Shares of integrated circuit designer MediaTek Inc (聯發科) rocketed by the daily limit of 7 percent yesterday morning after the company reported better-than-expected earnings for the first quarter of the year, dealers said.
With demand for smartphone chips remaining strong, many investors have high hopes that MediaTek will continue to ride the uptrend and post a significant increase in net profit for this year, dealers said.
MediaTek’s stock price jumped 6.99 percent to close at NT$505. The weighted index on the Taiwan Stock Exchange ended up 0.86 percent yesterday.
“It was no surprise that Media-Tek shares made a strong showing after the IC designer reported impressive first-quarter results, defying conventional wisdom that the first quarter is usually a slow period for the semiconductor business,” MasterLink Securities (元富證券) analyst Tom Tang (湯忠謙) said.
At an investors’ conference on Wednesday, MediaTek reported NT$10.14 billion (US$336.2 million) in net profit for the first quarter of the year, up 17.7 percent from the previous quarter and 171.4 percent year-on-year.
Its earnings per share (EPS) for the first quarter stood at NT$6.82, compared with NT$2.79 in the same period last year and NT$6.43 in the fourth quarter.
The local bourse was closed for a public holiday on Thursday.
“MediaTek’s first quarter EPS beat the market estimate of about NT$5 as the IC designer has improved its product portfolio, increasing its production of high-end chips in the mix,” Tang said.
“High-end chips have boosted MediaTek’s profit margin and strengthened its bottom line,” Tang said.
According to MediaTek, its first-quarter gross margin rose 2.6 percentage points from a quarter earlier to 48.3 percent.
In the first quarter, MediaTek shipped 75 million to 80 million smartphone chips, exceeding its estimate of 65 million units.
Tang said the higher-than-expected shipments showed MediaTek’s competitive edge in the global market, in particular in the fast-growing China market.
The company’s higher net profit also reflected its decision to bring a smaller rival, MStar Semiconductor Inc (晨星半導體), fully under its corporate umbrella in February, he said.
“Investors have been impressed by MediaTek’s sales guidance for the second quarter and that’s why they rushed to pick up the stock soon after the local bourse opened,” Tang said.
MediaTek forecast that its consolidated sales for the second quarter will range between NT$51.5 billion and NT$55.2 billion, up 12 to 20 percent from the first quarter, while its smartphone chip shipments are expected to total 80 million to 90 million units.
“I have no doubt that the IC designer will achieve its goal of shipping 300 million smartphone chips this year. In the first half of the year, the shipments could hit 160 million units,” Tang said.
Based on the company’s first quarter results, Tang said, his brokerage has raised its forecast for MediaTek’s 2014 EPS to NT$29.49 from an earlier estimate of NT$27.59.
Last year, the IC designer’s EPS was NT$20.57.
“Amid optimism toward MediaTek’s profitability, I think the stock will continue to steam ahead before facing strong technical resistance at about NT$590,” he said.