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May 26, 2017

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Deutsche Bank raises Largan price target

TAIPEI -- Germany's Deutsche Bank AG has raised its price target and earnings estimates for Taiwanese smartphone camera lens maker Largan Precision Co. because of the company's strong growth prospects from both high-end and mainstream markets.

Deutsche Bank lifted the stock's price target by 28 percent to NT$2,750 (US$92.13) — the second highest among all foreign brokerage firms tracking Largan, behind BNP Paribas' NT$2,800 — and gave it a "buy" rating.

It also raised its projections for Largan's earnings per share in 2014 by 11.0 percent to NT$129.3, in 2015 by 11.1 percent to NT$169.8 and in 2016 by 10.6 percent to NT$200.7, on expectations of strong growth in average selling price (ASP) and sales volume in the coming years.

"Largan is one of the few supply chain companies able to enjoy ASP upside from premium smartphones and volume growth from mainstream products (via China exposure)," Birdy Lu, a research analyst at Deutsche Bank in Taipei, wrote in a report released on June 26.

Largan currently generates 45-50 percent of its sales from Apple, 8-12 percent from premium Android phone makers such as HTC Corp. and LG Electronics Inc., and 30-35 percent from Chinese clients like Xiaomi Corp. and Huawei Technologies Co., according to data compiled by Deutsche Bank.

In the high-end market, Deutsche Bank expects Largan's volume to grow 10 percent a year and its ASP to grow 15 percent a year over the next two years because of its higher penetration of "new" camera designs, such as dual cameras, multi-image cameras and optical zoom cameras.

In the mainstream market, the bank forecast Largan would see 20 percent year-on-year volume growth and 5-10 percent increases in ASP in 2015 and 2016, mainly because of pixel upgrade in both front and rear camera models, larger lens apertures, and slim form factor.

Shares in Largan rose 0.45 percent to close at NT$2,245 Friday in Taipei trading, outperforming the 0.15 percent dip in the broader market.

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