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原始內容
Novatek
Enhanced margin profile and share gain offset by still muted consumer demand
Reiterate Rating: NEUTRAL | PO: 550.00 TWD | Price: 543.00 TWD
2Q26 margin beat on more favorable mix and pricing
2Q26 sales were bolstered by customers ' pull-in demand across DDIC and SoC, ahead of anticipated component price hike. 2Q26 GM improved by 340 bps QoQ to 42.4% (vs. BofAe 39.5%) on inflationary costs pass through, more favorable product mix, and benefit from low-cost inventory. Strong sales and solid GM took 2Q26 EPS to NT$10.40 (vs. BofAe/street of NT$7.66/7.65)
3Q26 sales driven by smartphone replenishment
The company guided 3Q26 sales to +7% QoQ at the mid-point, with strong growth in smartphone driver IC replenishment demand and solid edge AI related SoC shipment partly offsetting by soft demand in large driver IC. Components order pull-in from NB brands in 1H26 should lead to moderation in procurement activity in 2H26. 3Q26 GMs midpoint of 40% slightly down from 2Q26 as tailwind from low-cost inventory fade.
iPhone share gain and higher SoC mix support 2026/27
We now forecast Novatek's sales to grow +10%/+10% YoY in 2026/27, mainly supported by share gain in iPhone OLED DDIC supply (see Korea analyst Simon Woo's report), steady ramp in edge AI vision related SoC. With successful pricing adjustments to reflect rising manufacturing costs across all product line, coupled with mix shift toward margin accretive SoC segment, GMs should lift to 40.7%/39.5% in 2026/27. (vs. 37.7% in 2025)
Stay Neutral on mixed demand outlook
We lift our 2026/27/28 EPS estimates from NT$29.17/34.08/36.57 to NT$34.63/37.03/38.90, to factor in better pricing and margin assumptions. We raise our PO from NT$460 to NT$550, now based on 15x 2027 P/E (was 13x 2027 P/E), given enhanced margin profile and market position, but stay Neutral given demand softness in consumer electronic still lingers.
| Estimates (Dec) (NT$) | 2024A | 2025A | 2026E | 2027E | 2028E |
|---|---|---|---|---|---|
| Net Income (Adjusted - mn) | 20,342 | 16,348 | 21,076 | 22,533 | 23,671 |
| EPS | 33.43 | 26.87 | 34.63 | 37.03 | 38.90 |
| EPS Change (YoY) | -12.8% | -19.6% | 28.9% | 6.9% | 5.0% |
| Consensus EPS (Visible Alpha) | 30.25 | 33.33 | 35.45 | ||
| Dividend / Share | 28.00 | 23.00 | 23.00 | 27.00 | 27.00 |
| Free Cash Flow / Share | 25.27 | 20.41 | 42.92 | 32.25 | 39.06 |
| Valuation (Dec) | |||||
| P/E | 16.24x | 20.21x | 15.68x | 14.66x | 13.96x |
| Dividend Yield | 5.16% | 4.24% | 4.24% | 4.97% | 4.97% |
| EV / EBITDA* | 12.45x | 14.73x | 11.83x | 10.74x | 10.20x |
| Free Cash Flow Yield* | 4.65% | 3.76% | 7.90% | 5.94% | 7.19% |
| * For full definitions of iQ method SM measures, see page 7. |
This research report provides general information only. No part of this report may be used or reproduced or quoted in any manner whatsoever in Taiwan by the press or other persons without the express written consent of BofA Securities.
>> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analyst under the FINRA rules.
Refer to "Other Important Disclosures" for information on certain BofA Securities entities that take responsibility for the information herein in particular jurisdictions.
BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Refer to important disclosures on page 8 to 10. Analyst Certification on page 5. Price
06 August 2026
Equity
| Key Changes (NT$) | Previous | Current |
|---|---|---|
| Price Obj. | 460.00 | 550.00 |
| 2026E EPS | 29.17 | 34.63 |
| 2027E EPS | 34.08 | 37.03 |
| 2028E EPS | 36.57 | 38.90 |
| 2026E EBITDA (m) | 20,695.6 | 24,125.8 |
| 2027E EBITDA (m) | 24,042.0 | 26,584.9 |
| 2028E EBITDA (m) | 25,829.3 | 27,977.9 |
Mike Yang >>
Research Analyst Merrill Lynch (Taiwan) +886 2 2376 3729
mike.c.yang@bofa.com
Haas Liu >>
Research Analyst Merrill Lynch (Taiwan)
haas.liu@bofa.com
Cathy Hsu >>
Research Analyst Merrill Lynch (Taiwan) cathy.hsu3@bofa.com
Stock Data
| Price | 543.00 TWD |
|---|---|
| Price Objective | 550.00 TWD |
| Date Established | 6-Aug-2026 |
| Investment Opinion | B-2-7 |
| 52-Week Range | 352.00 TWD-606.00 |
| TWD | |
| Mrkt Val / Shares Out (mn) | 10,229 USD / 608.5 |
| Market Value (mn) | 330,422 TWD |
| Average Daily Value (mn) | 97.47 USD |
| Free Float | 90.2% |
| BofA Ticker / Exchange | NVKMF / TAI |
| Bloomberg / Reuters | 3034 TT / 3034.TW |
| ROE (2026E) | 29.6% |
| Net Dbt to Eqty (Dec-2025A) | -62.0% |
iQ profile SM Novatek
| Key Income Statement Data (Dec) | 2024A | 2025A | 2026E | 2027E | 2028E |
|---|---|---|---|---|---|
| (NT$ Millions) | |||||
| Sales | 102,788 | 100,663 | 110,626 | 122,104 | 129,980 |
| Gross Profit | 41,472 | 37,908 | 44,999 | 48,176 | 50,371 |
| Sell General &Admin Expense | (2,859) | (2,946) | (3,256) | (3,234) | (3,317) |
| Operating Profit | 21,806 | 18,237 | 22,602 | 25,030 | 26,496 |
| Net Interest &Other Income | 2,228 | 1,203 | 2,641 | 1,795 | 1,690 |
| Associates | 92 | 94 | 0 | 0 | 0 |
| Pretax Income | 24,126 | 19,534 | 25,243 | 26,825 | 28,185 |
| Tax (expense) / Benefit | (3,784) | (3,186) | (4,168) | (4,292) | (4,515) |
| Net Income (Adjusted) | 20,342 | 16,348 | 21,076 | 22,533 | 23,671 |
| Average Fully Diluted Shares Outstanding | 609 | 609 | 609 | 609 | 609 |
| Key Cash Flow Statement Data | |||||
| Net Income | 20,342 | 16,348 | 21,076 | 22,533 | 23,671 |
| Depreciation &Amortization | 1,127 | 1,143 | 1,523 | 1,555 | 1,482 |
| Change in Working Capital | (5,433) | (2,047) | 4,595 | (1,470) | 1,503 |
| Deferred Taxation Charge | NA | NA | NA | NA | NA |
| Other Adjustments, Net | 617 | (1,814) | 122 | (1,795) | (1,690) |
| Cash Flow from Operations | 16,652 | 13,629 | 27,317 | 20,823 | 24,967 |
| Capital Expenditure | (1,276) | (1,211) | (1,200) | (1,200) | (1,200) |
| (Acquisition) / Disposal of Investments | 0 | 0 | 0 | 0 | 0 |
| Other Cash Inflow / (Outflow) | 427 | (20) | 311 | 0 | 0 |
| Cash Flow from Investing | (849) | (1,232) | (889) | (1,200) | (1,200) |
| Shares Issue / (Repurchase) | 0 | 0 | 0 | 0 | 0 |
| Cost of Dividends Paid | NA | NA | NA | NA | NA |
