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原始內容

報告_CLSA_宏致3605_20261006

PDF 原檔：報告_CLSA_宏致3605_20261006_original.pdf

原始內容

Research provided by

6 October 2026

Taiwan

Technology

Reuters

3605.TW

Bloomberg

3605 TT

Priced on 6 October 2026

Taiwan Wtd@ 49,712.0

12M hi/lo NT$183.50/53.94

12M price target NT$270.00

±% potential

+57%

Shares in issue 163.8m

Free float (est.) 76.5%

Market cap US$928m

3M ADV

US$58.2m

Foreign s'holding 21.6%

Major shareholders

Yuan Wan-Ting 5.3%

Keyan Investment Co., Ltd.4.0%

SinoPac analysts: Vanessa Huang, SinoPac

Kevin SW Chen, SinoPac

vanessa.huang@cl-sec.com

+886 223 268151

+886 223 268179

Stock performance (%)

Source: Bloomberg

SinoPac

NT$172.00 - OUTPERFORM

Wired for growth

Initiate coverage with anOutperformrating andtarget price of NT$270

ACES is entering a two-engine growth phase. It is a key powercable supplier to Bloom Energy as Bloom doubles its fuel-cell capacity, and it is expanding its highspeed connector content from AI serverdaughterboards to ASIC motherboards, as a high-speed cable leg comes on stream. We forecast a 72% EPS Cagrover 202628, with OPM expanding from 7.4% in 2026 to 11.0% in 2027.Our TP of NT$270 is based on 20x 2H27-1H28SP EPS, andwe initiate coverage at Outperform.

Bloom Energy the keyearnings driver in 2027

ACES's multiyear partnership with Bloom locks in its share asBloomplansto lift capacity from 2GW in 2026to 4GW/6GW in 2027/28, based on our checks. ACES has shipped fuel-cell power cables to Bloomsince 1Q26 andwill add external DLO high-voltage cables,with ASP of US$80-100kper set. We expectBloom power cables tobeNT$5.8bn of sales and account for 28%of group revenue in 2027. Powerproducts need little incremental R&D and benefit fromstrong operating leverage. We expectoverall OPM to expand from 7.4% in 2026 to 11.0% in 2027.

High-speed products a new driver

Previously, ACES supplied only daughterboard connectors, at 10-20 units per rack. On ASIC platforms, where ODMs have more say in supplier selection, ACEShas secured theopportunityto shipboth motherboard and daughterboardconnectors (about 30 units per rack) and broadens its connector productofferings. With Gen6 connectors carryingaround a 15% ASP premium overGen5, andACES asone of only four vendors qualified by CSPs at Gen6,we forecast server revenue growth of 107%/74% YoY in 2026/27.The newly addedGen6 PCIe cableproduct, qualified by two CSPs, began shipping in April 2026 at 20% of GM, with room to rise towards 30% as yield improves.Hence, we expect GM to recover to 26%in 2027.

Capacity in place ahead of demand

ACES has committed firm capacityahead of demand. For power cables, it has leased a new facilitynext to its Philippine plant, with new capacity planned to come online in 4Q26. For serverproducts, it plansto raiseconnector capacity from 4m to 5m units/mo and will expand high-speed cableproduction lines fromtwo to eight.

Initiate coverage with an Outperform rating

We forecast 2027/28SPEPS of NT$11.19/NT$14.93, with our 2027 forecast 48% ahead of consensus. Our TP of NT$270 is basedon 20x 2H27-1H28SP EPS, backed by a 72% EPS Cagr in 2026-28SP drivenby power cableramp-upand high-speed connector shipment growth. We initiate coverage with an Outperformrating.

Source: SinoPac

Great

Meh

Financials at a glance

Source: SinoPac

Great

Meh Each setof power cablesfor Bloomcarries dollar content of US$80-100k ACES holds at least a 30% share We expect power cablesfor Bloom to grow 441%/59% in 2027/28

Bloom delivers compelling time-to-power

Bloom Energy the keyearnings driver in 2027

We see tremendous advantages for ACES from Bloom Energy's strongdemand backed by itsaggressive expansion plan. ACES supplies inner power cables used inside each fuel cell in 2026 and will begin supplying external diesel locomotive (DLO) cables that connect fuel cellstacks into a fuel cell module(energy server). Each set (including inner cable and external cable) carries dollar content of US$80-100k.

