MediaTek Inc (聯發科), the nation’s No. 1 handset chip designer, will beat its revenue guidance for the third quarter thanks to the expansion of its smartphone chip business, UBS Securities forecast last week.
In a research note dated on Friday, UBS expected MediaTek’s sales to grow 20 percent sequentially in the current quarter, slightly higher than Hsinchu-based company’s projection of between 13 and 18 percent.
The brokerage also predicted MediaTek’s margins would continue to rise in the fourth quarter following the production ramp-up of new MT6575/6577 dual-core platforms for affordable smartphones.
“After showing strong shipment growth in the third quarter, investors now have concerns on potential inventory corrections into the fourth quarter, and it might limit MediaTek’s share price upside in the near term,” said Jonah Cheng (程正樺), a Taipei-based analyst with UBS. “We maintain our view that MediaTek should be able to maintain sequential revenue growth in the fourth quarter of 2012, given the ramp up of new dual-core MT6577 chips.”
However, Cheng said he would also double check the sell-through situation during China’s “Golden Week” holiday from Oct. 1 to Oct. 10 to verify his projection.
UBS maintained a “buy” rating on the stock and a target price of NT$370.
Shares of MediaTek gained 1.35 percent to close at NT$339 on Friday.
On June 27, MediaTek announced that it had developed the MT6577 platform for sub-US$200 smartphones, the fastest growing segment of the global smartphone market.
In the second quarter, cellphone chips accounted for 45 percent to 55 percent of MediaTek’s total sales, with smartphone chips making up 20 to 25 percent of the sales during that time, MediaTek said.
The company shipped 21 million smartphone chips in the April-to-June period, topping an earlier shipment estimate of 18 million to 20 million units.
As a result of solid demand from Chinese buyers, MediaTek has raised its smartphone chip shipment target to 95 million units this year from a previous estimate of 75 million units.
Bill Lu (呂家璈), a Morgan Stanley analyst in Hong Kong, expected MediaTek to ship more than 200 million smartphone chips next year by offering a more complete solution to Chinese handset vendors that includes wireless connectivity and better performing chips.
“China’s smartphone adoption has been faster than the United States and Western Europe, but slower than South Korea thus far, and MediaTek’s smartphone ramp has been faster than its feature phone ramp,” he wrote in a separate note.
Another upside factor for MediaTek is growing interest in “white-box” tablets in emerging markets, which could approach 100 million to 150 million units next year and drive up MediaTek’s revenue if the company can tap into the supply chain, Lu said.
A white-box tablet is a model without a registered brand name, which is usually sold at a lower cost than branded tablets to gain traction among price-sensitive consumers.
Morgan Stanley raised its target price for MediaTek to NT$400 from NT$322, while keeping its “overweight” rating on the stock.