| Cash Flow from Financing | (20,956) | (18,741) | (14,039) | (13,996) | (16,430) |
| Free Cash Flow | 15,377 | 12,417 | 26,117 | 19,623 | 23,767 |
| Net Debt | (48,318) | (41,987) | (54,403) | (60,030) | (67,367) |
| Change in Net Debt | 5,119 | 6,352 | (12,414) | (5,627) | (7,337) |
| Key Balance Sheet Data | |||||
| Property, Plant &Equipment | 6,032 | 6,219 | 7,078 | 6,695 | 6,395 |
| Other Non-Current Assets | 17,327 | 17,607 | 21,263 | 20,927 | 20,906 |
| Trade Receivables | 20,274 | 21,099 | 22,417 | 25,723 | 26,974 |
| Cash &Equivalents | 48,771 | 42,419 | 54,832 | 60,460 | 67,797 |
| Other Current Assets | 9,996 | 10,022 | 9,702 | 10,302 | 9,853 |
| Total Assets | 102,401 | 97,366 | 115,293 | 124,106 | 131,924 |
| Long-Term Debt | 452 | 432 | 430 | 430 | 430 |
| Other Non-Current Liabilities | 9,661 | 9,343 | 9,472 | 9,458 | 9,459 |
| Short-Term Debt | 0 | 0 | 0 | 0 | 0 |
| Other Current Liabilities | 24,364 | 19,851 | 30,499 | 34,125 | 36,605 |
| Total Liabilities | 34,477 | 29,627 | 40,401 | 44,013 | 46,494 |
| Total Equity | 67,923 | 67,739 | 74,892 | 80,092 | 85,430 |
| Total Equity &Liabilities | 102,401 | 97,366 | 115,293 | 124,106 | 131,924 |
| iQ method SM - Bus Performance* | |||||
| Return On Capital Employed | 24.9% | 20.7% | 24.2% | 24.9% | 24.8% |
| Return On Equity | 30.1% | 24.1% | 29.6% | 29.1% | 28.6% |
| Operating Margin | 21.2% | 18.1% | 20.4% | 20.5% | 20.4% |
| EBITDA Margin | 22.3% | 19.3% | 21.8% | 21.8% | 21.5% |
| iQ method SM - Quality of Earnings* | |||||
| Cash Realization Ratio | 0.8x | 0.8x | 1.3x | 0.9x | 1.1x |
| Asset Replacement Ratio | 1.1x | 1.1x | 0.8x | 0.8x | 0.8x |
| Tax Rate (Reported) | 15.7% | 16.3% | 16.5% | 16.0% | 16.0% |
| Net Debt-to-Equity Ratio | -71.1% | -62.0% | -72.6% | -75.0% | -78.9% |
| Interest Cover | NM | NM | NM | NM | NM |
Key Metrics
- For full definitions of iQ method SM measures, see page 7.
Company Sector
Semiconductors
Company Description
Founded in 1997, Novatek is a worldwide leading display driver IC design company. Its product offering encompasses flat panel display driver ICs (DDI), timing controller ICs (TCON), video processing SoC such as LCD monitor scaler, TV SoC, DSC, STB controller IC, TDDI and OLED drivers. The company has over 30% market share in large-size driver IC market and 10+% market share in small-to-medium display driver IC market.
Investment Rationale
We rate Novatek as Neutral as we like its resilience in gross margin, dividend yield and position in high-end (OLED) DDIC market, vs the cautiousness held for the demand outlook and lack of spec upgrades in most of the consumer products (TV, PC, smartphone).
Focus tables
Exhibit 1: 2Q26 result review
2Q26 GM beat on better pricing and product mix
