Largan Earnings: Solving Periscope Yield Led to Impressive Profitability; Valuation Up 20%

Based on the better-than-expected December quarter results, we raise our fair value estimate for narrow-moat Largan Precision to TWD 3,000 from TWD 2,500. We were concerned that competitors would catch up while Largan struggled to improve its periscope lens production yield, but with solid revenue growth and impressive margin expansion from the previous quarter, we now have more confidence that Largan can stay well ahead of the competition and maintain its market share.