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Largan expected to face earnings headwinds in 2015: analyst

Largan expected to face earnings headwinds in 2015: analyst

Taipei, Feb. 8 (CNA) Taiwan's Largan Precision Co. (???), a major smartphone camera lens supplier to Apple Inc., may face limited earnings growth this year given the industry's slow transition to higher-resolution lenses, according to a local analyst. "With limited earnings upside and high market expectations, we continue to suggest investors take profit on the stock," Jeff Pu (???), a Taipei-based analyst at Yuanta Securities Investment Consulting Co. (????), wrote in a note to clients on Feb. 5. Largan reported January sales of NT$4 billion (US$126.4 million), up 66 percent year-on-year but down 30 percent from December, falling below market expectations of a 20 percent decline month-on-month. Pu said Largan's January sales came in below expectations because of lower demand for the iPhone, a smaller proportion of iPhone 6 Plus models in Largan's shipment mix and poor demand from Chinese handset brands. "February will be affected by fewer working days, and we don't expect much of a recovery in March owing to the fast-falling number of iPhone (shipments)," said Pu, who maintained his "downgrade" rating on Largan shares and his price target of NT$2,650 for the stock. The analyst believed that the camera specifications of the next-generation iPhone, dubbed iPhone 6S, will stay the same as the current iPhone 6 at 8-megapixels, limiting potential catalysts that could push Largan's stock price higher in the second half of 2015. Pu added that although the migration to 8-megapixel and 13-megapixel lenses will remain strong among Chinese vendors of mid-tier and low-end phones, upgrades to 16-megapixel and 20-megapixel lenses for flagship phones will be slow given the limited supply of CMOS sensors -- used to convert light into electrons. "On the other hand, we expect the specification migration in high-end models will be from new features such as optical image stabilization and fast autofocus, which benefit module makers more than lens makers, in our view," Pu said. Data from Japanese research firm Techno Systems Research showed that Japan-based Sony led the 2013 global CMOS image sensor market with a 33 percent share by sales value.
Sony, whose CMOS sensors are used in handsets made by Apple, Samsung and Huawei, announced on Feb. 2 that it plans to increase its production capacity for stacked CMOS image sensors from its current level of approximately 60,000 wafers per month to about 80,000 wafers per month by the end of June 2016.
Shares of Largan, the most expensive stock on Taiwan's stock exchange, closed flat at NT$2,605 in Taipei on Friday. (By Jeffrey Wu)


Updated : 2021-09-25 11:30 GMT+08:00