Shares of smartphone camera lens maker Largan Precision Co. (???) came under pressure Friday morning, despite a significant increase in third quarter net profit reported by the company a day earlier, dealers said.
The selling came as investors sought to lock in gains built in recent sessions amid expectations that Largan would post strong third quarter earnings.
Investors also wanted to limit their holdings of the stock due to worries over a possible interest rate hike by the U.S. Federal Reserve, likely in December, dealers said.
As of 11:55 p.m., shares of Largan had fallen 1.47 percent to NT$3,675.00 (US$116), with 695,000 shares changing hands on the Taiwan Stock Exchange, where the weighted index was down 0.41 percent to 9,181.25.
"The losses suffered by Largan showed that its impressive third quarter results had already been factored into the stock's price in recent sessions," Ta Ching Securities analyst Andy Hsu said.
"Investors simply pocketed their earlier gains built in Largan, and they did the same for Taiwan Semiconductor Manufacturing Co. (TSMC, ???)."
Shares of TSMC, the most heavily weighted stock in Taiwan, had fallen 0.27 percent to NT$188.00 as of 11:55 a.m.
The world's largest contract chip maker reported on Thursday a record quarterly net profit of NT$96.76 billion in the third quarter and forecast that its consolidated sales for the fourth quarter, a traditionally slow season, will only drop 0.9 percent-2 percent from the third quarter.
"In addition, global financial markets remained volatile amid concerns over a rate hike by the Fed. Many investors here worry that foreign institutional investors will move funds out of the country by cutting holdings in large cap stocks, like Largan and TSMC," Hsu said.
For Largan, which got a boost from the launch of Apple's latest iPhone 7 and iPhone 7 Plus in September, its net profit for the third quarter rose 88.6 percent from a quarter earlier to NT$6.96 billion, despite foreign exchange losses of NT$420 million.
Largan's gross margin for the third quarter hit a new high of 68 percent, up from 66.37 in the second quarter and much higher than the 55.1 percent seen during the same period last year.
"The third quarter gross margin was very encouraging and showed that Largan has made a lot of effort to improve its production portfolio," Hsu said.
"My understanding is that the company has cut the weight of voice coil motors (VOC), which command a lower profit margin." VCMs are one of the components in a smartphone camera lens.
At an investor conference on Thursday, Largan CEO Adam Lin (???) said he expected the company's sales for October and November to stay little changed from September, when its revenue hit NT$4.95 billion.
That was the highest monthly level so far in 2016 and was up 2.76 percent from August, but it was 10.19 percent lower than the same month a year earlier.
Lin said Largan's production capacity has been fully booked so far and because of its limited capacity, the company is working to boost its yield rate to increase production and sales.
Source: Focus Taiwan News Channel