Largan Precision Co (大立光) yesterday saw its share price fall to its lowest value in nearly seven weeks.
Apple Inc launched new iPhones on Tuesday, but shares of Largan, which supplies smartphone camera lenses for iPhones and iPads, plunged by 6.25 percent to close at NT$2,250 in Taipei trading, the lowest level since July 28, when the stock closed at NT$2,255.
Largan remains the most expensive stock on the local bourse, but the stock’s weakness, along with the declines seen in other major Apple suppliers, saw the TAIEX fall by 1.07 percent yesterday to the session’s low of 9,223.18 points.
For the whole of this week, the benchmark index has dropped by 1.96 percent from last week, the Taiwan Stock Exchange data showed.
Shares in metal casings supplier Catcher Technology Co (可成) fell 4.45 percent yesterday to NT$290, while those of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which supplies A8 processors for the iPhone 6, were 1.6 percent lower at NT$123 and Hon Hai Precision Industry Co (鴻海精密), a major system assembler for Apple products, edged down 0.6 percent to NT$99.4.
“The broader market will head for a moderate correction in the near term, if Largan’s decline [in shares] does not stop,” Everyoung Securities Investment Consulting Co (聚揚投顧) equity strategist Lee Kuan-chin (李冠嶔) said.
This week, Largan shares were 6.83 percent lower than last week, as investors were worried about the company’s profit margin outlook as the new iPhone products maintain use of 8 megapixel camera lenses, rather than the 13-megapixel lenses expected prior to their launch.
The recent weakness has pushed the stock below its 60-day moving average of NT$2,396, which means it could trend lower in the coming days.
Largan shares have surged by 85.19 percent since the beginning of the year and most analysts believe the company is one of the key beneficiaries in Apple’s supply chain, amid expectations about iPhone replacement demand over the next six months to one year.
Last week, the company posted NT$3.96 billion (US$131.8 million) in consolidated sales for last month, a record-high, pushing its cumulative sales for the first eight months of the year up 57 percent from the same period a year earlier to NT$24.30 billion.
However, CIMB Securities Ltd yesterday raised concerns over Largan’s margin prospects, as Apple did not upgrade the camera lens specifications for its iPhone 6 and iPhone 6 Plus as expected.
The Hong Kong-based brokerage advised investors to be cautious about further selling of the stock.
Maybank Kim Eng Securities Ltd also warned that Apple’s innovation is slowing down, which has implications for supply-chain firms.
“We believe Apple has probably entered into a so-called ‘innovator dilemma stage’ and it’s likely to transfer its margin pressure across its supply chain in 2014 and 2015,” the Singapore-based brokerage said in a report.
Nevertheless, Maybank Kim Eng still rates Largan its top pick among Apple’s suppliers, considering the company’s technology leadership, its superior manufacturing capabilities and a favorable customer base.
“Advancements in pixel migration, 3D application, image stabilizer and larger aperture, play to Largan’s strengths,” the brokerage wrote.
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