Furthermore, ACES has worked with Bloom on high-voltage power cablesfor SOFC for around sixyears, even thoughthe real contribution didnottranspireuntil 2026. On the back of this long-standing relationship, ACES is the key supplier during the development phase and holds at least a 30% share inthe mass productionstage. Together with these considerations, we expect inner cablestocontribute revenue of NT$5,113m/NT$8,074m in 2027/28, while external cables will add revenue of NT$707m/NT$1,154m.

Figure 1

Source: SinoPac

Aspower scarcity remains the key bottleneckfor AIdatacentreconstruction, Bloom serves as asuitable solutionand offers fuel cell systems that generate electricity from natural gas. Its modular, on-site, 24/7 power platform stands apart in the power sector. Against a conventional grid built on centralised generation, Bloom delivers compelling time-to-power, cleanerair and water emissions profile, native-DC compatibility with emerging 800V AI datacentrearchitectures, and a solution that communities and nearby residents accept more readily.

Meh

Figure 2

Bloom Energyoverview

Source: Bloom Energy

We expect Bloom to increase capacity from 2GW to 4GW/6GW in 2027/28

Figure 3

As of year-end 2025, Bloom's product backlog grew about 140% YoYto roughly US$6bn. Amid the surgingdemand, Bloom is improving backlog conversion and stepping up capacity expansion to capture the strong growth opportunity. In 2Q26, Bloom raised its full-year revenue guidance to US$3.9-4.2bn, up from US$3.4-3.8bn, and plans to double annual capacity from about 1GW in 2025, split across its California and Delaware sites, to 2GW by the end of 2026; and will further expand the capacity to 4GW/6GW in 2027/28, based on our channel checks.

Figure 4

Source: SinoPac Source: Sinopac We believe Bloom has greatpotential. On September 2026, Bloom announced that it leased a 158,000-square-foot facility at Encyclopedia Circle to expand its manufacturing operations.The size of the new facility is notable sinceit is nearly The newly leased facility could add another 5 GW, implying a long-term capacity potential of up to 10 GW

Figure 5

as large as Bloom's existing 164,000-square-foot manufacturing plant in Fremont. The existing plant can ultimately accommodate approximately 5GW of annual production capacity, which suggests the newly leased facility could add another 5GWfor fuel cell stacks, implyinga long-term capacity potential of up to10GW. Given the multiyear partnership that secures ACES's share, we have strong conviction that ACES is well positioned to benefit from Bloom's capacity expansion.

Figure 6

Source: LoopNet

Figure 7

BloomEnergypotential new facilitysite

Source: LoopNet, Sinopac

Source: SinoPac, Google Maps

We view Bloom's growth as sustainable, supported by favourable industry tailwinds. On financing, Bloom and Brookfield are partnering to develop AI datacentrepower DLO high-voltage cables launch might add another NT$707min revenue The power cable portfolio includes inner cable and external cable infrastructure, with Bloom providing its fuel cell-based power generation systems and Brookfield providing capital and infrastructure development capabilities. The strategic financing framework expanded on June30, 2026, from the original $5bn(October 2025) to $25bn, a fivefold increase. On customer wins, Nebius dropped its previously planned gas and combustion turbines in May 2026 and switched to Bloom's SOFC solution, signing a 10-year master agreement worth up to $2.6bn. The first phase covers 328MW of installed capacity, or roughly 250MW of guaranteed capacity, and is expected to come online within 2026. Bloom also expanded its Oracle contract from an initial 1.2GW to up to 2.8GW and signed deals including AEP (up to 1 GW) and Equinix (over 100 MW across 19 datacentres), broadening its customer base materially.

Wide range of power cable products

ACES supplies Bloom with a variety of power cables across different specifications, including Power Conversion System (PCS) cables, hot box cables and Diesel Locomotive (DLO) high-voltage cables, rather than a single product type. In 2026, ACES only supplies PCS cablesandhot boxcables, while the company will expand its product offerings to DLO high-voltage cables from2027, which we expect to contribute another NT$707mof sales for the whole year.

The PCS cables and hot box cables are the inner power cables. Hot box cables interconnect individual fuel cells within the hot box,where power generation creates significant heat and therefore requires materials with higher durability and heat resistance.Kaori and MTAR supply hot boxes for fuel cell power generation systems, which require ACES's hot boxcables as one of their key components.

On the other hand, PCS cables are installed inside the Power Conversion System (PCS) and are supplied to AcBel, a PCS solution provider. The PCS converts DC output into usable power and manages load changes. As SOFCs generate DC power with voltage varying according to load, the output cannot be directly connected to a datacentre.

The external power cable portfolio is mainlyDLO high-voltage cables, which transmit high-voltage DC power between fuel cell platforms, power modules and microgrid systems. As external cables need to withstand higher voltage levels, their dollar content is expected to be slightly higher than that of inner power cables.

