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CLSA cautious on HTC's corporate strategy

2012/12/05 12:50:44

Taipei, Dec. 5 (CNA) Taiwan's HTC Corp. needs to improve its corporate strategy despite market expectations that its new flagship smartphone will boost sales in the coming quarter, Hong Kong-based brokerage CLSA Asia-Pacific Markets said Tuesday.

The market's growing optimism over HTC's better-than-seasonal sales in the first quarter of next year, and the expected launch of its 2013 flagship model "M7" in March, has fueled its share price recently, said CK Cheng, a Taipei-based analyst at CLSA.

"The stock may edge higher from current levels, but we prefer to sit on the sidelines until we see a more coordinated product-launch campaign," said Cheng, who rated "sell" on HTC while maintaining its target price of NT$150 (US$5.16).

"The recent rally may prove short-lived if management still bets heavily on its engineering capability instead of a more balanced corporate strategy that takes account of device pricing, production and marketing," he wrote in a note to clients.

Based on CLSA's checks with supply chain, HTC has asked casing and semiconductor suppliers to prepare 4 million to 5 million M7 components in the first quarter of 2013, compared with CLSA's estimated total shipments of 7 million for HTC in the current quarter.

The brokerage forecast that HTC's first-quarter revenue would grow 6 percent from the fourth quarter, and kept its estimates for HTC's earnings per share unchanged at NT$11.32 for 2013 and at NT$15.02 for 2014.

In a separate report, Japanese brokerage Nomura Holdings Inc. upgraded its stock rating for HTC from "reduce" to "neutral" and raised its target price from NT$150 to NT$255.

"We think near-term disappointment is less likely than before with the new product cycle ahead," said Nomura analyst Aaron Jeng.

"However, we do not yet think HTC is a structural buy as its brand premium will continue to be challenged by the headwinds of smartphone commoditization in 2013," he wrote.

Jeng expects HTC's November sales to increase by 40 percent to 50 percent from October due to the recent launch of its new products.

Moreover, the lawsuit settlement between HTC and its rival Apple Inc. has improved consumers' sentiment and may help HTC gain market share back in the United States, Jeng said.

As of 11:27 a.m. Wednesday, shares of HTC rose 0.54 percent to NT$280 on the local bourse.

(By Jeffrey Wu)
ENDITEM/npw