BofA Upgrades Himax To Buy, Sees Benefit From Mobile/TV Recovery

In a report published Wednesday, BofA Merrill Lynch analyst Daniel Heyler upgraded the rating on Himax Technologies, Inc. (ADR) HIMX from Underperform to Buy, while raising the price target to $8.50.

Analyst Daniel Heyler said that the expectations of a rebound in 2H and 2016 were "starting to play out."

In the report BofA Merrill Lynch noted, "We detect continued improvement in the China smartphone and 4KTV markets and think DDI (display driven IC) momentum will accelerate, driven by: (1) improving demand, (2) inventory restocking and (3) better ASP/mix."

Heyler expects the company to generate 0-3 percent sequential sales growth in 2Q15, reaching about $220mn in 3Q and $277mn in 4Q.

The report said that the recent market survey suggested:

• A broadbased mobile unit/mix improvement in China
• More popular models from Huawei, Lenovo, Coolpad and ZTE that should more than offset weak sales to Samsung

Heyler believes that sales of display IC, which accounts for 70 percent of sales, will rebound, while growing non-driver products, which represent 22 percent of sales, would "align with our bull-case for 2016."

The EPS estimate for 2015 has been raised from $0.16 to $0.17, which is now 23 percent higher than the consensus expectations, while the EPS estimate for 2016, albeit unchanged, is 47 percent ahead.