Fingerprint Cards

Research note


Fingerprint Q3 – GM not as strong as we expected, FY guidance disappoints market

FPC’s Q3 report came in slightly above our estimate in terms of revenues but GM did not meet our high expectations. The revised guidance where FPC now expects revenues of SEK 7.2-7.5 billion weighs on the share today as it declines a bit over two percent. It seems like the market has had some time to digest the report, initially the share traded as low as SEK 80, almost ten percent down. On the positive side, FPC revised its guidance for the EBIT margin for the full year from above 37 percent to above 40 percent.

The conference call will start any moment, and we believe some more light will be shed on what the competitive situation looks like in FPC's most important segment - fingerprint sensors for mobile devices.

Following the report we will likely be a bit more conservative when it comes to when the smart card segment contributes significant volumes. That said, our long term view stays intact and we believe the market is underestimating FPC’s future prospects. We see an upside of 140 percent to our base case of SEK 209 and a 25 percent downside to our bear case of SEK 65. In our bull case we have a fair value of SEK 330 per share.

We argue that:

FPC is positioned to maintain its leading position in the mobile device segment

Given the upcoming (probable) announcement of a touch sensor in the new Mac, we believe fingerprint sensor penetration in laptops will increase rapidly, FPC stands well positioned with several leading OEMs as customers

If anything, we believe the penetration in the mid-range and low-end segment has taken off faster than FPC initially thought and FPC is in need of a cheaper solution to address the low-end segment – we believe FPC has lost some ground but we also believe FPC stands well positioned to take a leading position with the introduction of the FPC1028. Nokia is relaunching soon and still has a strong position within feature phones in many emerging markets – as a shift to smartphones is planned we believe FPC stands well positioned to gain significant volumes.

More to come … conference call right now …

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