Foreign brokerage raises target price on Largan to NT$5,100

A U.S.-based brokerage has raised its target price on shares of Largan Precision Co. (???), a smartphone camera lens supplier to Apple Inc., to NT$5,100.00 (US$161), the highest level among the foreign securities firms tracking the stock.

In a research note, the brokerage said that Largan is expected to benefit from the rising adoption of dual lenses in the global smartphone industry. Since Largan has taken the lead over its peers in production technology, the company could take a larger share in the dual lens adoption trend.

Vivo of China, one of Largan's major clients, is using dual lenses in its new smartphone models, which has strengthened its devices' 3D and selfie functions, and the new devices are scheduled to be unveiled in the fourth quarter of this year.

The brokerage said that it has sharply raised a target price on Largan shares to NT$5,100 from NT$4,000 amid optimism toward the manufacturer's fundamentals. The brokerage added that Largan is expected to soon return to a level of NT$3,775.00 seen Aug. 17 before the stock went ex-dividend by doling out NT$63.50 in cash dividends per share.

On Friday, Largan shares fell 1.89 percent to close at NT$3,635.00 on the Taiwan Stock Exchange, but remained the most expensive stock in Taiwan.

Under Taiwanese regulations, the names of foreign brokerages cannot be reported when they give price forecasts for specific stocks.

Vivo's adoption of dual lenses is expected to encourage its Chinese rivals to follow, and Largan will be among the suppliers that will see their shipments increase under such positive circumstances, the U.S. brokerage said. China has become one of the major smartphone markets for the global smartphone industry.

The brokerage said that dual lenses are expected to account for 2 percent of the total smartphone camera lenses used by smartphone brands, excluding Apple and Samsung Electronics Co., in 2016, and the ratio is expected to rise to 7 percent in 2017 and 14 percent in 2018.

On the back of its advanced production technology, Largan's earnings per share is expected to grow 41 percent in 2017 and to rise 36 percent in 2018, while its return on equity is expected to grow 38 percent in 2017 and rise 39 percent in 2018.

In the first seven months of this year, Largan's consolidated sales totaled NT$22.91 billion, down 23 percent from a year earlier, but in July alone, its sales grew 28 percent from a month earlier to NT$4.59 billion, the highest level so far this year.

Market analysts said that Largan's sales momentum will continue to grow in the third quarter, a traditional peak season for the global high-tech industry, on expectations that Apple will unveil its next- generation iPhones later in September.

Source: Focus Taiwan News Channel