PDF 原檔：報告_Citi_聯詠3034_20260806_original.pdf
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| 檔名 | size | 分類 | 親眼所見內容 |
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136KB | 真資料圖 | Figure 4/5：Novatek 12M forward P/E band（4.9x-21.1x）與 12M forward P/B band 疊加 ROE（1.0x-4.0x），2010-2026 |
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109KB | 真資料圖 | Bull/Base/Bear 目標價圖：現價 NT$543（06 Aug 26），Bull NT$600（+10%）、Base NT$555（+2.2%）、Bear NT$400（-26%） |
報告_Citi_聯詠3034_20260806_004.png |
214KB | 真資料圖 | Novatek 評等與目標價沿革圖（2023/08-2026/08，9 個歷史評等/TP 變動節點，如 2024-05 TP671、2025-08 降至460）+ Short-Term View/Catalyst Watch 圖 |
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原始內容
(RIC: 3034.IW, BB: 3034 11)
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Prepared for Kevin Lu
06 Aug 2026 13:13:22 ET │ 14 pages
Novatek (3034.TW)
Resilient 1H but early pull-in demand fading now; Neutral
CITI'S TAKE
Despite limited exposure to AI server, Novatek benefited from early pull-in demand and new product launches (eg, SoC), resulting in resilient 1H26 performance. However, looking forward, we think consumer demand could gradually fade away from 3Q26 onward. On the bright side, Novatek's market share gain in its US smartphone customer could help partially offset 2H headwinds. Overall, we still see limited catalysts in 2H for Novatek and stay at a Neutral rating with lifted TP of NT$555 (15x 2027E EPS).
2Q26 GM beat -2Q26 sales grew 24% QoQ with strong growth from SoC (>40% QoQ), followed by milder growth in LDDIC (+8% QoQ) and SMDDIC (+5% QoQ). 2Q26 GM of 42.4% surprised to the upside, beating Citi/consensus forecasts by 5.2ppt/2.8ppt, due to price adjustment, more low-cost inventory and favorable product mix. OP also saw better leverage given increasing sales scale. Overall OP levels beat Citi/consensus forecasts by 28%/24%.
3Q26 on high season but early pull-in demand fading now -The company guided 3Q26 sales to grow 7% QoQ at the mid-point, mostly thanks to high season for smartphone. By application, mgmt. sees fading early pull-in demand, resulting in QoQ decline in TV, NB, monitor and LDDIC, while SoC demand would be flat QoQ backed by edge AI/image vision products. 2Q26 GM is guided to decline 2.4ppt QoQ at the midpoint due to rising material and OSAT costs. The company continuously negotiates with clients to reflect inflation.
Conservatism over consumer demand; share gain in its US smartphone customer
-Due to the memory shortage and rising costs, mgmt. is conservative with 2H 26 end demand, given early pull-in in 1H. The company still targets introduction of more new products to maintain its sales growth and GM profile, such as edge AI, machine learning, foldable phone, OLED TDDI. For its US smartphone customer, given its superior technology capabilities in 22nm high-voltage process, we forecast the company wins a major share in iPhone adopting OLED DDIC from LG Display vs even share in last generation. Thus, we expect iPhone would help partially offset other consumer weakness. For FinFET process, the product is still under evaluation.
Earnings/TP raise; maintain Neutral -We raise our 2026/27E earnings by 12%/6% to factor in resilient GM profile despite inflation headwinds. We also introduce our 2028E earnings forecast. We lift our TP to NT$555 (15x 2027E EPS) from NT$460 (15x 2026E EPS) and maintain our Neutral rating.
Earnings Summary
| Year to 31Dec | Net Profit (NT$M) | DilutedEPS (NT$) | EPSgrowth (%) | P/E (x) | P/B (x) | ROE (%) | Yield (%) |
|---|---|---|---|---|---|---|---|
| 2024A | 20,342 | 33.41 | -12.7 | 16.3 | 4.9 | 30.1 | 5.2 |
| 2025A | 16,348 | 26.85 | -19.6 | 20.2 | 4.9 | 24.1 | 4.2 |
| 2026E | 21,042 | 34.55 | 28.7 | 15.7 | 4.4 | 29.4 | 5.3 |
| 2027E | 22,623 | 37.15 | 7.5 | 14.6 | 4.1 | 29.1 | 5.8 |
| 2028E | 24,500 | 40.23 | 8.3 | 13.5 | 3.9 | 29.6 | 6.2 |
Source: Powered by dataCentral
See Appendix A-1 for Analyst Certification, Important Disclosures and Research Analyst Affiliations.
