Foreign brokerages recommend buying Largan shares after August sales

09/07/2019 05:08 PM

Taipei, Sept. 7 (CNA) Two foreign brokerages urged investors to buy shares in Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., after the company reported record high monthly sales in August.

In a research note, a U.S.-based securities house said Largan's sales growth momentum will continue, with the next generation iPhones scheduled to debut later in September, and the manufacturer's sales for September expected to beat those in August.

The brokerage said it has left an "overweight" recommendation on Largan shares unchanged and maintained a target price of NT$5,200.00 (US$166).

On Friday, shares in Largan, the most expensive stock on the local market, fell 1.24 percent to close at NT$3,980.00 with 1.50 million shares changing hands on the Taiwan Stock Exchange, where the benchmark weighted index ended up 0.22 percent at 10,780.64 points.

The stock opened higher Friday to breach the NT$4,000-mark and hit NT$4,110.00 as investors took their cue from the manufacturer's reported record-high sales in August, released Thursday, to pick its shares, the dealers said.

Buying continued to push up the stock to the day's high of NT$4,135.00 in the early morning session before some investors pocketed their earlier gains to send the stock below the NT$4,000 level as well as the previous day's closing level at the end of the Friday session.

In a statement, Largan said it posted NT$6.48 billion in consolidated sales for August, a record monthly high, up 18.33 percent from a month earlier and also up 17.67 percent from a year earlier. It was the first time Largan has recorded monthly revenue of more than NT$6 billion.

In the first eight months of this year, Largan's consolidated sales totaled NT$35.84 billion, up 12.03 percent from a year earlier.

The brokerage said Largan has been taking advantage of its improving product mix, where sophisticated lenses weigh more, to boost its competitive edge against rivals.

Another securities house from the U.S. also expressed optimism over Largan's fundamentals, saying the Apple supplier's sales for July-August hit NT$11.9 billion, which accounted for about 68 percent of the brokerage's estimate for the entire third quarter, adding with sales likely to continue to grow the manufacturer is expected to have a good third quarter with the arrival of new iPhones.

Last week, Apple issued an invitation to the press, saying it will hold a "special event" on Sept. 10. The market widely anticipates the consumer electronics giant to unveil three new iPhones with an upgrade in specifications.

Looking ahead, the American brokerage said, Largan is expected to benefit from waves of smartphone replacements in 2020, seeing its shipments and the average selling prices growing on the back of progress in 5G technology development.

In addition to Apple, the U.S. securities house said Largan is expected to receive an increase in orders from South Korea's Samsung Electronics Co. to serve as a long term supplier of high-end smartphones, which will further improve its bottom line.

As a result, the brokerage has maintained its target price of NT$5,400.00 on Largan shares and left a "buy" rating on the stock unchanged.

However, other market analysts said they prefer to remain vigilant as it is unclear how well the new iPhones will be received.

(By Jeffrey Wu and Frances Huang)


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