 2013 respectively, compared with NT$28.44 last year.
MediaTek yesterday closed down 1.73 percent at NT$284 on the Taiwan Stock Exchange.
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