Analysts yesterday held mixed views about Largan Precision Co’s (大立光) performance during the second half of the year, after the company on Thursday reported better-than-expected results for the second quarter.
Some said the world’s largest handset camera lens maker might suffer from a downturn in the smartphone market, while others forecast that the company would maintain its growth given its industry leadership and diversified customer base.
“We believe Largan could be immune to the potential slowdown in the high-end smartphone market as more and more mid-range models are using advanced camera designs,” Arthur Hsieh (謝宗文), chief electronics and hardware analyst at UBS Securities, said in a note to clients yesterday.
Hsieh’s remarks came after recent market research reports indicated Samsung Electronics Co and Apple Inc were seeing slower sales of their Galaxy S4 and iPhone 5 smartphones.
Greater Taichung-based Largan told an investors’ conference a day earlier that it posted earnings per share of NT$15.17 in the April-to-June period, beating market expectations of a range between NT$9.8 and NT$11.5.
The company’s gross margin stood at 50.4 percent in the quarter, up 8.59 percentage points from the first quarter, while its consolidated sales in the second quarter rose 14.79 percent from a quarter earlier to NT$5.86 billion.
Largan said it expects to achieve growth in monthly and quarterly sales and net profit as clients plan to introduce new products later this year and because its customer portfolio has been diversified and its capacity will remain flexible in response to customers’ order adjustments.
Largan shares closed up 6.95 percent at NT$1,000 yesterday, retaining its position as the most expensive stock on the local bourse.
SinoPac Securities Co (永豐金證券) forecast Largan would keep its leadership in the camera lens market, adding that the third and fourth quarters are the peak season for mobile devices, while Merrill Lynch also forecast an improved third quarter, upgrading its forecast for the firm’s annual earnings per share by 4 percentage points to NT$67.87.
Largan's earnings per share was NT$41.58 last year, up from NT$38.76 in 2011.
However, Citigroup Global Markets Inc analyst Kevin Chang (張凱偉) holds a less optimistic view on Largan’s profitability.
“Our channel check suggests that the whole lens industry has seen significant capacity expansion and lenses are no longer in shortage,” Chang wrote in a separate note. “The easing of capacity constraints already led to more severe pricing pressure for most lens makers.”
The delayed launch of Apple’s new iPhone products may also have a negative impact on Largan, Chang said.
UBS upgraded its rating for Largan shares to “buy” from “neutral” and raised its target price to NT$1,200 from NT$900.
Merrill Lynch upgraded its target price to NT$1,390 from NT$1,350 and maintained a "buy" recommendation.
SinoPac retained its “buy” rating with its target price unchanged at NT$1,200, while Citigroup downgraded its rating to “sell” and cut its target price to NT$663 from NT$935.
Additional reporting by CNA