Lastly, ACES also ships cables directly to Bloom Energy for development purposes.

Figure 8

ACES power cable productand Bloom energy suppliers

Source: SinoPac, Bloom Energy

Figure 9

ACES supplies Bloom with a variety of power cables across different specifications

Source: SinoPac

DLO high-voltage cable opportunityheading into 800V DC era

We also see DLO cables, which are currently used outside the fuel cell, as having significant potential after introducing 800V architecture. Under conventional AC architecture, grid power, onsite turbines and reciprocating engines supply AC power, and the downstream transformer, switchgear and UPS cablesbelong to the utility/EPC supply chain, which ACES does not address. Bloom candeliver native DC power directly to the rack, so the DC output cables might become part of Bloom's system. We see this opening as a new content opportunity for ACES as a qualifiedhigh-voltage power cable supplier.

Within Bloom'senergy server under 800V architecture, the longer series stack of fuel cellsand the replacement of the inverter with DC-DC conversion require a redesign of the internal harness to high-voltage specifications, which we believe positions ACES to ship a growing volume of high-voltage DLO cablesover time.

Figure 10

800V DC architecture

Today's AI 48V Data Centers

Future AI 800V Data Centers

Source: SinoPac, TrendForce

We expect ACES's server business togrow 107%in 2026

Expect server revenue to grow a further 74%/33% in 2027/28SP

High speed connector products includemultitrack, board-to-board and E1/E3 connectors

High-speed products anew driver

In 3Q24, ACES passed product qualification with ODMs for the high-speed connectors used on Nvidia GB200 networking cards (NICs) and accelerator cards, marking its move from traditional PC peripherals into the server space and Nvidia supply chain. In2025, server revenue accountedfor 10% of ACES's total revenue.

Looking ahead, we expect ACES's server business togrow 107%in 2026, thanks to its new product offerings, higher content per rackofhigh-speed products, and strongcontribution from two major ASIC customers.Lookingahead, with the new connector capacity comingonline and increasing ASP driven by connector spec upgrade, we expect server revenue to further grow 74%/33% in 2027/28SP.

Figure 11

Source: SinoPac

Figure 12

High-speedconnectorproduct portfolio

Source: ACES

Connectors for ASIC carry up to 3x usage

ACES broadeningits connector product offerings in 2026

Figure 13

Broadening connector footprint in ASICs

Since Nvidia has strict control overits supply chain, ACES previously supplied only the daughterboard high-speed connectorsfor GB200/300 servers, at roughly 10 to 20 units per rack. On ASIC platforms, since ODMs have greater influence over supplier selection, ACES secures share on both the motherboard and the daughterboard, lifting content to around30 units per rack.

Besides, ACES historically supplied only MCIO connectors to these ASIC customers, but as further qualifications clear, the company will broaden its connector product offerings in 2026 to include Multi-Track, board-to-board, and E1/E3 connectors. We expect the contribution from ASIC customers to scale further in 2H26, driving server revenue to grow 64%HoH.

Figure 14

ACES high-speed connector content per rack increase

ACES provides MCIO and a wide range of high-speed connectors

Source: SinoPac

Migration from Gen5 to Gen6 is the first major shift since 2022

Source: ACES

Riding the Gen6 ASP curve with a compatibility advantage

Aside from the spectacular growth in the connector shipments, weexpect ACES to benefit from the ongoing Gen6 connector upgrade cycle, with ASPs expected to increase by 15%. The AI server trays currently adopt a mix of Gen5 and Gen6 connectors, but we expect the penetration of Gen6 connectors to gradually increase going forwardas the migration from Gen5 to Gen6 is the first major generational shift since Genoa introduced Gen5 in 2022.

Gen6 connector ASP is 15% higher than Gen5

Only 3-4vendors are qualified by CSPs at Gen6

PCIe has been used inonboard and in-chassis interconnects

Each generation upgrade raisesbarriers to entry

Figure 15

Source: SinoPac

Only three to four connector vendors are qualified by CSPs at Gen6, and ACES is one of them.Furthermore, ACES can supply both Gen5 and Gen6platforms under its existing qualification, with no need to re-sample or re-qualify for Gen5. This is becauseGen6 connectors keep footprint backward compatibility with Gen5. By contrast, other peers must re-sample and run through the full qualification process again to move up to Gen6.

