Asia brokerage raises target price on MediaTek shares to NT$500

11/30/2019 02:41 PM

Taipei, Nov. 30 (CNA) An Asian brokerage has raised the target price on shares of Taiwan-based integrated circuit designer MediaTek Inc. to NT$500 (US$16.39), amid optimism toward the company's efforts in developing 5G chips.

In a research note, the Asian securities house said with the company unveiling the Dimensity 1000 chip, the first 5G system-on-chip (SoC) in its Dimensity mobile SoC family in Taipei and Shenzhen Tuesday, MediaTek is expected to see strong sales growth momentum in 2020.

As a result, the Asian brokerage said it has hiked a target price on MediaTek shares from NT$482 to NT$500, while leaving a "buy" recommendation on the stock.

On Friday, MediaTek shares shed 2.32 percent to close at NT$421.50 in line with the Taiwan Stock Exchange, where the benchmark weighted stock ended down 1.10 percent at 11,489.57 points due to rising concerns over trade frictions between the United States and China after U.S. President Donald Trump signed a bipartisan bill to support Hong Kong despite a warning from Beijing.

Even with the plunge on Friday, MediaTek's share price has soared more than 34 percent since the beginning of the third quarter amid high hopes for its 5G chip shipments. That has allowed its shares to outperform the broader market, which gained about 7 percent during this period.

According to MediaTek, international smartphone brands are scheduled to introduce new gadgets powered by the Dimensity 1000 chip, which used the advanced 7 nanometer process of Taiwan Semiconductor Manufacturing Co. (TSMC), in the first quarter of next year.

The Asian brokerage said TSMC's 7nm technology, which has taken the lead over peers in the global market, is expected to help MediaTek's 5G chips secure more orders, in particular from Chinese brands.

Market analysts said a move to introduce the Dimensity 1000 chip in Shenzhen showed MediaTek's ambitions to have a higher share in China. They said MediaTek's Chinese customers include Xiaomi and OPPO.

The securities house said the specifications of MediaTek's new 5G SoC make the chip suitable to China's network sharing strategies, which is expected to boost its sales in the huge Chinese market.

The Asian brokerage has forecast that shipments of the Dimensity 1000 chip will reach 55 million units in 2020 from an earlier estimate of 38 million, and that MediaTek's earnings per share for 2020 and 2021 are expected to hit NT$21.75 and NT$25.84, respectively.

Three U.S. brokerages were also upbeat about MediaTek due to the presence of the new chip, and they gave the stock a target price of NT$470, NT$480 and NT$490, respectively.

One of the three optimistic U.S. securities houses said the average selling price of the Dimensity 1000 chip is expected to be US$37, targeting flagship smartphone models priced at around 3,500 Chinese yuan (US$500).

The American securities house, which gave a NT$470 target price on the stock, said the new 5G chip is expected to account for 22 percent of MediaTek's total sales in 2020, with shipments of 60 million units.

Another U.S. brokerage, which issued a NT$490 target price for MediaTek shares, said the company has boasted the Dimensity 1000 chip is more powerful than Qualcomm Inc.'s Snapdragon 855 so the technology strength is expected to help the Taiwanese firm secure more orders from Chinese brands. The brokerage has maintained an "overweight" rating on the stock.

In addition to its ambitions to penetrate the global 5G smartphone chip market, MediaTek announced earlier this month that it will team up with American semiconductor giant Intel Corp. to develop 5G chips for use in notebook computers.

The third U.S. brokerage said it gave a thumbs-up to MediaTek's partnership with Intel, adding such cooperation will give the IC designer alternative sales sources. It has urged investors to raise their holdings in MediaTek shares.

A European brokerage meanwhile said the Dimensity 1000 chip is likely to trigger waves of replacements in the smartphone market, forecasting MediaTek will launch the mid-range 5G SoC in the second quarter of next year and solutions in the second half of the year to attract more clients.

(By Jiang Ming-yan and Frances Huang)


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