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Largan shares plunge on lingering growth concerns

Largan shares plunge on lingering growth concerns

Shares of Largan Precision Co., a smartphone camera lens supplier to Apple Inc., took a beating Tuesday morning amid lingering concerns over slowing global demand for smartphones, dealers said.

Such worries have been raised by a move by foreign institutional investors to cut the target price on Largan shares, the most expensive stock in the local market, prompting investors to dump the stock soon after the local main board opened, and selling soon escalated, they said.

As of 11:50 a.m., shares of Largan had fallen 6.63 percent to NT$2,535.00 (US$77.76) with 1.39 million shares changing hands. The weighted index on the Taiwan Stock Exchange lost 0.53 percent at 8,440.38 points.

"Largan's sales for October have showed signs of slowing growth momentum in the global smartphone market," Hua Nan Securities analyst Kevin Su said. "At a time when investors here shifted their attention to biotech stocks, they tended to cut their holdings in electronics heavyweights, like Largan, to move funds to the biotech sector."

Among the rising biotech stocks, which have played catch-up with the electronics sector, SCI Pharmtech Inc. had risen 10 percent, the maximum daily increase, to NT$101.50 after the company reported NT$312 million in net profit for the first nine months of this year, up 43.8 percent from a year earlier.

In October, Largan posted 5.77 billion in consolidated sales, up 6 percent from a year earlier, and the year-on-year growth significantly slowed compared with the previous nine months of the year ranging between 19 percent and 67 percent. In the first 10 months, Largan's consolidated sales rose 34 percent from a year earlier to about NT$46.20 billion.

"More and more investors fear that smartphone sales growth will be disappointing. They prefer to cut their holdings in smartphone-related stocks, including Largan, for the moment, even ahead of the upcoming Christmas shopping season to avoid further losses," Su said.

Su said that market sentiment toward Largan shares was also dampened by a downgrade by foreign institutional investors in the stock's target price. A U.S.-based brokerage has sharply cut its target price on Largan shares from NT$3,600 to NT$2,100, which is lower than the stock's current price.

According to the U.S. brokerage, since Largan declined a request by Apple to cut product prices, the U.S. consumer electronics giant has shifted part of its orders from Largan to Kantatsu, a Japanese supplier.

"But, I have reservations about the brokerage's note. Largan has taken the lead over its rivals in smartphone camera lens production and I do not think that it is easy for Apple to find another supplier to rival Largan for the moment," Su said.

Su said that while the brokerage has cut the target price on Largan shares to NT$2,100, the stock could find some technical support at around NT$2,370 in the short term.

"After the recent sell-off, Largan shares have become relatively cheap. So, it is likely that some bargain hunters will jump into the market to pick up the stock," Su said.

Updated : 2021-09-23 07:30 GMT+08:00