UBS Investment Research analysts Stephen Chin, Mahavir Sanghavi and Steven Chin maintain a Buy rating for Qualcomm, Inc. (NASDAQ:QCOM) as the LTE RF front end integration likely helps maintain strong LTE share.

Our checks at the Mobile World Congress found that competitor Intel Corporation (NASDAQ:INTC) and Broadcom Corporation (NASDAQ:BRCM)’s Cat 6 LTE modems with carrier aggregation are in sampling/shipment stages but design wins and thus volumes will likely be limited near term. We estimate Qualcomm, Inc. (NASDAQ:QCOM)’s Cat 6 LTE modem (20nm chip) combined with its RF front end chip called RF360 which integrates a tuner, antenna, Power Amplifier and the Radio and supports 40+ LTE bands will help its large global customers’ lower their # of SKUs from 5 to 2 which we believe will help it maintain its LTE lead.

QCT margins likely improve

Qualcomm, Inc. (NASDAQ:QCOM)’s 64-bit Snapdragon 610 and 615 chips which include Cortex A53 cores with LTE are targeted at mid to low tier LTE SKUs in China. We expect this targeted product approach vs. its prior strip-down parts is a key to meeting its 18-20% op margin goal in its QCT segment as China LTE volumes ramp in 2H14. We estimate total China LTE volume in CY14 at 100M and total LTE at 350M.

China NDRC investigation an overhang; not likely to impact LTE timing

While there was no update on the NDRC’s monopoly law investigation of Qualcomm, Inc. (NASDAQ:QCOM) initiated back in Nov-13, our checks find that China LTE ramp will likely not be impacted by the timing of a decision by NDRC. We believe the decision will likely come down to Qualcomm’s royalty rate and its ability to collect royalty on 3-mode (China Mobile) phones which use TD-LTE.

Qualcomm’s valuation

Our price target for Qualcomm, Inc. (NASDAQ:QCOM) is based on 15x (11.7x ex-cash) our FY15E EPS of $5.60.