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Citigroup remains upbeat about Largan on long-term demand growth

Citigroup remains upbeat about Largan on long-term demand growth

Taipei, Oct. 7 (CNA) U.S. bank Citigroup Inc. has maintained its "buy" rating for Largan Precision Co., a Taiwan-based smartphone lens supplier to Apple Inc., after the company posted record-high revenue for the third quarter. Largan's revenue in the July-September quarter rose 21.3 percent from the previous quarter to NT$12.1 billion (US$398 million), beating Citigroup's forecast and market expectations. "We expect Largan to keep delivering strong revenue growth momentum as it benefits from Apple's iPhone 6 launch and (a product) mix shifting to (models with) higher average selling prices," Citigroup analyst Arthur Lai wrote in a note on Monday. The product with a higher average selling price cited by Lai is the lenses used in Apple's 5.5-inch iPhone 6 Plus smartphone, which is estimated to be 50 percent more expensive than the lens used in the 4.7-inch iPhone 6. He believed that the lens used in the iPhone 6 Plus also carries a 15 percent higher gross profit than the lens in the iPhone 6 even though Largan has to absorb the cost of the optical image stabilization (OIS) component used only in the 5.5-inch model rather than passing it on to Apple. The analyst was also upbeat over the potential long-term growth of Largan's earnings, saying that the lens market was moving toward an upgrading of specifications, such as OIS and optical zoom lenses, in which Largan as the leading player could "cherry-pick" orders. Moreover, Largan has a dominant position in China, the world's biggest smartphone market, because it can deliver products with high yield rates to Chinese customers and boost its profits, Lai added. Largan shares edged down 2.74 percent at NT$2,305.0 in Taipei Tuesday, lagging behind a 0.6 percent dip in the broader market. (By Jeffrey Wu)


Updated : 2021-05-06 13:02 GMT+08:00