Given a limited potential upside to earnings, Goldman Sachs Group Inc downgraded Largan Precision Co’s (大立光) shares to “neutral” from “buy” in its latest report.
Goldman Sachs on Thursday said it downgraded Largan’s shares because marketing trend for the Greater Taichung-based company seemed to be progressing slower than it had anticipated.
Though Goldman Sachs remained structurally positive toward technological upgrades in the industry, it forecast Largan’s product mix would trend up slower due partly to key customer dynamics and partly to the smartphone-lens upgrade cycle in China.
Largan, the nation’s leading maker of handset lenses, supplies camera lenses to smartphone vendors including Apple Inc, Samsung Electronics Corp and HTC Corp (宏達電).
Goldman Sachs analyst Robert Yen (嚴柏宇) said some of Largan’s major customers will start focusing on mid-end smartphones in the second half of the year as the main volume driver.
However, Largan would be hard pressed to hold a higher market share in the mid-end smartphone camera lens market, like it has in the high-end market, due to rising competition, Yen said.
Goldman Sachs trimmed its target price for Largan’s shares to NT$790 from NT$1,020 to reflect its lowered estimates for Largan’s return on equity.
Another reason was that Apple, whose orders are expected to account for 43 percent of Largan’s sales this year, might lower its contribution to 39 percent next year and 36 percent in 2015.
Largan shares closed down 0.83 percent at NT$716 yesterday, underperforming the broader market, which gained 1.79 percent.