Analysts yesterday remained positive on Largan Precision Co’s (大立光) outlook this quarter after the company reported record earnings for last quarter, but the camera lens supplier’s shares still plunged on margin concerns.
On Thursday, Largan said its net profit reached NT$5.285 billion (US$173.73 million) in the July-to-September quarter, up 127.7 percent year-on-year and 41.99 percent quarter-on-quarter. Consolidated sales grew 69 percent annually and 21 percent quarterly to NT$12.08 billion last quarter.
Largan’s earnings per share stood at NT$39.4 last quarter, which is 7 percent higher than HSBC Securities Taiwan Corp’s forecast and 11 percent higher than market consensus, HSBC said in a client note.
“We estimate sales to grow 24 percent quarter-on-quarter and gross margin to improve 0.2 percentage points to 52.7 percent on scale, yield rate improvement and stable pricing environment,” the brokerage said.
HSBC maintained an “overweight” rating — equivalent to a “buy” rating — on Largan shares, with a price target of NT$3,200.
Meanwhile, Apple Inc’s iPad Air 2 and iPad Mini 3, released yesterday, showed no major surprises on hardware specification, but its 6.1mm thickness and ultrathin camera are impressive, which is positive for Largan, as it supplies 40 percent of iPad products’ camera lenses, Yuanta Securities Co (元大證券) said in a separate note.
The brokerage also kept its “buy” rating on Largan shares unchanged.
However, Largan shares plunged 6.9 percent to NT$2,160 yesterday in Taipei trading, as investors took note of the company’s gross margin, which declined to 52.49 percent last quarter from 58.2 percent a quarter earlier.
Compared with a year earlier, the gross margin was higher than 47.11 percent, according to the company.
On Thursday, Largan chief executive officer Adam Lin (林恩平) attributed the decline to the increased production of the high-cost voice coil motor and optical image stabilization assembly business.
Analysts said the quarterly decline in gross margin reflected an adjustment in Largan’s product portfolio, but expected margin improvement after the production yield rate becomes more stable.
Daiwa Capital Markets Inc said Largan remained one of its top picks in the smartphone space due to its solid industry position, and expected the company to benefit from its dual growth drivers of Apple orders and the growing Chinese market.
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