About the PCIe migrationand Gen6 spec upgrade

PCIe has long been used for on-board and in-chassis interconnects. In the Vera Rubin platform, PCIe Gen6 serves as the in-tray bridge to front-of-tray modules such as CX-9 SuperNICs, BlueField-4 DPUs and NVMe storage. GPU-to-GPU scaleup runs on NVLink, with UALink as the open alternative; these fabrics work alongside PCIe.

In order to address ever-larger training models, the PCIe must scale with the fastgrowing size of model parameters and datasets. The move from Gen5 to Gen6 is not a simple speed doubling, even though per-lane bandwidth rises from 32 GT/s to 64 GT/s. It reworks the link from the coding scheme up. Gen1 through Gen5 doubled I/O speed using NRZ signaling. Gen6 switches to PAM4 four-level signaling and, for the first time, adds FEC (Forward Error Correction), which lets the receiver detect andcorrect transmission errors on its own.

Each generation doubles bandwidth while tightening signal-integrity specs, which demands higher-precision connector manufacturing. This creates a real barrier to entry for high-speed connector suppliers.

Figure 16

Figure 17

Source: Marvell

Figure 18

Source: Marvell

Source: SinoPac

Figure 19

Source: SinoPac

Figure 20

ACES high-speed cable product offerings

Source: ACES

High-speed cablesemergingas a potential driver

ACES previously supplied connectors only. After several years of effort, its Gen6 PCIe cable has now been qualified by two CSP clients, and the company began shipping the in-rack cable product in April 2026. We expect high-speed cable shipments to enlarge after the new capacity comes online and more CSP orders in 2H26.Hence, we expect high-speed cable revenue to grow from NT$268m in 2026 to NT$793/NT$982m in 2027/28.

Currently, its high-speed cable product carries gross margin of merely 20%, but it is likely to edge up to around 30% as the scale enlarges,and yield improves.

Source: SinoPac Connector capacity is set to rise from 4m units/month to 5m units/month ACES expects connector shipments to reach 50m units in 2027

Figure 22

Capacity in place ahead of demand

ACES is rapidly expanding its high-speed cable and connector capacity, with highspeed cable production lines expected to increase from two in 2025 to eight in 2H26, while itwillproactively ramp up connector monthly capacity from 4m units in July 2026 to 5m units by the end of 2026 to address customer demand ahead of order placement.

Supported by strong customer demand and sufficient capacity, ACES expects total connector shipments to reach 25m units in 2H26 and 50m units in 2027, representing a significant increase from 15m units in 1H26.

As for power cablesfor Bloom Energy, ACEShas leased a new facilitynext to its Philippine plant, with the new power cable capacity planned to come online in 4Q26.

Figure 23

Figure 24

ACES global production footprint

Source: ACES

Source: ACES, SinoPac

Source: ACES, SinoPac

ACEShas manufacturing facilities across key regions worldwide

Networking: stable growth

Figure 25

Diversified growth engines

ACES's networking product portfolio includes set-top boxes, WiFi devices, routers, and other networking equipment. We expect the business to benefit from technology upgrades and equipment replacement driven by advances in wireless communications, IoT, cloud computing, and cybersecurity. However, tariff and inflationary pressures, together with component shortages among Asian customers, are likely to limit growth. We expect networking product revenue to grow by 34% and 14% in 2026 and 2027, respectively.

Figure 26

Source: ACES

Source: SinoPac

Automotive: rising electronic content

ACES's product range spans ADAS, reversing radar and camera, body control, smart cockpit, smart antenna, and high-voltage connectors and harnesses, extending into applications such as EV charging guns. It has entered a US EV major as well as European and Chinese Tier-1 supply chains. Going forward, it will continue to focus on high-voltage, high-frequency, and high-speed connection technologies. The company expects the automotive sector to stay flat in 2027 to reflect muted demand and limited internal resource allocation, as itfocuseson AI-related business at this stage. In the long-term,growth from the automotive sector will bedriven by ADAS upgrades, which liftsdemand for sensors and compute, alongside rising EV penetration, which adds high-value electronic systems and power semiconductor content.

Figure 27

ACES Automotive product portfolio

Source: ACES

Figure 29

ACES Industrial product portfolio

Source: ACES

Source: SinoPac

Muted 2026, with Windows 12 driving a replacement cycle in late 2027

Industrial: asteady UPS-driven base

ACES supplies industrial power cords, used mainly in uninterruptible power systems (UPS). A UPS is an electrical device that acts as a reliable buffer when the main power supply behaves abnormally, such as during a fault, outage, or unstable voltage. It keeps automation controllers, sensors, and actuators continuously powered so equipment keeps running. When a power problem occurs, the UPS supplies stable backup power to prevent equipment failure, data corruption, or system crashes. We expect ACES's industrial business to grow steadily, with growth of 9% and 14% in 2026 and 2027, respectively.

