Himax Technologies Inc (HIMX)

[ScovilleUnits]

Himax: Loses Large Customer, Northland Capital Lowers TP

http://blogs.barrons.com/emergingmarketsdaily/2014/04/15/himax-loses-large-customer-northland-capital-lowers-tp/?mod=google_news_blog

April 15, 2014, 9:02 A.M. ET
By Shuli Ren

The one-day sale of Google Glass (GOOG) does not seem to help Taiwan-based display manufacturer Himax Technologies (HIMX), whose shares fell 14% to close at $9 yesterday.

Today, only a month after raising his target price for Himax Technologies (March 10), Northland Capital Markets analyst Tom Sepenzis changed his mind and lowered his price target from $20 to $15, “as a large South Korean customer has pulled display driver orders for the remainder of the year.”

The impact on Himax’s full-year revenue seems substantial. Here is Sepenzis:
The rest of the business continues to track slightly ahead of expectations, but the growth rate for the total small/medium display driver business will likely drop from 30% to 15% for the year.

The impact to the top line from the shortfall in orders from the South Korean customer will likely be in the range of $50-$60 million for CY14, and this will most likely continue into CY15. The reason for the reduced orders is unclear at this time, but this will have an impact in every quarter beyond Q114.

The change in expectations is primarily driven by the order change at its customer, but is also seeing increased pricing pressure, especially at the low end of the handset and tablet range. This could have a negative impact on margins in addition to the revenue hit.

We are reducing our CY14 estimates from $971.1 million and $0.68 to $920.9 million and $0.61 and our FY15 ESP estimate from $1.2 billion and $0.91 to $1.14 billion and $0.83.

But Northland Capital Markets maintains a Buy rating, saying:
HIMX is currently trading at $9.00, which reflects a P/E of 14.8X our adjusted EPS of $0.61 for the current year and 10.8X CY15. This is well below the group average of 21.1X CY14 earnings.

The major catalysts for this company are still firmly intact with new interest in array lenses taking shape and an increased push by Google to get Glass out into the world. The virtual reality space is heating up, and we expect multiple product introduction this year which could help LCOS compensate for the current shortfall in the display driver business, especially as we enter 2015.

So Google, be a good savior, and push the Glass out!