Largan shares plunge after gross margin falls significantly in Q3

Taipei, Oct. 13 (CNA) Shares of Largan Precision Co. tumbled more than 6 percent Monday, the first day of trading since the smartphone camera lens supplier reported a significant drop in its third-quarter gross margin.

On their return from the Oct. 10-12 National Day long weekend, investors took cues from a plunge on the U.S. markets at the end of last week, triggered by renewed U.S.-China tensions, with selling spreading across the broader market.

Largan shares slid 6.07 percent to close at NT$2,320.00 (US$75.57) but came off a low of NT$2,260.00 on the main board, where the Taiex, the weighted index on the Taiwan Stock Exchange, shed 1.39 percent to end at 26,923.42.

Soon after the local main board opened, Largan, which posted the third quarter results just before the break, came under heavy pressure.

At the investor conference on Thursday, Largan said its gross margin -- the difference between revenue and cost of goods sold -- fell to an eight-quarter low of 47.2 percent in the third quarter, down 6.4 percentage points from the second quarter and down 3 percentage points from a year earlier due to foreign exchange changes and an increase in outsourcing components.

However, the Apple Inc. supplier's third-quarter net profit rose, reaching NT$7.08 billion.

This marked a 586 percent quarter-over-quarter increase, and a 6.8 percent rise compared with the same time last year, with earnings per share at NT$53.05.

Meanwhile, its third-quarter consolidated sales stood at NT$17.68 billion, a quarterly rise of 51 percent but down 7 percent from a year earlier.

In the third quarter, lenses with resolutions of 20 megapixels or higher, which carry higher profit margins, accounted for 10-20 percent of Largan's total sales. Lenses in the 10-20 megapixel range made up 60-70 percent, 8-megapixel lenses represented less than 10 percent, and other products comprised 20-30 percent.

In the first nine months of this year, Largan posted NT$14.56 billion in net profit, down 16 percent from a year earlier due to a decline in income generated from its noncore businesses. The nine-month EPS stood at NT$109.06.

During the investors conference, Largan Chairman Adam Lin (林恩平) said foreign exchange rates are expected to heavily influence any changes in its gross margin in the fourth quarter.

Lin said sales in October could be little changed from September, while revenue in November is likely to fall from October.

He said Largan's fourth factory will expand its production capacity in 2026, while some clients have negotiated with his company to roll out products overseas to allow more flexibility in production and improve operational resilience.