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Macquarie cautious over MediaTek's slow margin improvement

Macquarie cautious over MediaTek's slow margin improvement

Taipei, Oct. 30 (CNA) Taiwanese chip designer MediaTek Inc. posted a lower-than-expected quarterly gross margin in the third quarter and is likely to face more competition next year, Australia's Macquarie Securities said Tuesday. MediaTek's gross margin for the July-September quarter rose to 41.2 percent from 40.8 percent in the second quarter, hitting the low end of its guidance of 41 to 43 percent but falling short of the 42 to 43.5 percent estimated by the market, the brokerage said. Though predicting that its smartphone chip shipments will grow further in the fourth quarter, MediaTek forecast its gross margin at 41 to 43 percent, the same level it expected in the third quarter. "We think Wall Street will have to lower overly bullish margin forecasts and likely try to focus on unit upside, but strong volume growth is already known by the market," said Jerry Su, an analyst at Macquarie Capital Securities Ltd.'s Taiwan Branch. "We worry that if margins do not see strong uplift in the second half of 2012, then the Street's hope for margin uplift throughout 2013 will be even more challenging to materialize, given rising competition in the first half of 2013," he wrote in a report. Macquarie maintained an "underperform" rating on MediaTek shares and a target price of NT$245 (US$8.38). British bank Barclays Plc maintained an "overweight" rating and a target price of NT$395 for MediaTek, saying it was optimistic about the company's market-share gains and a likely increase in shipments of quad-core chips starting in the first quarter of 2013. The bank said, however, that it was disappointed by MediaTek's conservative margin outlook, which was affected by competition and the rising costs of chip upgrades. UBS Securities kept a "buy" rating for MediaTek, expecting the company to get a boost in the future from increased production of quad-core chips, but it did cut its target price for the stock to NT$360 from NT$370. "Even though we still hold a positive view on MediaTek's fourth-quarter and long-term outlook, we think the share price momentum might be weaker in the near term given the share price has soared about 35 percent from the bottom in July," said Jonah Cheng, a Taipei-based analyst with UBS. CLSA Asia-Pacific Markets held its "sell" rating and its NT$285 target price for MediaTek, based on a decline in average selling prices of smartphone chips and increasing competition from China's state-backed Spreadtrum Communications Inc. The Hong Kong-based brokerage forecast MediaTek's shipments at 114 million units in 2012 and 275 million units in 2013, and it expected the company's gross margin to hit 41.6 percent for the whole of this year and 42.9 percent next year. MediaTek shares closed down 1.37 percent at NT$325.00 in Taipei trading Tuesday. (By Jeffrey Wu)


Updated : 2020-12-04 14:07 GMT+08:00