Notebookand Consumer

Under the twin pressures of softening end-consumer demand and continued supply-chain cost increases, we expect ACES's full-year NB revenue to decrease 12%in 2026 and return to a growth trajectory in 2027. However, we remain cautiously optimistic about 2027 withthe launch of Windows 12, combined with easing component shortagesand broader AI adoption, which should drive consumer replacement demand, lifting global NB shipments -5%/5%year over year in 2027/28, which is a gradual recovery following a weaker 2026.

Figure 31

Figure 32

Global NB shipment forecast

ACES Consumerproduct portfolio

Source: SinoPac

Source: ACES

We expect NB and Consumer to return to a growth trajectoryfrom 2027

ACES has long-standing relationship with Schneider Electric

ACES ramped-uphighvoltage power cables for power racksin 2Q26

Figure 33

Source: SinoPac

Diversifying into new growth opportunities

We found that ACES is diversifying its products'end-application by developing new specification and engagingwith new clients. Hence, we believe in its long-term balanced growth.

Power rack: leveraging its long-standing relationshipwith Schneider

ACES hasalong-standing relationship with Schneider Electricatits Philippineplant. The partnership dates back more than 20 years, with ACES's Philippine plant initially serving Schneider almost exclusively. Over the years, the product portfolio has expanded from conventional power cables to uninterruptible power systems (UPS) and, more recently, power racks for AI datacentres.

ACES began shippinghigh-voltage power cables for power racks in1Q26 and entered the volume ramp-up phase in 2Q26.We remain positive on power rack adoption as the PSU in every IT tray hits a physical limitas rack power reaches 1MW, occupiesrack space and capscompute density. Moving power shelves and BBU/CBU into a dedicated power rack decouples power from computing and frees

PSU/Power Shelf moved to Power Rack

Schneider showcased power rack product at Computex 2026

the IT rack for near-full compute use. It also enables 800V HVDChigh-voltage delivery cuts current and I²R losses, lifting efficiency from the 48V era's 80-90% towards >90%, while scaling per-rack power module and high-voltage cable content.Given the industry trendof increasing in-rack space density and surging single-rack voltage, we expect ACES's high-voltage power cable business to continue growing.

Figure 34

Source: SinoPac, TI, Tech news

Figure 35

Schneider power rack product

Source: SinoPac

Figure 36

Source: SinoPac

TP of NT$270

Initiate with an Outperformrating

We initiate coverage ofACES with an Outperformrating given its dual growth engine from Bloom's strong expansion and high-speed connectorcustomer wins and generation upgrades. We forecast 2027/28 EPS of NT$11.19/NT$14.93, with our 2027 forecast48% ahead ofconsensus. Our TP of NT$270is based on 20x 2H27-1H28SP PE, backed by a 72% EPS Cagr in 2026-28SP driven by Bloom's significant ramp and larger content in server products. Initiate coveragewith an Outperform rating.

Company profile

ACES was founded in 1996,and it mainly produces connectors, micro-coaxial cable, high-speed transmission cables, and RF connectors. Connectors and cable assemblies link two separate subsystems or operating units and carry the signals between them, allowing the overall system to function properly. They are used across a wide range of electronic products, with main applications spanning notebooks and PC peripherals, consumer electronics, automotive electronics, cloud servers, networking equipment, and industrial equipment.

To keep pace with the push towards lighter, thinner, and smaller notebooks and consumer devices, ACES developed high-temperature-resistant, fine-pitch, and low-profile productsat an early stage. At the same time, it is moving actively into the high-frequency, high-speed connectors, high-speed cables, and power supplies required for cloud servers, as well as the connector and cable assemblies used in automotive electronics.

AI-relatedproduct contribution increasing

ACES has leveragedM&A to gain new capabilities, plants and technology

Figure 37

Source: SinoPac

Company development

ACES has used M&A well to gain new capabilities, plants and technology, which in turn opened doors to new customers and markets. In 2015, it bought MEC IMEX to add cable assembly capability and a plant in the Philippines, which took it into the industrial market. In 2017, the CPC deal gave it access to the European auto connector market and a plant in Vietnam. In 2019, it bought Kuang Ying to add metal stamping capacity and reach Taiwan telecom customers. The key deal came in 2021, when ACES bought 100% of Genesis, a US high-speed interconnect maker based in Atlanta. The main goal was to gain Genesis's long-standing ties with US CSP and cloud customers. In 2025, ACES opened its Phase Two R&D headquarters in Taoyuan, which focuses on cloud connectors and high-speed cables. We believe 10years of M&A have turned ACES from a consumer connector maker into a supplier of high-speed interconnect solutions for AI servers and the cloud.

