Largan Precision Earnings: Android Shipments Volume and Periscope Profitability Disappoints

We trimmed our fair value estimate for Largan Precision 3008 to TWD 2,500 from TWD 2,600 following its second-quarter earnings call due to the weaker-than-expected outlook in Android sales and profitability of periscope lenses for Apple. Largan alluded that shipments of its midend lenses would outperform its higher-end lenses in the second half, but we doubt if it is enough to compensate for the disappointing first-half revenue as the overall smartphone market outlook for 2023 has declined further. We view Largan’s shares as fairly valued as the upside from its periscope lenses, highly likely to be released in the iPhone 15 Pro Max telephoto camera, has already been fully priced in.

Largan’s revenue continued to decline, down by 15.3% year on year in the June quarter to TWD 8.2 billion as Android-related shipment volumes disappointed. However, gross margins held about flat quarter on quarter at 49.3% due to shipping more expensive lenses. Though decent June data of Android camera suppliers and Largan’s optimism on midend lenses suggest Android smartphone shipments are passed their worst, we think the recovery would be softer than previously anticipated. Hence, we trim our revenue forecast by 5% for 2023. We maintain our 2024 revenue forecast as we expect more robust upgrade demand for lenses in Android smartphones.