Mon, Oct 19, 2015 - Page 13 News List

Brokers down on Largan

Staff writer, with CNA

Two foreign brokerages have lowered their target price on shares of Largan Precision Co (大立光), a smartphone camera lens supplier to Apple Inc, although the Taiwanese firm reported higher-than-expected third quarter earnings.

The brokerages said that they were cautious about Largan’s earnings outlook for next year, given the possibility of slower sales growth of the latest iPhone models unveiled by Apple last month.

One of the brokerages lowered its target price on Largan shares from NT$4,080 to NT$3,520 citing slower sales growth momentum, but kept its “buy” rating on the stock.

By law, the names of foreign brokerages cannot be reported when they give price forecasts for specific stocks.

The company on Thursday reported a record-high net profit for the third quarter, but the stock closed unchanged at NT$2,585 on Friday in Taipei Trading, off an early high of NT$2,690 as investors took profit.

Market analysts said the failure of Largan shares to maintain their early gains on Friday showed market caution about sales of the new smartphones, which are the main drivers of the company’s shipment growth.

In the third quarter, Largan posted NT$8.21 billion (US$252.6 million) in net profit and earnings per share of NT$61.17, a new quarterly high in the company’s history.

The third quarter net profit represented a quarterly growth of about 70 percent, largely on the back of foreign exchange gains.

Despite the spike in net profit, Largan’s gross margin fell 2.61 percentage points sequentially to 57.71 percent in the third quarter due to a lower yield rate for new products and higher labor costs.

One of the brokerages said that while the company’s third quarter earnings per share was higher than the NT$52.6 forecast by foreign institutional investors, caution remained about the outlook for the company’s shipments in the fourth quarter and next year.

The brokerage cut its forecast for Largan’s EPS by 8.5 percent for next year and by 9.4 percent for 2017, projecting NT$206.33 and NT$239.44, respectively.

However, taking into account the company’s third quarter results the brokerage raised this year’s earnings per share forecast by 1.3 percent to NT$181.66.

Another foreign brokerage also cited concerns over a possible slowdown in sales of the new smartphones and cut its forecast for the company’s earnings per share this year by 8 percent to NT$194.58.

The brokerage also lowered its target price on Largan shares from NT$3,800 to NT$3,500, but maintained an “overweight” recommendation on the stock.

For the first nine months of the year, Largan’s earnings per share was NT$129.99, compared with NT$89.51 in the same period of last year.

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