n Neutral
Price (06 Aug 26 13:30)
NT$543.00
Target price
NT$555.00↑
from NT$460.00
Expected share price return
2.2%
Expected dividend yield
5.3%
Expected total return
7.6%
Market Cap
NT$330,422M US$10,237M
Jack Chen AC
+886-2-8726-9091 jack1.chen@citi.com
Laura (Chia Yi) Chen +886-2-8726-9090 laura.cy.chen@citi.com
Nicholas Lai +886-2-8726-9093 nicholas.lai@citi.com
Prepared for Kevin Lu
| 3034.TW: Fiscalyearend31-Dec | Price:NT$543.00; TP:NT$555.00; | MarketCap:NT$330,422m; Recomm:Neutral | MarketCap:NT$330,422m; Recomm:Neutral | MarketCap:NT$330,422m; Recomm:Neutral | MarketCap:NT$330,422m; Recomm:Neutral | MarketCap:NT$330,422m; Recomm:Neutral | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Profit&Loss(NT$m) | 2024 | 2025 | 2026E | 2027E | 2028E | Valuation ratios | 2024 | 2025 | 2026E | 2027E | 2028E |
| Sales revenue | 102,788 | 100,663 | 112,924 | 119,597 | 126,996 | PE(x) | 16.3 | 20.2 | 15.7 | 14.6 | 13.5 |
| Cost of sales | -61,315 | -62,755 | -68,232 | -72,919 | -77,321 | PB(x) | 4.9 | 4.9 | 4.4 | 4.1 | 3.9 |
| Gross profit | 41,472 | 37,908 | 44,692 | 46,679 | 49,676 | EV/EBITDA(x) | 12.5 | 15.3 | 12.1 | 10.8 | 9.8 |
| Gross Margin (%) | 40.3 | 37.7 | 39.6 | 39.0 | 39.1 | FCFyield (%) | 4.8 | 3.3 | 4.6 | 6.6 | 7.0 |
| EBITDA(Adj) | 22,035 | 18,328 | 23,281 | 25,865 | 28,079 | Dividend yield (%) | 5.2 | 4.2 | 5.3 | 5.8 | 6.2 |
| EBITDAMargin(Adj) (%) | 21.4 | 18.2 | 20.6 | 21.6 | 22.1 | Payout ratio (%) | 84 | 86 | 84 | 84 | 84 |
| Depreciation | -229 | -91 | -80 | -80 | -80 | ROE(%) | 30.1 | 24.1 | 29.4 | 29.1 | 29.6 |
| Amortisation | 0 | 0 | 0 | 0 | 0 | Cashflow(NT$m) | 2024 | 2025 | 2026E | 2027E | 2028E |
| EBIT (Adj) | 21,806 | 18,237 | 23,201 | 25,785 | 27,999 | EBITDA | 22,035 | 18,328 | 23,281 | 25,865 | 28,079 |
| EBIT Margin (Adj) (%) | 21.2 | 18.1 | 20.5 | 21.6 | 22.0 | Working capital | -3,919 | -4,735 | -5,605 | -478 | -1,163 |
| Net interest | 1,296 | 1,019 | 909 | 931 | 955 | Other | -1,464 | -1,889 | -2,160 | -3,162 | -3,499 |
| Associates | 113 | 83 | 199 | 180 | 180 | Operating cashflow | 16,652 | 11,704 | 15,517 | 22,226 | 23,417 |
| Non-Op/Except/Other Adj | 911 | 195 | 1,130 | 40 | 40 | Capex | -943 | -907 | -197 | -400 | -400 |
| Pre-tax profit | 24,126 | 19,534 | 25,439 | 26,937 | 29,174 | Net acq/disposals | 0 | 0 | 0 | 0 | 0 |
| Tax | -3,784 | -3,186 | -4,397 | -4,313 | -4,674 | Other | 182 | -280 | -767 | -330 | -330 |
| Extraord./Min.Int./Pref.div. | 0 | 0 | 0 | 0 | 0 | Investing cashflow | -761 | -1,187 | -965 | -730 | -730 |
| Reported net profit | 20,342 | 16,348 | 21,042 | 22,623 | 24,500 | Dividends paid | -19,472 | -17,038 | -13,996 | -17,675 | -19,004 |