| (NT$mn) | 2Q25A | 1Q26A | 2Q26A | QoQ% | YoY% | BofAe | Diff (%) | Consensus | Diff (%) |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 26,152 | 23,145 | 28,660 | 23.8% | 9.6% | 28,155 | 1.8% | 28,174 | 1.7% |
| Gross profit | 9,494 | 9,040 | 12,157 | 34.5% | 28.1% | 11,129 | 9.2% | 11,166 | 8.9% |
| Gross margin (%) | 36.3% | 39.1% | 42.4% | 3.4ppt | 6.1ppt | 39.5% | 2.9ppt | 39.6% | 2.8ppt |
| Operating income | 4,823 | 4,028 | 6,466 | 60.5% | 34.1% | 5,146 | 25.6% | 5,216 | 24.0% |
| Operating margin (%) | 18.4% | 17.4% | 22.6% | 5.2ppt | 4.1ppt | 18.3% | 4.3ppt | 18.5% | 4.0ppt |
| Pre-tax income | 4,602 | 4,389 | 7,782 | 77.3% | 69.1% | 5,615 | 38.6% | 5,646 | 37.8% |
| Pre-tax margin (%) | 17.6% | 19.0% | 27.2% | 8.2ppt | 9.6ppt | 19.9% | 7.2ppt | 20.0% | 7.1ppt |
| Net income | 3,739 | 3,767 | 6,328 | 68.0% | 69.2% | 4,660 | 35.8% | 4,641 | 36.3% |
| Net margin (%) | 14.3% | 16.3% | 22.1% | 5.8ppt | 7.8ppt | 16.6% | 5.5ppt | 16.5% | 5.6ppt |
| EPS - Diluted (NT$) | 6.14 | 6.19 | 10.40 | 68.0% | 69.2% | 7.66 | 35.8% | 7.65 | 35.9% |
Source: BofA Global research estimates, Bloomberg, company data
Exhibit 2: BofAe vs. consensus
We are 8-19% ahead of consensus given higher sales and margin assumptions
| 2026E | 2026E | 2026E | 2027E | 2027E | 2027E | 2028E | 2028E | 2028E | |
|---|---|---|---|---|---|---|---|---|---|
| (NT$mn) | BofAe | Consensus | Diff (%) | BofAe | Consensus | Diff (%) | BofAe | Consensus | Diff (%) |
| Revenue | 110,626 | 107,356 | 3.0% | 122,104 | 116,832 | 4.5% | 129,980 | 124,536 | 4.4% |
| Gross profit | 44,999 | 42,100 | 6.9% | 48,176 | 45,484 | 5.9% | 50,371 | 48,859 | 3.1% |
| Gross margin (%) | 40.7% | 39.2% | 1.5ppt | 39.5% | 38.9% | 0.5ppt | 38.8% | 39.2% | -0.5ppt |
| Operating income | 22,602 | 19,996 | 13.0% | 25,030 | 22,386 | 11.8% | 26,496 | 24,755 | 7.0% |
| Operating margin (%) | 20.4% | 18.6% | 1.8ppt | 20.5% | 19.2% | 1.3ppt | 20.4% | 19.9% | 0.5ppt |
| Pre-tax income | 25,243 | 21,402 | 17.9% | 26,825 | 23,834 | 12.5% | 28,185 | 26,102 | 8.0% |
| Pre-tax margin (%) | 22.8% | 19.9% | 2.9ppt | 22.0% | 20.4% | 1.6ppt | 21.7% | 21.0% | 0.7ppt |
| Net income | 21,076 | 17,816 | 18.3% | 22,533 | 19,869 | 13.4% | 23,671 | 21,789 | 8.6% |
| Net margin (%) | 19.1% | 16.6% | 2.5ppt | 18.5% | 17.0% | 1.4ppt | 18.2% | 17.5% | 0.7ppt |
| EPS (NT$) | 34.63 | 29.03 | 19.3% | 37.03 | 32.22 | 14.9% | 38.90 | 35.80 | 8.6% |
Source: BofA Global research estimates, Bloomberg
Exhibit 3: Earnings estimate change
We raise our 2026/27/28 EPS by 6-19% on higher sales assumptions and GM/OpM improvement
| 2026E | 2026E | 2026E | 2027E | 2027E | 2027E | 2028E | 2028E | 2028E | |
|---|---|---|---|---|---|---|---|---|---|
| (NT$mn) | New | Old | Diff (%) | New | Old | Diff (%) | New | Old | Diff (%) |
| Revenue | 110,626 | 107,571 | 2.8% | 122,104 | 119,150 | 2.5% | 129,980 | 125,258 | 3.8% |