Source: SinoPac, ACES

Shareholding structure

ACES's shareholding structure is relatively stable, with the top 10 owningabout 30%, including Directors andSupervisors' total share of 9%. Foreign investor holdings have increased since the company entered the high-speed connectors industry andwere around 22% in August 2026.

Foreign investors hold about 22% of shares

ASIC customer winsto help server revenue grow 74% YoY in 2027SP

Figure 39

Source: SinoPac

Figure 40

Source: TEJ, Sinopac

Financial forecasts

We forecast sales to rise by 22%/56%/30%in 2026/27/28, fueled by robust highspeed connector shipmentsfrom2H26, rising Gen6 penetration that drives highspeed connector ASP expansion, and Bloom's sustained, large-scale capacity expansion, which should provide a durable growth engine.

AI productsales, both connectors and cables,will make a more meaningful revenue contribution in 2H26SPgiven ACES'sbroadening ASIC customer base. We expect shipment contribution from high speed connectors andcables to help its server revenue grow a further 107%/74%YoY into 2026/2027.

Growth rate of sales to accelerate from 2026SP

Both GM and OPM steadily improving

Figure 41

Source: SinoPac

Giventhehigh-speedconnectors carry higher gross margin of 40% and cable's GM keeps improving with the learning curve, we forecast ACES's GM to expandfrom 24.9% in 2026to 26.0%/26.1%in 2027/28, partially offset by the strong power cables ramp which may dilutethe overallgrowth margin.

Source: SinoPac

Figure 43

Source: SinoPac

Capex-to-sales ratio of 12%/8%in 2025/26

Free cashflow per share of NT$-0.6/0.8in 2025/26

Figure 44

Source: SinoPac

Cashflow and balance sheet

ACES's balance sheet shows healthy debt exposure with an improvingnet cash level. Given its plan to massively expand capacity at its Taiwan plants, we expect Capex to remainat a high levelof NT$1,075min 2026and then slightly declineto NT$855m in 2027.We forecast its depreciation-to-sales ratio to be around 3% in 2027, which is at the lowend of its historical level.

We expect ACES's ROE to expand from 10% in 2026 to 21% in 2027 and 23% in 2028, as the volume ramp of AI high-speed connectors and BloomEnergy power cables drives a richer product mix and gross margin expansion, delivering 121% EPS growth in 2027.

We expect ACES's FCF to turn positive in 2026as operating cashflow scales with the AI high-speed connector and Bloom power cable ramp while Capex normalises after the 2026 capacity buildout. Looking ahead, we expect ACES's free cashflow per share to be NT$0.8-1.5in coming years.

Figure 45

Figure 46

Capex and depreciation to sales

Source: SinoPac

Source: SinoPac

Figure 47

Free cashflow per share

Source: SinoPac

Figure 49

Source: SinoPac

Figure 50

Forward PE

Source: SinoPac

Source: SinoPac

Figure 49

Source: SinoPac

Figure 50

Source: SinoPac

ACEShas had a dividend payout ratio of around 29-36% in the past five years, except for 2023, when the company reported a loss. Weexpect to maintain a payout ratio around 35%as the ACES's earnings significantly improved, but the actual dividend payout depends on future investments and business plans.

Figure 51

Source: SinoPac

Figure 52

Figure 53

Source: SinoPac

Source: SinoPac

ACES Enters from Gen6 with Vertical Integration and flexible leadtime

CSPs are searching for a supplier able to provide both connectorsand cables

Competitive positioning

In high-speed connectors, ACES competes primarily withoverseas peers including Amphenol (APH), TE, and Molex. APH's edge lies in a development-technology lead of one to two generations, while ACES's relative strength rests on customers'recognition ondeliveringquality comparable to the overseas majors, alongside more flexible lead times, strong capacity-expansion support, and fast ramp-up.

The structural opportunity comes from the supply chain integration trend. As transmission speeds rise, CSPs increasingly prefer suppliers which canintegrate highspeed connectors with high-speed cablesand ship assembled,finished goods.

ACES is one of the few Taiwanese players with this vertical-integration footprint

Gen6suppliers include ACES, APH,TE, andLotes

Figure 54

Source: Sinopac,Bloomberg

ACES is one of the few Taiwanese players with this vertical-integration footprint: it holds wire-drawing technology transferred in-house from ITRI, produces everything from wire drawing through assembly on its own, and its commitment to moving into high-speed cableshas beennoted by AWS and Meta, backed by roughly two years of qualification work already completed.