| Net Margin (%) | 19.8 | 16.2 | 18.6 | 18.9 | 19.3 | Financing cashflow | -21,010 | -16,869 | -13,402 | -17,675 | -19,004 |
| CoreNPAT | 20,342 | 16,348 | 21,042 | 22,623 | 24,500 | Net change in cash | -5,119 | -6,352 | 1,151 | 3,821 | 3,683 |
| Per share data | 2024 | 2025 | 2026E | 2027E | 2028E | Free cashflow to s/holders | 15,709 | 10,797 | 15,319 | 21,826 | 23,017 |
| Reported EPS($) | 33.41 | 26.85 | 34.55 | 37.15 | 40.23 | ||||||
| Core EPS($) | 33.41 | 26.85 | 34.55 | 37.15 | 40.23 | ||||||
| DPS($) | 28.00 | 23.00 | 29.05 | 31.23 | 33.82 | ||||||
| CFPS($) | 27.35 | 19.22 | 25.48 | 36.49 | 38.45 | ||||||
| FCFPS($) | 25.80 | 17.73 | 25.15 | 35.84 | 37.79 | ||||||
| BVPS($) | 111.62 | 111.32 | 123.59 | 131.72 | 140.75 | ||||||
| Wtdavgordshares(m) | 609 | 609 | 609 | 609 | 609 | ||||||
| Wtdavgdiluted shares (m) | 609 | 609 | 609 | 609 | 609 | ||||||
| Growthrates | 2024 | 2025 | 2026E | 2027E | 2028E | ||||||
| Sales revenue (%) | -6.9 | -2.1 | 12.2 | 5.9 | 6.2 | ||||||
| EBIT (Adj) (%) | -18.2 | -16.4 | 27.2 | 11.1 | 8.6 | ||||||
| CoreNPAT(%) | -12.8 | -19.6 | 28.7 | 7.5 | 8.3 | ||||||
| CoreEPS(%) | -12.7 | -19.6 | 28.7 | 7.5 | 8.3 | ||||||
| BalanceSheet(NT$m) | 2024 | 2025 | 2026E | 2027E | 2028E | ||||||
| Cash&cashequiv. | 48,771 | 42,419 | 43,570 | 47,391 | 51,074 | ||||||
| Accounts receivables | 20,274 | 21,099 | 23,291 | 23,663 | 25,265 | ||||||
| Inventory | 8,701 | 8,641 | 14,100 | 14,325 | 15,296 | ||||||
| Net fixed &other tangibles | 19,385 | 19,208 | 19,698 | 20,117 | 20,537 | ||||||
| Goodwill &intangibles assets | 0 | 0 | 0 | 0 | 0 | ||||||
| Financial &other | 5,271 | 5,999 | 7,322 | 7,584 | 7,954 | ||||||
| Total assets | 102,401 | 97,366 | 107,980 | 113,080 | 120,126 | ||||||
| Accounts payable | 10,635 | 9,352 | 14,232 | 14,247 | 15,206 | ||||||
| Short-term debt | 0 | 0 | 0 | 0 | 0 | ||||||
| Long-term debt | 0 | 0 | 0 | 0 | 0 | ||||||
| Provisions &other liab | 23,843 | 20,274 | 18,541 | 18,678 | 19,270 | ||||||
| Total liabilities | 34,477 | 29,627 | 32,773 | 32,925 | 34,475 | ||||||
| Shareholders' equity | 67,923 0 | 67,739 | 75,207 0 | 80,155 | 85,651 | ||||||
| Minority interests | 0 | 0 | 0 | ||||||||
| Total equity | 67,923 | 67,739 -42,419 | 75,207 | 80,155 | 85,651 | ||||||
| Net debt (Adj) | -48,771 | -43,570 | -47,391 | -51,074 | |||||||
| Net debt to equity (Adj) (%) | -71.8 | -62.6 | |||||||||
| For definitions of the items in this table, | please click here. | -57.9 | -59.1 | -59.6 |
Prepared for Kevin Lu
Figure 2. Novatek - Earnings Revisions
