Target price on Largan shares cut after September sales

Taipei,  A foreign brokerage has downgraded its target price on shares of Taiwan-based smartphone camera lens maker Largan Precision Co. after the company reported lower-than-expected sales for September.

In a research note, the Asian brokerage said Largan has felt the pinch of the sanctions imposed by Washington on Chinese telecom equipment supplier Huawei Technologies Inc., which is one of the Taiwanese manufacturer’s major clients.

In addition, a move by international smartphone brands to postpone plans to upgrade their cameras is expected to further affect Largan’s sales in the short term, the brokerage said, adding it has cut its target price on Largan shares to NT$3,750 (US$129) from NT$4,755.

Largan said in a statement released on Monday that it posted NT$5.13 billion in consolidated sales in September, up 2 percent from a month earlier but down 22 percent from a year earlier. The market had previously anticipated that Largan would enjoy a 4 percent-6 percent month-on-month increase in sales.

After the September sales report, Largan shares plunged 2.28 percent to close at NT$3,220.00 on the Taiwan Stock Exchange main board on Tuesday, although the weighted index surged 1.24 percent on the back of solid gains posted by U.S. markets overnight.

In September, 20 megapixel and above lenses, which command a higher profit margin, accounted for 20 percent-30 percent of Largan’s total sales, while 10-20 megapixel lenses made up 50 percent-60 percent and 8-10 megapixel lenses represented 10 percent-20 percent, the company said.

In the third quarter, Largan said, its consolidated sales totaled NT$14.79 billion, up 17 percent from a quarter earlier but down 20 percent from a year earlier, Largan data showed.

In the first nine months of this year, Largan posted NT$40.65 billion in consolidated sales, down 4 percent from a year earlier, the data indicated.

Despite the cut in target price for Largan shares, the Asian brokerage left an “outperform” rating on the stock, citing the company’s lead over its peers in high-end camera lens development.

Another Asian brokerage said the impact on Largan’s sales from the sanctions suffered by Huawei is expected to continue into the first half of next year, but the securities firm said it remained upbeat about the long-term trend for smartphone brands to upgrade their cameras.

The securities house said it had left unchanged a target price of NT$4,350 and a “buy” rating on Largan shares.


Source: Focus Taiwan News Channel

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