| Gross profit | 44,999 | 42,085 | 6.9% | 48,176 | 46,136 | 4.4% | 50,371 | 48,210 | 4.5% |
| Gross margin (%) | 40.7% | 39.1% | 1.6ppt | 39.5% | 38.7% | 0.7ppt | 38.8% | 38.5% | 0.3ppt |
| Operating income | 22,602 | 19,324 | 17.0% | 25,030 | 22,727 | 10.1% | 26,496 | 24,538 | 8.0% |
| Operating margin (%) | 20.4% | 18.0% | 2.5ppt | 20.5% | 19.1% | 1.4ppt | 20.4% | 19.6% | 0.8ppt |
| Pre-tax income | 25,243 | 21,106 | 19.6% | 26,825 | 24,564 | 9.2% | 28,185 | 26,362 | 6.9% |
| Pre-tax margin (%) | 22.8% | 19.6% | 3.2ppt | 22.0% | 20.6% | 1.4ppt | 21.7% | 21.0% | 0.6ppt |
| Net income | 21,076 | 17,753 | 18.7% | 22,533 | 20,737 | 8.7% | 23,671 | 22,254 | 6.4% |
| Net margin (%) | 19.1% | 16.5% | 2.5ppt | 18.5% | 17.4% | 1.0ppt | 18.2% | 17.8% | 0.4ppt |
| EPS (NT$) | 34.63 | 29.17 | 18.7% | 37.03 | 34.08 | 8.7% | 38.90 | 36.57 | 6.4% |
Source: BofA Global research estimates
BofA GLOBAL RESEARCH
BofA GLOBAL RESEARCH
BofA GLOBAL RESEARCH
Exhibit 4: Income statement
Quarterly and annual income statement
| (NT$mn) | 1Q26 | 2Q26 | 3Q26E | 4Q26E | 1Q27E | 2Q27E | 3Q27E | 4Q27E | 1Q28E | 2Q28E | 3Q28E | 4Q28E | 2025 | 2026E | 2027E | 2028E |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | $23,145 | $28,660 | $30,588 | $28,233 | $28,276 | $29,895 | $32,874 | $31,058 | $30,777 | $33,413 | $33,451 | $32,339 | $100,663 | $110,626 | $122,104 | $129,980 |
| COGS | -$14,105 | -$16,503 | -$18,206 | -$16,813 | -$16,921 | -$17,996 | -$20,076 | -$18,935 | -$18,767 | -$20,418 | -$20,571 | -$19,852 | -$62,755 | -$65,628 | -$73,928 | -$79,609 |
| Gross profit | $9,040 | $12,157 | $12,382 | $11,420 | $11,355 | $11,899 | $12,799 | $12,123 | $12,010 | $12,995 | $12,880 | $12,486 | $37,908 | $44,999 | $48,176 | $50,371 |
| Operating expenses | -$5,012 | -$5,691 | -$6,072 | -$5,621 | -$5,460 | -$5,718 | -$6,045 | -$5,924 | -$5,746 | -$5,984 | -$6,103 | -$6,042 | -$19,671 | -$22,396 | -$23,146 | -$23,876 |
| SG&A | -$736 | -$841 | -$883 | -$795 | -$779 | -$802 | -$835 | -$818 | -$793 | -$833 | -$850 | -$841 | -$2,946 | -$3,256 | -$3,234 | -$3,317 |
| R&D | -$4,276 | -$4,850 | -$5,189 | -$4,826 | -$4,681 | -$4,915 | -$5,210 | -$5,106 | -$4,953 | -$5,151 | -$5,254 | -$5,201 | -$16,725 | -$19,141 | -$19,912 | -$20,558 |
| Operating income | $4,028 | $6,466 | $6,309 | $5,800 | $5,895 | $6,182 | $6,754 | $6,200 | $6,264 | $7,011 | $6,776 | $6,444 | $18,237 | $22,602 | $25,030 | $26,496 |
| Non-operating income | $362 | $1,316 | $483 | $480 | $454 | $455 | $445 | $440 | $423 | $424 | $418 | $425 | $1,296 | $2,641 | $1,795 | $1,690 |
| Interest income | $228 | $223 | $224 | $225 | $219 | $223 | $222 | $222 | $218 | $221 | $220 | $219 | $1,028 | $900 | $886 | $878 |
| Investment income | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $94 | $0 | $0 | $0 |
