Largan Proves To Be Resilient Amid Smartphone Demand Rout; FVE Maintained at TWD 2,600

We maintain our fair value estimate for narrow-moat Largan Precision at TWD 2,600 following solid June quarter results. While we think the sparse upgrades in smartphone lenses would cause the incumbent technological leader, Largan, to lose its share of the lower-end smartphone market, we expect that the negative impact is smaller than its peers, and the shortfall would mostly be offset by a stronger USD against TWD. We view Largan’s shares as undervalued as the company is more resilient to the ongoing weak smartphone demand and upgrades as it has more exposure to Apple. It is an attractive defensive name with a limited downside, and we believe sentiment may improve once smartphone demand rebounds when China’s economic stimuli take effect as the region accounts for one quarter of worldwide smartphone sales.