| 3Q26E | 3Q26E | 3Q26E | 4Q26E | 4Q26E | 4Q26E | 2026E | 2026E | 2026E | 2027E | 2027E | 2027E | 2028E | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (NT$mn) | New | Old | Chg. | New | Old | Chg. | New | Old | Chg. | New | Old | Chg. | New |
| Sales | 31,043 | 28,344 | 10% | 30,076 | 28,344 | 6% | 112,924 | 105,007 | 8% | 119,597 | 111,543 | 7% | 126,996 |
| Sequential growth (%) | 8% | 12% | -3% | 0% | 12% | 4% | 6% | 6% | 6% | ||||
| Gross profit | 11,933 | 10,879 | 10% | 11,562 | 10,879 | 6% | 44,692 | 39,724 | 13% | 46,679 | 43,436 | 7% | 49,676 |
| Opex | 5,464 | 5,272 | 4% | 5,323 | 5,017 | 6% | 21,490 | 18,801 | 14% | 20,894 | 19,488 | 7% | 21,677 |
| Operating profit | 6,469 | 5,607 | 15% | 6,239 | 5,862 | 6% | 23,201 | 20,924 | 11% | 25,785 | 23,948 | 8% | 27,999 |
| Pre-tax profit | 6,701 | 5,929 | 13% | 6,567 | 6,272 | 5% | 25,439 | 22,336 | 14% | 26,937 | 25,390 | 6% | 29,174 |
| Net income | 5,562 | 4,921 | 13% | 5,385 | 5,143 | 5% | 21,042 | 18,747 | 12% | 22,623 | 21,325 | 6% | 24,500 |
| EPS(NT$) | 9.13 | 8.08 | 13% | 8.84 | 8.45 | 5% | 34.55 | 30.79 | 12% | 37.15 | 35.02 | 6% | 40.23 |
| Gross margin (%) | 38.4% | 38.4% | +0.1 ppt | 38.4% | 38.4% | +0.1 ppt | 39.6% | 37.8% | +1.7 ppt | 39.0% | 38.9% | +0.1 ppt | 39.1% |
| Opexratio (%) | 17.6% | 18.6% | -1.0 ppt | 17.7% | 17.7% | -0.0 ppt | 19.0% | 17.9% | +1.1 ppt | 17.5% | 17.5% | -0.0 ppt | 17.1% |
| Operating margin (%) | 20.8% | 19.8% | +1.1 ppt | 20.7% | 20.7% | +0.1 ppt | 20.5% | 19.9% | +0.6 ppt | 21.6% | 21.5% | +0.1 ppt | 22.0% |
| Net margin (%) | 17.9% | 17.4% | +0.6 ppt | 17.9% | 18.1% | -0.2 ppt | 18.6% | 17.9% | +0.8 ppt | 18.9% | 19.1% | -0.2 ppt | 19.3% |
© 2026 Citigroup Inc. No redistribution without Citigroup's written permission.
Source: Citi Research Estimates
Figure 1. Novatek - 2Q26 Results
| (NT$mn) | 2Q26 Actual | 1Q26 Actual | Q/Q | 2Q25 Actual | Y/Y | 2Q26 Citi | Diff. | 2Q26 Cons. | Diff. |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 28,660 | 23,145 | 24% | 26,152 | 10% | 25,270 | 13% | 27,980 | 2% |
| Gross profit | 12,157 | 9,040 | 34% | 9,494 | 28% | 9,396 | 29% | 11,082 | 10% |
| Gross margin | 42.4% | 39.1% | +3.4 ppt | 36.3% | +6.1 ppt | 37.2% | +5.2 ppt | 39.6% | +2.8 ppt |
| Op. profit | 6,466 | 4,028 | 61% | 4,823 | 34% | 5,034 | 28% | 5,226 | 24% |
| OPmargin | 22.6% | 17.4% | +5.2 ppt | 18.4% | +4.1 ppt | 19.9% | +2.6 ppt | 18.7% | +3.9 ppt |
| Net income | 6,328 | 3,767 | 68% | 3,739 | 69% | 4,775 | 33% | 4,640 | 36% |
| EPS(NT$) | 10.39 | 6.19 | 68% | 6.14 | 69% | 7.84 | 32% | 7.64 | 36% |
© 2026 Citigroup Inc. No redistribution without Citigroup's written permission.
