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Largan shares fall below NT$500 mark on Q2 outlook concerns

2012/04/27 12:10:24

Taipei, April 27 (CNA) Shares of Largan Precision Co. Ltd., one of Taiwan's leading cell phone camera lens suppliers, took a beating Friday morning, falling below NT$500 (US$17.06), amid rising concerns over its earnings outlook after the company gave cautious sales guidance a day earlier, dealers said.

Selling emerged right after the local bourse opened as investors took cues from Largan's first quarter results, in which the company posted the lowest net profit in about two years, and pessimism toward its second quarter outlook further dampened investor sentiment, they said.

As of 11:29 a.m., shares of Largan had fallen 7 percent, the maximum daily decline, to NT$498.50 with 684,000 shares changing hands, while the benchmark weighted index was down 0.19 percent at 7,506.88 points.

"Largan's gloomy assessments did hit investors' confidence," Horizon Securities analyst Benson Huang said. "After a bad first quarter, Largan will have to go through further difficulties for the second quarter."

Largan posted NT$882 million in net profit for the January-March period, down 24 percent from a quarter earlier, after sales fell 9.2 percent quarter-on-quarter to NT$3.64 billion.

The company's earnings per share for the first quarter stood at NT$6.58, compared with NT$8.65 recorded a quarter earlier.

Even worse, Largan forecast it will see a double digit decline in sales for the second quarter from the first quarter on reductions in orders from its major customers.

"Among its major customers, HTC and Nokia cut their orders to Largan in the first quarter. I do not expect the situation will improve in the second quarter," Huang said.

"In addition, Apple is expected to postpone its orders to Largan for the second quarter before the U.S. firm launches its new version of iPhone in the second half of this year," Huang said.

According to Huang, Apple accounted for 40-45 percent of Largan's total sales in 2011, while HTC and Nokia took 30-35 percent.

Huang said as competition in the cell phone camera lens business is getting fiercer than ever, Largan is expected to initiate further price cuts to win orders.

"My brokerage has lowered its forecast of Largan's sales for the second quarter to NT$3.2 billion from an earlier estimate of NT$4 billion after the first quarter results," Huang said.

"The second quarter gross margin is expected to fall further to a range between 35 and 36 percent in reflection of the sales drop," he said.

Largan's gross margin for the first quarter fell to 38.5 percent from 39.7 percent recorded a quarter earlier.

Huang said Largan shares are likely to encounter further downward pressure over the next few sessions after the stock fell below the psychological NT$500 mark.

"Amid lingering worries over its earnings, the stock may soon test the nearest technical support at around NT$460.00," Huang said.

(By Han Ting-ting and Frances Huang)