Handset camera lens supplier Largan Precision Co (大立光) is expected to see revenue increase 20 percent this quarter from last quarter due to product launches by major clients, Credit Suisse Securities said this week.
The brokerage also expected the company to achieve higher gross margin because of continued improvement in yield rates and favorable product trends.
The forecast came after Largan reported NT$7.16 billion (US$242.3 million) in consolidated sales for the July-to-September quarter on Saturday last week, the second-highest level for quarterly sales in the company’s history.
“We expect another 20 percent quarter-on-quarter sales growth in the fourth quarter,” said Pauline Chen (陳柏齡), an analyst at Credit Suisse Securities’ Taipei branch, in a note to her clients on Tuesday.
“This is mainly driven by decent sales feedback from new iPhones and several new models from Chinese smartphone customers,” she added.
Credit Suisse forecast the company’s gross margin might reach between 47 percent and 48 percent this quarter, and revised upward its earnings per share (EPS) forecast by 5 percent to NT$66 this year and by 8 percent to NT$69.2 next year. Largan last year reported EPS of NT$41.6.
JPMorgan Securities also forecast Largan to report record sales this quarter and benefit from the expansion of the high-end lens market over the next 12 to 18 months.
“Largan will continue to dominate the mainstream market as competitors are struggling with yield,” JPMorgan analysts William Chen (陳威元) and Alvin Kwock (郭彥麟) said in their note on Monday.
At least one analyst expressed caution about the company’s outlook, saying the growing number of competitors might lead to lower lens prices after stable prices in the first half of this year.
"We believe competitors’ aggressive moves as a result of new capacity are leading to weakness in pricing," HSBC Securities Taiwan Corp analyst Yolanda Wang (王郁雅) said in her research note on Tuesday.
Other challenges include Apple Inc’s strategy to diversify its supplier base and Largan’s low production ramp up of 8-megapixel lenses for Samsung Electronics Co, Wang said.
HSBC predicted Largan’s averaged selling prices would decline 6 percent this year from last year and adjusted down its sales forecasts by 14 percent to NT$30 billion this year and by 16 percent to NT$31 billion next year.
It also cut this year’s EPS estimate by 14 percent to NT$70 and next year’s EPS estimate by 16 percent to NT$71.
Shares of Largan have risen 27.89 percent since the beginning of the year, outperforming the broader market’s 8.38 percent.