Source: Citi Research Estimates, Company Reports, Bloomberg
Prepared for Kevin Lu
Figure 3. Novatek - Forecast Summary
| 2027 2026 | 2027 2026 | 2027 2026 | 2027 2026 | 2027 2026 | 2027 2026 | 2027 2026 | 2027 2026 | 2027 2026 | 2027 2026 | 2027 2026 | 2027 2026 | 2027 2026 | 2027 2026 | 2027 2026 | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (NT$ inMn, year-endDec) | 1Q | 2QE | 3QE | 4QE | 1QE | 2QE | 3QE | 4QE | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 2025E | 2026E | 2027E | 2028E |
| Revenue | 23,145 | 28,660 | 31,043 | 30,076 | 28,815 | 29,671 | 30,556 | 30,556 | 54,834 | 64,372 | 79,956 | 135,366 | 109,957 | 110,429 | 102,788 100,663 | 112,924 | 119,597 | 126,996 |
| COGS | -14,105 | -16,503 | -19,110 | -18,513 | -17,679 | -18,174 | -18,533 | -18,533 | -37,818 | -43,758 | -51,998 | -67,974 | -59,015 | -64,217 | -61,315 -62,755 | -68,232 | -72,919 | -77,321 |
| GrossProfit | 9,040 | 12,157 | 11,933 | 11,562 | 11,135 | 11,497 | 12,023 | 12,023 | 17,015 | 20,614 | 27,958 | 67,392 | 50,941 | 46,212 | 41,472 37,908 | 44,692 | 46,679 | 49,676 |
| Operating Expense | -5,012 | -5,691 | -5,464 | -5,323 | -5,187 | -5,074 | -5,500 | -5,133 | -9,400 | -10,757 | -13,180 | -19,618 | -18,212 -19,550 | -19,666 | -19,671 | -21,490 | -20,894 | -21,677 |
| SG&Aexpenses | -736 | -860 | -807 | -812 | -778 | -801 | -733 | -794 | -1,659 | -1,855 | -2,186 | -3,018 | -2,802 -2,759 | -2,859 | -2,946 | -3,215 | -3,107 | -3,044 |
| R&D expenses | -4,276 | -4,831 | -4,656 | -4,511 | -4,409 | -4,273 | -4,767 | -4,339 | -7,741 | -8,902 | -10,994 | -16,601 | -15,410 | -16,791 | -16,807 -16,725 | -18,275 | -17,787 | -18,633 |
| EBIT | 4,028 | 6,466 | 6,469 | 6,239 | 5,949 | 6,423 | 6,523 | 6,890 | 7,615 | 9,857 | 14,778 | 47,773 | 32,729 | 26,662 | 21,806 18,237 | 23,201 | 25,785 | 27,999 |
| Net Interest Income | 226 | 237 | 224 | 222 | 231 | 243 | 230 | 227 | 57 | 78 | 96 | 107 | 509 | 1,234 1,296 | 1,019 | 909 | 931 | 955 |
| Net Other Income | 136 | 1,079 | 8 | 106 | 8 | 98 | 8 | 106 | 233 | -121 | -324 | 234 | 1,274 | 336 | 1,024 278 | 1,329 | 220 | 220 |
| Pre-Tax Profit | 4,389 | 7,782 | 6,701 | 6,567 | 6,188 | 6,764 | 6,761 | 7,223 | 7,906 | 9,815 | 14,549 | 48,115 | 34,511 | 28,231 | 24,126 19,534 | 25,439 | 26,937 | 29,174 |
| Tax | 622 | 1,454 | 1,139 | 1,182 | 1,052 | 812 | 1,149 | 1,300 | -1,515 | -1,888 | -2,732 | -9,249 | -6,542 | -4,914 | -3,784 -3,186 | -4,397 | -4,313 | -4,674 |
| Net Profit | 3,767 | 6,328 | 5,562 | 5,385 | 5,136 | 5,952 | 5,612 | 5,923 | 6,391 | 7,927 | 11,817 | 38,866 | 27,970 | 23,318 | 20,342 16,348 | 21,042 | 22,623 | 24,500 |
| EPS (NT$) | 6.19 | 10.39 | 9.13 | 8.84 | 8.43 | 9.77 | 9.21 | 9.73 | 10.50 | 13.02 | 19.41 | 63.81 | 45.88 | 38.29 33.41 | 26.85 | 34.55 | 37.15 | 40.23 |
| Margins (%) | ||||||||||||||||||
| GrossMargin | 39.1 | 42.4 | 38.4 | 38.4 | 38.6 | 38.7 | 39.3 | 39.3 | 31.0 | 32.0 | 35.0 | 49.8 | 46.3 | 41.8 | 40.3 37.7 | 39.6 | 39.0 | 39.1 |
| Operating Margin | 17.4 | 22.6 | 20.8 | 20.7 | 20.6 | 21.6 | 21.3 | 22.5 | 13.9 | 15.3 | 18.5 | 35.3 | 29.8 | 24.1 | 21.2 18.1 | 20.5 | 21.6 | 22.0 |
| Net Margin | 16.3 | 22.1 | 17.9 | 17.9 | 17.8 | 20.1 | 18.4 | 19.4 | 11.7 | 12.3 | 14.8 | 28.7 | 25.4 | 21.1 19.8 | 16.2 | 18.6 | 18.9 | 19.3 |
