報告_UBS_義隆2458_3Q26_20261105

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First Read

Elan Microelectronics

Q426E likely to be the near-term trough

Q326 earnings below on softer NB demand environment

Elan's Q326 EPS of N $0.58 (net profit N $168mn) was below UBSe/street of N $1.29/1.71, as a result of lower revenue amid weaker NB demand environment. Q326 revenue was already reported at N $2.2bn (-31% QoQ), below UBSe/street of N $2.4/2.8 bn as NB brand customers further reduced their orders from late-Aug on softer end-demand after retail price hike and higher component inventories. GM was down 2.7ppts QoQ to 44.7% on less favourable mix, directionally in-line with UBSe of ~2ppt QoQ decline. It booked non-op loss of N $100mn, vs N $294mn gain in Q226, mainly due to unrealized loss on financial assets. Despite softer earnings, Elan remains committed on its high dividend yield policy and is considering to raise its payout.

Near-term demand remains m ted b t Q426E likely to be the tro gh

Elan is restricted from providing Q4 financial guidance given the accumulated non-op gain in past four quarters exceeded 10% of the net profit. With October sales reported at N $461 mn (-23% MoM), Elan expects Q426 remains a challenging quarter amid softer demand environment and ongoing inventory adjustment. Nevertheless, we think channel inventory is on track to be depleted in the coming months and Q426 is likely to mark the trough for near-term revenue. We forecast Q426E sales to decline 38% QoQ in Q426E but will rebound by 27% QoQ in Q127E on restocking. Into 2027, Elan noted it has won some new projects at top NB brands, while also sees share gain opportunities following its peer's business restructure, as well as ramping low-cost solution to capture market trend. It also see good progress of haptics (2026 sales 5-6x vs 2025) and single layer on-cell (3-4x), and we believe the momentum should continue into 2027.

ADAS and Drone remain key long-term growth drivers

Elan's AI-related revenue reached 14% of sales in Q326 and is expected to further increase in Q426F as AI revenue remains more resilient vs NB-related products. Its ADAS revenue is primarily driven by EV bus now and it thinks the proliferation into logistic vehicles should be the next driver. Its drone-related business is on track to see higher revenue contribution from 2027F as it has penetrated into hunder iger's supply chain, as well as two other customers, supplying both domestic and overseas demand. Elan noted on top of the camera modules, its obstacle avoidance system, which carries much higher ASP of US$800, could start to ramp from Q127F. We forecast its AI-business to see a 45% sales CAGR in 2025-30E, outpacing traditional HMI.

Val ation: Maintain b y with a NT$150 price target

We cut 2026/27/28E EPS to N $6.35/6.94/11.55 from N $8.19/10.82/13.28 on softer NB demand and prolonged inventory adjustment. We lower our P to N $150 (from N $170) using a lower multiple of 15x H227-H128E PE (from 16x 2027E P/E) to factor in overall market valuation contraction. We view current headwinds as cyclical and believe the market underappreciates Elan's AI opportunities and upside from share gain.

Source: Company accounts, LSEG Eikon, UBS estimates. Metrics marked as (UBS) have had analyst adjustments applied. Valuations: based on an average share price that year, (E): based on a share price of N $ 117.50 on 05-Nov-2026

Eq ities

aiwan

Semiconductors

RIC: 2458. WBBG: 2458

Trading data and key metrics

Jerry S

Analyst jerry.su@ubs.com +886-28-722 7306

Annie Chen

Associate Analyst annie.chen@ubs.com +886-2-8722 7281

Fig re 1: UBS vs. consens s estimates

Source: UBS estimates, LSEG

Fig re 2: Elan's ann al P&L

Source: Company data, UBS estimates.

Fig re 3: Elan's ann al and q arterly forecasts

0.4% -3.8% -2.5% -5.8% 3.4% 5.7% -33.0% -51.7% 5.3% -2.9% -18.6% 9.3% 39.6%

50.1% 48.0% 47.2% 49.3% 47.6% 47.4% 44.7% 44.9% 48.9% 48.6% 46.5% 46.7% 48.3%

25.2% 24.5% 23.9% 23.1% 24.1% 21.7% 13.3% 0.5% 24.1% 24.2% 17.7% 19.7% 25.5%

28.4% 26.2% 18.3% 7.2% 19.5% 14.7% 27.3% 22.0% 20.8% 19.0% 18.0% 20.0% 21.5%

-19.7% -52.1% 13.0% 22.0% 28.6% 148.5% -79.1% -89.4% 27.6% -10.7% -25.1% 9.1% 66.6%

