Oppenheimer affirms Himax (Nasdaq: HIMX) with a Perform rating following Q3 results and outlook issued Thursday.

Analyst Andrew Uerkwitz commented, Although top-line performance was stronger than expected, margin took a hit due to panel pricing pressure. This higher revenue/margin pressure trend is likely to continue as mgmt stressed its commitment to sacrificing GM to secure a LT leading position within the capacity expansion currently underway in China. With non-traditional growth initiative revenues (TDDI, AMOLED, WLO, LCOS) likely not a contributing factor until 2H16 or beyond, and weak near-term macro conditions and guidance, we remain sidelined.

On margins, Uerkwitz said: Gross margin down 200bps sequentially and 270bps Y/Y due primarily to DDIC pricing pressure (amplified by large-panel drivers gaining mix share) and lower NRE income in the Q. In the near-term, additional NRE income from LCOS and WLO should help offset some pricing pressure.

Estimats changes: FY15E/FY16E rev./non-GAAP EPS from $650 million/$0.13 and $582 million/$0.05 to $682 million/$0.15 and $650 million/$0.07.

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