| Sequential Growth (%) | ||||||||||||||||||
| Revenue | 1.4 | 23.8 | 8.3 | -3.1 | -4.2 | 3.0 | 3.0 | 0.0 | 16.5 | 17.4 | 24.2 | 69 | -19 | 0 | -7 -2 | 12 | 6 | 6 |
| GrossProfit | 3.8 | 34.5 | -1.8 | -3.1 | -3.7 | 3.2 | 4.6 | 0.0 | 25.5 | 21.2 | 35.6 | 141 | -24 | -9 | -10 -9 | 18 | 4 | 6 |
| EBIT | 4.3 | 60.5 | 0.0 | -3.6 | -4.6 | 8.0 | 1.6 | 5.6 | 32.3 | 29.4 | 49.9 | 223 | -31 | -19 | -18 -16 | 27 | 11 | 9 |
| Net Profit | 2.1 | 68.0 | -12.1 | -3.2 | -4.6 | 15.9 | -5.7 | 5.5 | 27.2 | 24.0 | 49.1 | 229 | -28 | -17 | -13 -20 | 29 | 8 | 8 |
| EPS | 2.1 | 68.0 | -12.1 | -3.2 | -4.6 | 15.9 | -5.7 | 5.5 | 27.2 | 24.0 | 49.1 | 229 | -28 | -17 | -13 -20 | 29 | 8 | 8 |
© 2026 Citigroup Inc. No redistribution without Citigroup's written permission. Source: Citi Research Estimates, Company Reports
NT$
600
500
400
300
Aug 25
BASE Assumptions
• Weak TDDI demand with mild growth in OLED shipments in 2026/27E
- 39.6%/39.0% GPM and 18.6%/18.9% OPM in 2026/27E
BEAR Assumptions
Va • Tougher competition from peers in TDDI leading to some share loss
- More impact from the entity list change
- Ease of the supply chain tightness
Prepared for Kevin Lu
4 10% Upside
NT$ 555.00
A 2.2% Upside
Bull/Bear: Novatek (3034.TW)
NT$ 400.00
× 26% Downside
Prepared for Kevin Lu
Novatek
Company description
Novatek Microelectronics Corp., Ltd. designs, manufactures, and markets integrated circuits (ICs). The company's products are used in telecommunication, computer peripherals, consumer electronics, and LCD (liquid crystal display) drivers.
Investment strategy
We rate Novatek shares as Neutral. 2026 headwinds mainly came from rising memory costs and inflation (eg, OSATs), pressuring its GM profile. Although rising costs are negatively impacting end demand, we believe downside is likely limited given lean inventory levels both in Novatek itself and customers. Looking forward, we do expect Novatek to see good progress in 2026 in OLED DDIC for both the Android camp and iPhone camp with potential market share gain. However, considering lack of catalysts in sight in 2H26, we believe its share price would be range bound in the near term. A high dividend yield of c.5% would provide some protection to the shares, in our view.
Valuation
Our target price of NT$555 is based on a 15x 2027E PE, which is higher than the average level of its 1-year forward consensus PE average of 13x over the past five years, justified by lean inventory levels in the industry, better S/D in the TV market, likely better progress in AMOLED DDIC for Apple business starting in 2026 (higher-than-expected market share) and ASIC upside. Our target price is equivalent to 2026/27E PB of 4.5x/4.2x.
Risks
Key upside risks that could cause the stock to trade above our target price include: 1) less macro uncertainty and recovering consumer demand; 2) fast edge AI ramp and resolution migration; 3) SoC business growth faster than expected; and 4) less increase in gold prices. Key downside risks include: 1) foundry hike pressure along with muted end demand; 2) foundry capacity constraints for certain nodes to limit growth potential; 3) edge AI ramp and resolution migration slowdown; 4) SoC business growth slows; and 5) more increase in gold prices.
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