Shares of Largan Precision Co., a supplier of smartphone camera lenses to Apple Inc., moved sharply higher Tuesday after foreign and local brokerages raised their target prices for the stock amid optimism toward its business outlook.
Largan shares jumped 6.17 percent to close at NT$2,410.00 (US$86.69) on the Taiwan Stock Exchange (TWSE), while the Taiex, the weighted index, ended up 120.16 points or 0.68 percent at 17,789.27.
Soon after the local equity market opened, Largan shares attracted strong buying to rise by 10 percent, the maximum daily increase, at one point as investors took cues from the positive sentiments of institutional investors to purchase the stock, dealers said.
Although the stock came down from this high by the end of the session, it was still able to serve as one of the drivers for the upturn on the main board throughout the session, market analysts said.
In a research note released over the weekend, a U.S.-based brokerage raised a target price on Largan shares to NT$2,600 from NT$2,300 and upgraded a recommendation on the stock to "overweight" from "neutral" as the securities house turned upbeat about the global smartphone market with international brands expected to adopt more high-end camera lenses in which Largan specializes.
The American brokerage said Largan shares had lost about 36 percent in recent sessions, lagging the broader market, due to negative leads about the company such as a fall in revenue and a drop in gross margin.
Now that Largan's fundamentals have showed signs of recovering, the U.S. brokerage said, it was time for investors to hunt for bargains, adding that with more international smartphone brands adopting high-end smartphone lenses, the Taiwanese supplier is expected to see its gross margin stabilizing.
In the third quarter of this year, Largan's gross margin -- the difference between revenue and the cost of goods sold -- fell to 59.3 percent from 60.33 percent in the second quarter in the wake of a weaker product mix.
Kuo Ming-chi (???), an analyst with China-based TF International Securities, said the Taiwanese supplier, which owns a comprehensive smartphone lens patent portfolio, had signed a long-term agreement with a top Chinese smartphone brand so shipments to the Chinese client are expected to rise by 20 percent annually instead of a 15-20 percent drop previously forecast by Kuo.
Kuo is known for analyzing Apple and stocks in the U.S. consumer electronics giant's supply chain, such as Largan and iPhone assembler Hon Hai Precision Industry Co.
Largan declined to comment on the long-term agreement with a Chinese buyer.
Kuo said Apple's upcoming iPhones are expected to continue to upgrade camera lenses, which is expected to be in favor of Largan, adding that over the next two years, the adoption of advanced camera lenses by the iPhones is expected to help Largan gain a larger market share.
A large local brokerage also had an upbeat attitude toward Largan, and issued a target price on its shares to NT$3,000.
In the first 11 months of this year, Largan's consolidated sales fell 16.79 percent from a year earlier to NT$42.46 billion.
Source: Focus Taiwan News Channel