Taipei-Shares of Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., soared more than 4 percent Friday after the company reported a day earlier a new high in net profit for 2019, dealers said.
Following the 2019 results, a Japanese brokerage issued a target price of NT$6,000.00 (US$200) for Largan shares, saying that the Taiwanese manufacturer will continue to benefit from an upgrade in hardware specifications by international smartphone brands.
Largan shares rose 4.11 percent to close at NT$5,065.00, with 1.08 million shares changing hands on the Taiwan Stock Exchange Friday, when the benchmark weighted index ended up 0.45 percent at 12,024.65 points.
The stock opened up 2.26 percent in the wake of a strong earnings report for 2019, and buying accelerated amid rising optimism toward Largan's bottom line, which vaulted the share price past NT$5,000.00. The strength continued into the end of the session, the dealers said.
"The 2019 results simply served as a catalyst to Largan's gains soon after the local stock market opened today," equity market analyst Andy Hsu said. "The increasing buying showed that investors have faith in the company's earnings outlook."
In an investor conference held Thursday, Largan announced that it posted NT$28.26 billion in net profit in 2019, up 16 percent from a year earlier, with earnings per share (EPS) at NT$210.69, compared with NT$181.67 in 2018.
Both net profit and EPS for 2019 hit record highs for the company. Its EPS was the highest-ever level among all the companies listed on the local equity market. Largan was the first listed company to register an EPS of more than NT$200 in Taiwan.
Its gross margin -- the difference between revenue and cost of goods sold -- for 2019 rose 0.27 percentage points to 69.05 percent, indicating an improved product mix during the year. It was the fourth consecutive year in which Largan posted a gross margin at around 67 percent.
In 2019, 20 mega-pixel lenses and higher, which command a higher profit margin, accounted for 20 percent-30 percent of Largan's total sales value at NT$60.75 billion, while 10-20 mega-pixel lenses made up 50 percent-60 percent, and 8 mega-pixel lenses represented 10 percent-20 percent, the company said.
In the fourth quarter of last year, Largan posted NT$8.09 billion in net profit, down 5.5 percent, with EPS at NT$60.32. The decline in net profit for the October to December period came after Largan booked a foreign exchange loss of NT$1.32 billion on the back of a stronger Taiwan dollar against the U.S. dollar.
In the quarter to December, Largan's gross margin stood at 71.13 percent, up 2.02 percentage points from a quarter earlier and also 1.71 percentage points from a year earlier.
"With more and more international smartphone brands keen to upgrade their camera lenses, Largan, which has taken the lead over its peers in production technology, remained the largest beneficiary of the trend," Hsu said.
In a research note, a securities company from Japan said it has raised its target price to NT$6,000.00 from NT$5,520.00 and left a "buy" rating on the stock, saying that continued improvement in product mix will continue to boost its profitability in the future.
The Japanese brokerage has also raised its forecasts for Largan's EPS for 2020 and 2021 by 2.6 percent and 2.3 percent, respectively, to NT$270.1 and NT$314.9.
A U.S. brokerage said Largan's gross margin for the fourth quarter was better than expected, and its gross margin is expected to continue to grow by 1.3 percentage points from a year earlier to 70.8 percent in 2020 on an improvement in product portfolio.
The American securities house said it has forecast Largan's EPS for 2020 and 2021 at NT$279.96 and NT$343.25, respectively, adding that it has maintained a target price on Largan shares at NT$5,550.00 and left a "buy" recommendation unchanged.
Source: Focus Taiwan News Channel