Source: Company data, UBS estimates

Fig re 4: Elan trades near its historical P/E m ltiple

Source: LSEG

Fig re 5: Elan's FINI ownership recovering from near-term tro gh

Source: EJ

Forecast ret rns

Company Description

Elan Microelectronics is a aiwan-based fabless IC design house specialising in humanmachine interface including touchscreen controllers, touchpad modules, pointing stick modules and fingerprint sensors, specifically for notebook PCs. It started with microcontrollers (MCUs) for PC peripherals and consumer electronics upon establishment in 1994, and further expanded the reach into notebook PC input devices through the acquisition of a related subsidiary under KOA Corporation in 2003.

Val ation Method and Risk Statement

Our price target is based on a target PE multiple.

Fabless integrated circuit (IC) design houses face a variety of uncertainties, including rapidly changing technology, end-market demand, competition, employee turnover and foundry wafer costs. hey are also vulnerable to legal disputes over intellectual property rights.

For Elan, we believe key risks include: 1) PC and NB demand dynamics, with any slowdown in these end-markets directly impacting Elan's growth and also its new product roll-outs; 2) a longer-than-expected product qualification cycle or slower-than-expected product adoption among clients; 3) fiercer-than-expected price competition from global and Asian peers negatively impacting growth and gross margin; and 5) faster-than-expected foundry and assembly cost increases negatively impacting gross margin.

Q antitative Research Review

UBS Global Research publishes a quantitative assessment of its analysts' responses to certain questions about the likelihood of an occurrence of a number of short term factors in a product known as the 'Quantitative Research Review'. he views for this month can be found below. Views contained in this assessment on a particular stock reflect only the views on those short term factors which are a different timeframe to the 12-month timeframe reflected in any equity rating set out in this note. For previous responses please make reference to (i) previous UBS Global Research reports; and (ii) where no applicable research report was published that month, the Quantitative Research Review which can be found at https://neo.ubs.com/quantitative, or contact your UBS sales representative for access to the report or the Quantitative Research eam on ubs-quant-answers@ubs.com. A consolidated report which contains all responses is also available and again you should contact your UBS sales representative for details and pricing or the Quantitative Research eam on the email above.

Elan Microelectronics

Req ired Disclos res

his document has been prepared by UBS Securities Pte. Ltd., aipei Branch, an affiliate of UBS AG. UBS AG, its subsidiaries, branches and affiliates, including former Credit Suisse AG and its subsidiaries, branches and affiliates are referred to herein as "UBS".

For information on how UBS manages conflicts and maintains the independence of its UBS Global Research product; historical performance information; certain additional disclosures concerning UBS Global Research recommendations; and terms and conditions for certain third party data used in research report, please visit https://www.ubs.com/disclosures. Unless otherwise indicated, information and data in this report are based on company disclosures including annual, interim and quarterly reports and other company announcements. Figures in performance charts refer to the past; past performance is not a reliable indicator of future results. Additional information will be made available on request. UBS Securities Co. Limited is licensed by the China Securities Regulatory Commission to conduct securities investment consultancy businesses. UBS acts or may act as principal in the debt securities (or in related derivatives) that may be the subject of this report. his recommendation was finalized on: 05 November 2026 11:55 AM GM . UBS has designated certain UBS Global Research department members as Derivatives Research Analysts where they publish research principally on the analysis of the price or market for a derivative, and provide information reasonably sufficient on which to base a decision to enter into a derivatives transaction. Where Derivatives Research Analysts co-author research reports with Equity Research Analysts or Economists, the Derivatives Research Analyst is responsible for the derivatives investment views, forecasts, and/or recommendations. Q antitative Research Review: UBS Global Research publishes a quantitative assessment of its analysts' responses to certain questions about the likelihood of a number of short term factors occurring, in a product known as the 'Quantitative Research Review'. Views in this assessment on a particular stock reflect only those short term factors and a timeframe different to the 12-month timeframe reflected in any equity rating set out in this document. For the latest responses, please see the Quantitative Research Review Addendum at the back of this document, where applicable. For previous responses, please refer to: (i) previous UBS Global Research reports and (ii) where no applicable research report was published that month, the Quantitative Research Review at https://neo.ubs.com/quantitative, or contact your UBS sales representative for access to the report or the Quantitative Research eam at ubs-quant-answers@ubs.com. A consolidated report containing all responses is also available; for details and pricing, please contact your UBS sales representative or the Quantitative Research team at the above email.