Largan shares dive on sales; target prices cut by foreign brokerages

Taipei-Shares of Largan Precision Co., a smartphone camera lens supplier to Apple Inc., took a beating Monday after the company reported a more-than 10 percent month-on-month decline in sales for December, which raised concerns over shipments of the premium iPhone X, dealers said.

The selling also came after several foreign brokerages cut their target prices on Largan shares after a poor sales report for December, with the target price reduced to as low as NT$3,600 (US$122), the dealers said.

Shares of Largan, the most expensive stock in the local market, fell 4.15 percent to close at NT$3,930, with 1.18 million shares changing hands on the Taiwan Stock Exchange, underperforming the broader market, where the weighted index ended up 0.33 percent at 10,915.75 points.

The stock came under heavy pressure soon after the local equity market opened in the wake of a December sales report released Friday, and selling continued into the end of the session as concerns over the iPhone X sales kept weighing upon investor sentiment, the dealers said.

In December, Largan posted NT$4.88 billion in consolidated sales, down 13 percent from a month earlier and also down 10 percent from a year earlier. Largan, which generates about 40 percent of its sales from Apple, said its sales for January are expected to fall further due to slow-season effects.

In the fourth quarter of last year, Largan's consolidated sales totaled NT$16.09 billion, up 8 percent from a quarter earlier and up 2 percent from a year earlier. In 2017, the smartphone camera lens maker posted NT$53.13 billion in consolidated sales, up 10 percent.

"The latest sales data implies that the iPhone X has not been received well in the global market," Ta Ching Securities analyst Andy Hsu said. "Moreover, Largan's Chinese customers have slowed their pace of placing orders at a time of a slowing smartphone market in China," he said.

Largan has scheduled an investor conference for Thursday to disclose the results for the fourth quarter and give sales guidance for the first quarter of this year.

Largan shares hit an intraday high of NT$5,995 Nov. 3, but soon countered selling to send its price lower in reflection of worse-than-expected November sales, although the iPhone X went on sale in early November.

The December sales report sparked additional selling on the stock Monday, the dealers said.

In the wake of the December sales drop, several foreign brokerages cut their target prices on Largan shares, which added pressure on the stock, the dealers said.

A U.S.-based brokerage has cut its target price on Largan shares to NT$3,600 from NT$4,100, while leaving a "neutral" rating on the stock unchanged. The U.S. securities house said that in addition to worries over the iPhone X, Largan is faced with escalating pressure from its rivals in high-end lenses.

Another U.S. brokerage said that due to a move for Largan's customers to adjust their inventories in the fourth quarter of last year, it could report a gross margin of 69 percent in the quarter, down from 71 percent seen in the third quarter.

The brokerage has cut its target price on Largan shares to NT$4,250 from NT$5,500 and reiterated a "neutral" recommendation on the stock.

CNA cannot identify the brokerages because media outlets in Taiwan are not allowed to report the names of foreign brokerages when they give price forecasts for specific stocks and fluctuations in the index.

Source: Focus Taiwan News Channel