Apple’s (NASDAQ: AAPL) adoption of 3D image scanning on the iPhone X may explain why Himax Technologies (NASDAQ: HIMX) is up this year. Even the lofty forward P/E of ~ 40 times is not scaring value investors away. Shareholders have good reason to look forward to Himax’s growth in 2018.
Himax reported that large panel driver ICs accounted for ~ 28% of total revenues in its third quarter but anticipated deferred shipments to Q4.
The company saw the IC business improve in the first half of the year, thanks to strong sales in the TV market. Chinese customers deferred some of its shipments to its current Q4. The market is re-valuing the share price to reflect this incoming revenue.
Costs, through CapEx, grew sharply, from $1.9 million last year to $10.2 million. Himax is expanding its WLO production line aggressively. It also booked its new building construction costs. These investments will allow for Himax to house further WLO capacity, align its equipment with LCOS production, and allow for the hiring of more staff.
Recall that Himax is working with Qualcomm (NASDAQ: QCOM) for 3D sensing development. The sensing solution needs high precision equipment. Not only will Himax improve its quality output but this investment will build a bigger moat against entrants looking to enter this market.
Takeaway
Expect Himax stock valuations to stay at elevated levels. 2018 will be a good year for the company.