By contrast, other Taiwanese peers have yet to build comparable vertical integration. Customers have historically split connectors and cables across separate suppliers, with cable suppliers represented by BizLink(3665TT) andLongwell (6290 TT), while peers such as Lotes (3533 TT),Alltop (3526 TT), Argosy (3217 TT) and JPCConnectivity (6197 TT) arelikewise strong in connectorsbut lack in-house cable capability.

Since the Gen5 qualified-supplier base was already fragmented, the Gen6 bar of combined connector-plus-cable capability becomes ACES's entry point, bringing ACES into design-in from Gen6. The qualified connector supplier base issmall, with suppliers includingAPH, TE, and ACES, with Lotesadded subsequently.

Peer comparison

ACES's primary local competitors in connectors include Lotes, Alltop, Argosy and JPC Connectivity. Inthe cable industry, it competes withBizlinkandLongwell. ACES's foreign peers include Amphenol, TE and FIT.

Target price calculation

We initiate coverage of ACESwith an O-PFrating and atarget price of NT$270, based on 20x 2H27-1H28SPEPS, supported by a strong 72% EPS Cagr in 202628SP.We use a PE-based methodology for ACES, in line with other connector companies. We initiate coverage with anOutperform rating.

Our target multiple of 20x is in line with the 2027SP average PE of 20.4x for Taiwanlisted connector and cable peers with direct AI datacentre exposure, namely BizLink, Lotes and JPC Connectivity. We view this as a reasonable anchor. ACES offers faster earnings growth than the group, with 2027SP EPS growth of 121% versus the peer average of 52%, while its 2027-28SP ROE of 21-24% sits at the low end of the peer range of 22-52%.

We also believe the target PE premium is justified as the AI revenue contribution, including AI data transmission and power, rises from 4% in 2024to 48% in 2027SP. The company maintains its key supplier position at Bloom as the company ramps up its capacity expansion, while ASIC customer wins and higher connector content from the Gen6 upgrade cycle should provide additional growth drivers.As the company gradually shifts away from its legacy consumer electronics base and its exposure to cyclical downturns, we see room for a structural rerating.

Key risks

We see fourkey operational risks for ACES:

Raw material cost volatility:Copper prices drive a large share of Cogsfor ACES's cable products, while connectors carry far less exposure.ACES currently reprices its cable products with customers on a quarterly basis, which has allowed it to sustain a long-term GM of around 20% on power cables.However, the pass-through might be lagging, so sharp copper price swings could cause quarterly GM to fluctuate before repricing impact catches up.

Delays in ODM pull-in:ACES ships its high-speed connectors directly to ODM customers. Becauserack assembly sits at the final stage of the AI server supply chain, any upstream disruption, such as componentsshortages and assembly yield issue, could push out rack shipment schedules or reduce volumes.This could in turn lead ODMs to cut or defer orders for high-speed connectors from ACES, creating quarter-to-quarter volatility in server revenue.

Slower-than-expected ramp-up at Bloom Energy: Power cables for Bloom will account for 28%/35% of ACES's revenue in 2027/28SP, which makes Bloom's ramp-up thesingle largest swing factor in our forecasts. Delays could arise on both the supply and demand sides. On the supply side, Bloom could fall behind its capacity plan if new facility fit-out, equipment installation or hiring takes longer than expected. On the demand side, its datacentre customers could defer deployments due to grid interconnection, gas supply or financing hurdles, or due to regulatory headwinds such as tighter permitting and emissions rules for on-site gasfired generation, utility restrictions on behind-the-meter power, or changes to fuel cell tax incentives. Either scenario would directly reduce ACES's power cable shipments. As volumes scale, Bloom may also qualify a second cable supplier, which would add pressure to ACES's share and ASP.

Prolonged NB weakness: NB andConsumer remains ACES's largest segment at 35% of 2026SP revenue, and our forecasts assume it returns to 4%/12% growth in 2027/28SP on a Windows 12-driven replacement cycle. If end-demand stays soft or the replacement cycle slips, a further NB decline could offsetpart of the growth from Bloom and AI servers and dilute group GM.

