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Shares of MediaTek up on better-than-expected Q3 sales

2013/10/08 12:03:51

Taipei, Oct. 8 (CNA) Shares of MediaTek Inc., one of Taiwan's leading integrated circuit designers, gained ground Tuesday morning after the company reported higher-than-expected consolidated sales for the third quarter, dealers said.

The buying also reflected optimism over MediaTek's leading position in the China smartphone chip market as the IC designer is scheduled to start shipments of its first eight-core chip in the first quarter of next year, they said.

As of 11:19 a.m., shares of MediaTek had added 2.01 percent to NT$380.50 (US$12.94) with 4.99 million shares changing hands. The weighted index on the Taiwan Stock Exchange was up 0.24 percent at 8,354.03.

"MediaTek benefited from strong demand from Chinese smartphone vendors to report impressive consolidated sales for the July-September period," KGI Securities analyst Eason Lee said.

In a statement released Monday, MediaTek announced third quarter consolidated sales of NT$39.01 billion, up 17.22 percent from the second quarter.

The sales were the highest ever for MediaTek in a single quarter and were higher than the company's earlier guidance of NT$34.9 billion to NT$37.6 billion.

In September alone, MediaTek's consolidated sales totaled NT$13.04 billion, up 2.3 percent from August. That was the third highest monthly total in the company's history, trailing only NT$13.58 billion in sales in January 2010 and NT$13.22 billion in sales in July 2013.

"Based on MediaTek's sales growth in the third quarter, my brokerage expects the company's gross margin for the three months to improve from the second quarter and range between 43.5 percent and 44 percent," Lee said. In the second quarter, the IC designer's gross margin stood at 43.2 percent.

"In addition, MediaTek's operating margin for the third quarter could hit 18-19 percent, also improving from a quarter earlier," Lee said. The IC designer had an operating margin of 17.7 percent in the April-June period.

"So it's possible that MediaTek will report about NT$6 in earnings per share for the third quarter, compared with NT$5.01 recorded in the second quarter. The growth will be quite good," Lee said.

Global IC design houses have now entered the traditionally slow fourth quarter, and the market has widely predicted that MediaTek's consolidated sales for the October-December period will fall more than 15 percent from the previous quarter.

But Lee did not share the pessimistic outlook, even with the high baseline set by the company in the third quarter. "Demand from China will remain solid in the fourth quarter. As the Lunar New Year holiday falls in January next year, Chinese smartphone vendors are still building up their inventories to meet demand during the holiday period," Lee said. Lee said he was also upbeat about the launch of MediaTek's eight-core smartphone chip, expecting that shipments of the new chip will help the IC designer further penetrate the China market.

According to Lee, MediaTek has a 48-52 percent share of China's smartphone chip market, ahead of U.S.-based Qualcomm Inc., which has a 29-32 percent share.

Lee cautioned, however, that as MediaTek shares have posted significant gains in recent sessions on optimism over its earnings prospects, the stock could face short-term technical resistance at around NT$385.

(By Jackson Chang and Frances Huang)