Novatek Microelectronics Corp (聯詠) expects revenue and earnings to continue to increase this quarter on the back of a better product mix, the company said on Thursday after posting better-than-expected financial results for last quarter.

Novatek designs chips used in flat-panel displays and multimedia applications.

The Hsinchu-based company told an investors’ conference that its revenue in the July-to-September quarter is likely to rise to between NT$37.8 billion and NT$38.8 billion (US$1.36 billion and US$1.40 billion) from NT$34.11 billion three months earlier.

Novatek expects gross margin to expand to 48 to 51 percent and operating margin increase to 33 to 36 percent this quarter, on the back of continued product mix adjustments and product price hikes.

The company has been improving its product mix of large display driver ICs (DDI), system-on-chip solutions for TV controllers and OLED DDIs.

It reported gross margin of 50.33 percent and operating margin of 35.16 percent in the April-to-June quarter, both exceeding guidance and increasing significantly from the prior quarter and the previous year.

Net profit was NT$9.79 billion in the second quarter, up 66.57 percent quarter-on-quarter and 282.76 percent year-on-year, the company said. Earnings per share (EPS) were NT$16.08, compared with NT$9.66 the previous quarter and NT$4.20 a year earlier, it said.

In a note to its clients on Friday, Cathay Futures Consultant Co (國泰證期顧問) retained its “buy” rating on Novatek and set its 12-month target price on the stock to NT$774.

Cathay revised upward its EPS forecast for the company to NT$60.08 for this year, up 8.49 percent from its previous estimate, and adjusted its next-year EPS target to NT$64.49, also up 6.21 percent from its estimate before.

“Work from home and learn from home have evolved into a long-term trend, and it will still take 2 to 2.5 years for semiconductor companies to have extra production capacity. Basically, there is no immediate solution to the capacity constraint in the overall supply chain,” Cathay said in its note on Friday.

“As far as IC designers are concerned, how to obtain production capacity has become the biggest issue. Even if there are some doubts about the outlook for [the] flat panel sector, the tight capacity will still keep DDI average selling prices at high levels,” it said.

Novatek shares closed 1.75 percent lower at NT$560 on Friday in Taipei trading. They have advanced 51.76 percent so far this year.

Cathay’s target price for Novatek compares with Taishin Securities Investment Advisory Co’s (台新投顧) NT$660, Capital Investment Management Corp’s (群益投顧) NT$619 and Yuanta Securities Investment Consulting Co’s (元大投顧) NT$870.

Several foreign brokerages last week also raised their target prices for Novatek, after the company’s gross margin last quarter exceeded 50 percent and its optimistic outlook for this quarter eased market concerns about the near-term outlook for its shipments, which have been capped by a tight supply of components since last year, especially wafers.

Among the foreign brokerages were Goldman Sachs Group Inc, which set a stock price of NT$1,049, JPMorgan Securities Ltd with NT$700, Nomura Holdings Inc with NT$720 and Morgan Stanley with NT$414.

With improved prospects for Novatek’s profit margins, Goldman Sachs raised the company’s EPS forecast to NT$56 this year and NT$55 next year, while JPMorgan adjusted upward its forecast to NT$61 for this year and NT$64 next year.


●Origin：TAIPEI TIMES
●Link：https://www.taipeitimes.com/News/biz/archives/2021/08/09/2003762260