260622_2449_京元電_ms_kyec

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M June 22, 2026 03:45 PM GMT

King Yuan Electronics Co Ltd | Asia Pacific

Longer burn-in and strong CPU demand drive revenue upside

CPU demand from the largest customer should grow robustly in 2027. Next-gen XPU burn-in is also running longer than we expected. Raise our price target to NT$388 and reiterate OW.

Next-generation XPU burn-in time is longer than we expected, suggesting 3-5% revenue upside in 2026: Over the past two months, KYEC's share price has been relatively subdued (up 12%) vs. ASE's (>40%), mostly as the largest customer's Rseries XPU slipped slightly. (The TAIEX is up 22%.) However, as we noted in Asia AI Summit 2026 Feedback , R-series XPU should start contributing in late 2Q26 and ramp quickly in 3Q26. Moreover, our recent industry checks suggest that R-series XPU burn-in time could double from our initial forecast, to 5-6 hours, owing to thermal design challenges, driving 3-5% 2026e revenue upside.

How much could KYEC benefit from strong Agentic AI demand? Previously, in KYEC: Benefiting from Google TPU/CPU demand upside; OW, we mentioned that KYEC could benefit from strong Google CPU demand. We've also seen CPU demand from the largest customer growing rapidly in recent weeks, especially after it showcased stronger V-series CPU performance than x86 and guided for US$20bn in V-series CPU revenue for the current fiscal year. See our Key Computex Takeaways.

KYEC handles nearly 100% of final testing and burn-in for that CPU. We now forecast that CPU demand from the largest customer could reach 8-10% of total revenue in 2026e and 2027e. Combined with Google CPU, total CPU demand could exceed 15% of total revenue in 2026, one of the company's fastest-growing segments. See Exhibit 1 for our AI demand breakdown.

3Q26 should show strong sequential growth - at least 15% Q/Q: We cite (1) sustainable B-series XPU demand, (2) R-series XPU ramp, (3) new Google 3nm TPU ramp, and (4) traditional smartphone peak season demand.

KYEC may further expand capacity: With longer test time for next -gen XPU and rising testing needs from its major US customer, we believe KYEC may expand capacity further in Taiwan or the US in 2026-2027, creating revenue upside.

Reiterate our 2026e revenue growth of 40% y/y; raise price target to NT$388 (implies 26x 2027e EPS) - stay OW: We believe the major investor concern (Rseries XPU delay) has cleared, and there might be additional 2026-2027e revenue upside. P/E is 22x our slightly increased 2027 EPS estimate, which we still view as attractive vs. its 2025-2028e revenue CAGR of 38%.

Idea

King Yuan Electronics Co Ltd (2449.TW, 2449 TT)

Greater China Technology Semiconductors | Taiwan

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