Investment thesis

ACES is evolving from a notebook connector maker into a supplier of AI interconnects and power cables, with two growth engines ramping at the same time. The first is Bloom Energy. ACES has co-developed SOFC power cables with Bloom for about six years, and it is currently one of three suppliers of Bloom's power cable assemblies, with around one-third of the total. It ships inner PCS andhot-box cables in 2026 and adds external DLO high-voltage cables from 2027, with order visibility extending to 2028 and beyond. The second engine is AI/ASIC servers. On ASIC platforms, ODMs have more say in supplier selection, so ACES wins both motherboard and daughterboard sockets, which lifts content from 10-20 to ~30 units per rack. Gen6 raises connector ASP by ~15%, and a new in-chassis PCIe Gen6 cable line, qualified by two CSPs, adds a higher-content stream. ACES integrates vertically from wire drawing to final assembly, which makes it one of the few Taiwanese suppliers able to ship connector-plus-cable solutions as CSPs consolidate their vendor base.

Catalysts

(1) Bloom's capacity ramp from 2GW to 4GW/6GW in 2026-28 and new datacenterwins (Oracle, Nebius, AEP, Equinix) converting into cable orders; (2) DLO high-voltage cable shipments starting in 2027; (3) ASIC customer ramps in 2H26 and a broader product range beyond MCIO into Multi-Track, board-to-board and E1/E3 connectors; (4) rising Gen6 penetration on AI server trays; (5) high-speed cable lines expanding from two to eight by end-2026, with GM improving from ~20% toward ~30%.

Valuation details

We adopt a PE-based valuation methodology as we believe the market will mainly focus on the earnings growth outlooks of high-speed connector makers, which is better reflected with PE metrics. We assign a target multiple of 20x PE, more than +1sd of the three-year average, to reflect a strong outlook with margin expansion and an EPS Cagr of 72% in 2026-28 on solid Bloom Energy demand and increasing high speed connector content.

Investment risks

There could be downside risk to sales growth and margins if: (1) Bloom's deployments or backlog conversion slow on financing, gas supply or permitting delays, or ACES loses share among Bloom's cable suppliers; (2) ASIC programs ramp more slowly or CSP Capex is cut; (3) Gen6 adoption is slower than expected, or competition from Amphenol, TE, Molex and Lotes pressures ASP; (4) high-speed cable yield and GM improve more slowly than we assume; (5) NB and consumer demand weakens further on component shortages, tariffs and inflation; (6) TWD appreciation or higher copper prices squeeze margins.

ACES scores highin balance-sheet-quality

Figure 56

Source: SinoPac

Detailed financials

Profit & Loss (NT$m)

Profit & loss ratios

Source: SinoPac

The Glpbal Equities

Database Great Meh

Balance sheet (NT$m)

evalu@tor The Global Equities Dalabase

Balance sheet ratios

Cashflow (NT$m)

evaor The Globai Equities Database

Cashflowratio analysis

DuPont analysis

EVA ® analysis

Source: SinoPac

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Companies mentioned

ACES (3605 TT -NT$172.00 -OUTPERFORM) 3M (N-R) AcBel Polytech (N-R) AEP (N-R) Alltop (N-R) Amazon (N-R) AMD (AMD US -US$631.75 -O-PF)¹ Amphenol (N-R) Apple (AAPL US -US$332.89 -O-PF)¹ Argosy (N-R) AWS (N-R) Bizlink (3665 TT -NT$2,325.0 -O-PF)² Bloom Energy (N-R) Brookfield (N-R) Bunzl (N-R) certainteed (N-R) Cisco (N-R) CPC (N-R) Equinix (N-R) FIT (N-R) Genesis (N-R) ITRI (N-R) JPC (N-R) Kaori (8996 TT -NT$1,600.0 -HC O-PF)² Ke Yan Investments (N-R) Kuang Ying (N-R) Living Spaces (N-R) Longwell (N-R) Lotes (3533 TT -NT$1,865.0 -HLD)² MEC IMEX (N-R) Meta (N-R) Microsoft (MSFT US -US$525.18 -O-PF)¹ Mitac (N-R) Molex (N-R) MTAR Technologies (N-R) Nebius (N-R) Nvidia (NVDA US -US$238.90 -HC O-PF)¹ Office Depot (N-R) OnTrac (N-R) Oracle (ORCL US -US$142.48 -HLD)¹ Porite (N-R) Quanta (2382 TT -NT$333.5 -O-PF)² Sanmina-SCI Corp (N-R) Schneider Electric (N-R) Syscom Computer (N-R) Taishin International (N-R) TD Synnex (N-R) TE Connectivity (N-R)

Tesla (TSLA US -US$378.73 -U-PF)³ Three-Circle (N-R) UPS (N-R) Vinatech (N-R) Walters&Wolf (N-R)

Wei Ji Investments (N-R)

¹ Covered byCLSA Americas; ² Covered by SinoPac; ³ Covered by CLSA