Shares of Largan Precision Co (大立光) rose by the daily limit on Friday after several foreign brokerages advanced their target prices on the leading handset lens maker after it released better-than-forecast first-quarter results last week.
Largan, one of Apple Inc’s major camera lens suppliers, on Thursday posted net profit of NT$1.85 billion (US$62.34 million), or earnings per share (EPS) of NT$13.79 in the first quarter of the year, beating analysts’ average estimate of EPS of NT$12.42 by up to 10 percent.
Prior to Thursday’s conference call, investors had been concerned that the Greater Taichung-based company’s bottom line might suffer from weaker shipments of Apple’s products.
However, Largan chief executive Adam Lin (林恩平) told investors he remained optimistic about the company’s second-quarter performance because Largan’s clients, including new customer Samsung Electronics Co, planned to ship more high-end smartphone models equipped with high-priced, ultra-high pixel cameras from this quarter.
“We think the impact of the slowdown in iPhone shipments will be milder than expected in the second quarter of the year,” Daiwa Capital Markets analyst Birdy Lu (呂家霖) said in a note released on Thursday.
“While Apple guided for a 20 percent quarter-on-quarter fall in its second-quarter sales, we believe Largan’s production of iPhone components will not fall as much as channel inventory is lower now,” Lu added.
Daiwa Capital retained its “buy” rating on Largan’s shares, but raised its target price for the stock from NT$930 to NT$975.
Meanwhile, Credit Suisse AG on Friday upgraded its rating on Largan to “outperform” from “neutral” but lowered its target price to NT$825 from NT$850, as analysts Josette Chang and Pauline Chen (陳柏齡) said the lenses maker’s guidance for this quarter turned out better than forecast.
Largan told analysts on Thursday its revenue is expected to post growth in the second quarter, although it did not offer a forecast on gross margin.
Goldman Sachs took a similar upbeat stance by hiking its target price on Largan shares to NT$800 from NT$790, although the brokerage maintained its “neutral” rating on the stock.
Meanwhile, Deutsche Securities raised its target price on Largan shares to NT$830 from NT$820, and raised its recommendation on the stock to “buy” from “hold.”
Morgan Stanley and JPMorgan Securities both upgraded their recommendation on Largan shares to “neutral” from “underweight” and raised their target prices on the stock to NT$728 and NT$750 respectively, from NT$638 and NT$700.
“Given that the share price has underperformed the TAIEX by 16 percent year-to-date, we think now is a good time to close our underweight position,” JPMorgan analysts William Chen (陳威元) and Alvin Kwock (郭彥麟) said in a note on Friday.
“However, we are still worried about the fourth quarter of the year if Apple finally decides to position its low-cost iPhone as a mainstream model with more than 50 percent allocation,” they said.
“If this happens, average selling price or margin pressure is likely to be much more severe than last year,” they added.
Largan’s shares closed up 6.98 percent at NT$736 on Friday.
Additional reporting by CNA