At NT$970 per share, Largan Precision Co’s (大立光) stock is already the most expensive in Taiwan, but analysts say the handset camera lens maker’s shares could move further higher as it gains a bigger share of the global smartphone market.
The industry’s continued development in hardware specifications and Largan’s increasingly diversified client base can help the company offset the downside from the weakening growth in the high-end smartphone sector, they said.
Analysts’ confidence in the Greater Taichung-based company has pushed Largan shares to gain 24.68 percent so far this year and 63.3 percent over the past 12 months.
On Friday, HSBC Securities Taiwan Corp became the latest brokerage to raise its target price on the company’s stock to more than NT$1,000 at NT$1,066.
The move came on the heels of similar upward stock price revisions made recently by other brokerages, including KGI Securities Corp (凱基證券) at NT$1,035, BNP Paribas Securities at NT$1,152, SinoPac Securities Co (永豐金證券) at NT$1,200 and Bank of America Merrill Lynch at NT$1,350.
“The increasing requirements for high-quality picture and video for smartphones, such as improved enhancement in low-lighting, will continue to make designing and manufacturing smartphone camera lens units challenging,” HSBC Securities analyst Yolanda Wang (王郁雅) said on Friday in a note to clients.
With its superior technology in the manufacture of high-end camera lenses, Wang said the company is expected to secure a more than 70 percent share of the Apple Inc iPhone’s 8-megapixel (MP) rear-facing camera lens orders, which could sustain its growth momentum in the second half of the year, following launches of new iPhones and other products from non-Apple clients.
Largan also counts HTC Corp (宏達電), Research In Motion Limited, Motorola Mobility, Nokia Oyj, Samsung Electronics Co, Huawei Technologies Co Ltd (華為) and ZTE Corp (中興) among its major clients.
An earlier report by HSBC showed that Samsung’s smartphone market share is expected to increase to 37 percent in 2015 from 29 percent last year, as the Galaxy maker plans to expand its exposure in the US$300 to US$400 price bracket to mitigate the negative impact of the saturation of the high-end smartphone market.
“It is natural to for Samsung to add Largan to its list of vendors, given its increasing demand for lens units and Largan’s capacity, yield and patent portfolio,” Wang said.
It is also worth noting that Chinese clients are likely to account for about 25 percent of Largan’s total sales next year, compared with 14 percent last year, on the back of the Chinese market’s aggressive migration from 8MP to 13MP lenses, KGI said.
“Largan will see continued growth momentum from Chinese and South Korean vendors, as well as from Apple in the second half of the year, due to the company’s leading designing, yield and capacity over competitors,” KGI analyst Richard Ko (柯良蔚) said in a note on July 5.
KGI forecast Largan’s revenue would increase 26.6 percent to NT$25.63 billion (US$862 million) this year from the record-high revenue of NT$20.07 billion it recorded last year, with further growth to NT$33.11 billion expected next year.
The company’s net profit is expected to hit NT$7.55 billion, or NT$56.3 per share, this year and NT$9.32 billion, NT$69.5 per share, next year, compared with NT$5.58 billion, NT$41.6 per share, last year, KGI predicted.