Foreign brokerage raises target price on MediaTek


TAIPEI — Daiwa Securities raised its target price on Taiwan-based integrated circuit designer MediaTek Inc. on Wednesday, citing an upbeat outlook on the IC designer’s profit margin on the back of rising high-end chip shipments.

In a research note, Japan-based Daiwa Securities said MediaTek has been benefiting from shipments of quad-core smartphone chips and may report a gross margin of 44 percent for the third quarter, up 1 percentage point from the second quarter.

MediaTek is expected to report NT$6.18 in earnings per share for the July-September period, up about 24 percent from a quarter earlier, the brokerage said.

Daiwa Securities maintained its “buy” recommendation on MediaTek shares but raised its target price on the stock to NT$480 from NT$430.

MediaTek shares closed up 1.15 percent at NT$396.00 on the Taiwan Stock Exchange Wednesday, while the weighted index ended down 0.29 percent at 8,393.62 points.

Many investors in the local bourse have been keeping a close eye on MediaTek’s third quarter results, which are scheduled to be released Nov. 1.

The IC designer posted NT$39.01 billion in third-quarter consolidated sales, up 17.22 percent from the second quarter, beating its earlier estimate of between NT$34.9 billion and NT$37.6 billion.

Daiwa Securities said inventories of smartphone chips have been shrinking after heavy buying during China’s National Day holiday in the first week of October, therefore, MediaTek’s fourth-quarter consolidated sales for the fourth quarter may fall only 1-5 percent from the previous quarter.

The sales forecast was particularly significant as the fourth quarter is usually a slow season for the semiconductor industry.

With increasing shipments of high-end chips, MediaTek’s gross margin is likely to climb to 45.1 percent in the fourth quarter and its EPS for 2013 could reach NT$19.96, compared with NT$12.8 in 2012, Daiwa Securities said.

With MediaTek scheduled to start shipments of its more advanced eight-core smartphone chips in November, its gross margin is expected to grow accordingly, pushing up its EPS to NT$25.46 for 2014, the brokerage forecast.

Eight-core chips could account for 10 percent of MediaTek’s total sales in 2014, according to Daiwa Securities.