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Foreign brokerages cut target prices on Largan on sales outlook

2017/12/09 18:26:40

Taipei, Dec. 8 (CNA) Two foreign brokerages have lowered their target prices on shares of Largan Precision Co., a smartphone camera lens supplier to Apple Inc., after the Taiwanese company gave a cautious forecast of its December sales.

In a research note released earlier this week, a U.S.-based securities house said Largan's weakening sales momentum in the fourth quarter of the year reflected its unsatisfactory yield rates at its new plant in Taichung.

The caution toward Largan's fourth-quarter revenue is unrelated to global demand for smartphone camera lenses, which remains solid, the brokerage said.

As a result, the brokerage said, it was cutting its target price on Largan shares from NT$6,400 to NT$5,500 (US$183) and keeping a "neutral" recommendation on the stock.

On Friday, Largan shares closed up 1.63 percent at NT$4,370.00 on a technical rebound after their recent massive losses on the Taiwan Stock Exchange.

Before Friday's rebound, the stock had come under heavy pressure after the company forecast on Tuesday a monthly drop in its consolidated sales growth.

In November, Largan recorded a 0.05 percent monthly increase in consolidated sales to NT$5.62 billion, but the figure was below expectations in light of the fact that the premium iPhone X went on sale on Nov. 3.

This week, Largan shares continued to fall, dropping 8.98 percent despite Friday's rebound, amid worry over the company's December sales and those of the iPhone X.

On Dec. 1, Largan shares closed below the NT$5,000 mark for the first time since July 7 amid worry over shipments of the new iPhone.

The stock has fallen 26.98 percent since Nov. 3, when it closed at its highest level ever at NT$5,985.00.

The U.S. brokerage has lowered its forecast for Largan's earnings per share (EPS) in 2017 by 6 percent, and in 2018 and 2019 by 9 percent, to NT$196.06, NT$296.38 and NT$365.95, respectively. Largan's EPS was NT$169.47 last year.

Meanwhile, an European brokerage has also cut its target price on Largan shares, from NT$6,500 to NT$5,800, in the wake of the cautions December sales forecast, but maintained its "outperform" recommendation on the stock.

The brokerage said the fourth quarter is unlikely to be a good one for Largan, in light of the company's lower than expected sales growth.

The European securities house also lowered its forecast for Largan's EPS, by 4 percent for 2017, 10.6 percent for 2018, and 9.5 percent for 2019, to NT$193, NT$273 and NT$334, respectively.

CNA cannot identify the brokerages because media outlets in Taiwan are not allowed to report the names of foreign brokerages when they give price forecasts for specific stocks and fluctuations in the index.

(By Jeffrey Wu and Frances Huang)