Deutsche Bank upgrades HTC on ‘strategic changes’

Staff writer, with CNA

Tue, Mar 11, 2014 - Page 14

Deutsche Bank AG has upgraded its rating on HTC Corp (宏達電) shares from “sell” to “hold,” becoming the first foreign brokerage in almost a year to envision a better outlook for the Taiwanese smartphone maker.

The upgrade came with a significantly revised target price for HTC shares to NT$155 from NT$85, citing what it described as HTC’s “right strategic changes” in its mid-tier and low-end devices.

HTC shares closed up 1.81 percent at NT$140.5 yesterday in Taipei trading.

Deutsche Bank analyst Birdy Lu (呂家霖) said in a client note on Friday that he feels encouraged to see HTC launching more mid-range phones, such as the Desire 816 — a fourth-generation smartphone with a 5.5-inch display and a quad-core processor that costs US$293.

One reason behind the optimism is that the winning formula for mid to low-end smartphones targeting emerging markets is the cost-to-performance ratio, rather than product innovation or brand value, he said.

“Another positive change is that HTC is starting to leverage MediaTek’s low-cost SoC [system-on-a-chip] solution and ODM [original design manufacturing] partners for mainstream products,” Lu said.

Moreover, Lu said he believes HTC will focus on ODM projects again and is likely to gain orders from the new Nexus tablet from Google Inc, which could account for 10 to 12 percent of HTC’s sales in the second half of the year.

Deutsche Bank predicted that HTC would return to profitability beginning this year, with estimated earnings per share of NT$1.5 for this year and NT$8.1 next year.