| Others | $133 | $1,093 | $259 | $255 | $235 | $232 | $223 | $219 | $206 | $203 | $198 | $206 | $174 | $1,741 | $909 | $812 |
| Pre-tax profit | $4,389 | $7,782 | $6,792 | $6,280 | $6,349 | $6,637 | $7,200 | $6,640 | $6,687 | $7,435 | $7,194 | $6,869 | $19,534 | $25,243 | $26,825 | $28,185 |
| Tax | -$622 | -$1,454 | -$1,087 | -$1,005 | -$1,003 | -$1,075 | -$1,152 | -$1,062 | -$1,070 | -$1,193 | -$1,152 | -$1,100 | -$3,186 | -$4,168 | -$4,292 | -$4,515 |
| Net income | $3,767 | $6,328 | $5,706 | $5,275 | $5,346 | $5,562 | $6,048 | $5,578 | $5,618 | $6,242 | $6,042 | $5,769 | $16,348 | $21,076 | $22,533 | $23,671 |
| Diluted EPS (NT$) | $6.19 | $10.40 | $9.38 | $8.67 | $8.79 | $9.14 | $9.94 | $9.17 | $9.23 | $10.26 | $9.93 | $9.48 | $26.86 | $34.63 | $37.03 | $38.90 |
| %of Sales | ||||||||||||||||
| Gross margin | 39.1% | 42.4% | 40.5% | 40.5% | 40.2% | 39.8% | 38.9% | 39.0% | 39.0% | 38.9% | 38.5% | 38.6% | 37.7% | 40.7% | 39.5% | 38.8% |
| Operating margin | 17.4% | 22.6% | 20.6% | 20.5% | 20.8% | 20.7% | 20.5% | 20.0% | 20.4% | 21.0% | 20.3% | 19.9% | 18.1% | 20.4% | 20.5% | 20.4% |
| Pre-tax margin | 19.0% | 27.2% | 22.2% | 22.2% | 22.5% | 22.2% | 21.9% | 21.4% | 21.7% | 22.3% | 21.5% | 21.2% | 19.4% | 22.8% | 22.0% | 21.7% |
| Net margin | 16.3% | 22.1% | 18.7% | 18.7% | 18.9% | 18.6% | 18.4% | 18.0% | 18.3% | 18.7% | 18.1% | 17.8% | 16.2% | 19.1% | 18.5% | 18.2% |
| QoQ growth% | ||||||||||||||||
| Revenue | 1.4% | 23.8% | 6.7% | -7.7% | 0.2% | 5.7% | 10.0% | -5.5% | -0.9% | 8.6% | 0.1% | -3.3% | -2.1% | 9.9% | 10.4% | 6.4% |
| Gross profit | 3.8% | 34.5% | 1.9% | -7.8% | -0.6% | 4.8% | 7.6% | -5.3% | -0.9% | 8.2% | -0.9% | -3.1% | -8.6% | 18.7% | 7.1% | 4.6% |
| Operating profit | 4.3% | 60.5% | -2.4% | -8.1% | 1.6% | 4.9% | 9.3% | -8.2% | 1.0% | 11.9% | -3.4% | -4.9% | -16.4% | 23.9% | 10.7% | 5.9% |
| Pre-tax profit | -0.6% | 77.3% | -12.7% | -7.5% | 1.1% | 4.5% | 8.5% | -7.8% | 0.7% | 11.2% | -3.2% | -4.5% | -19.0% | 29.2% | 6.3% | 5.1% |
| Net profit | 2.1% | 68.0% | -9.8% | -7.5% | 1.3% | 4.0% | 8.7% | -7.8% | 0.7% | 11.1% | -3.2% | -4.5% | -19.6% | 28.9% | 6.9% | 5.0% |
| YoY growth% | ||||||||||||||||
| Revenue | -14.7% | 9.6% | 24.5% | 23.7% | 22.2% | 4.3% | 7.5% | 10.0% | 8.8% | 11.8% | 1.8% | 4.1% | -2.1% | 9.9% | 10.4% | 6.4% |
| Gross profit | -16.2% | 28.1% | 38.8% | 31.1% | 25.6% | -2.1% | 3.4% | 6.2% | 5.8% | 9.2% | 0.6% | 3.0% | -8.6% | 18.7% | 7.1% | 4.6% |
| Operating profit | -29.3% | 34.1% | 63.6% | 50.2% | 46.4% | -4.4% | 7.1% | 6.9% | 6.3% | 13.4% | 0.3% | 3.9% | -16.4% | 23.9% | 10.7% | 5.9% |
| Pre-tax profit | -28.5% | 69.1% | 55.2% | 42.2% | 44.6% | -14.7% | 6.0% | 5.7% | 5.3% | 12.0% | -0.1% | 3.5% | -19.0% | 29.2% | 6.3% | 5.1% |
| Net profit | -28.4% | 69.2% | 56.1% | 43.0% | 41.9% | -12.1% | 6.0% | 5.7% | 5.1% | 12.2% | -0.1% | 3.4% | -19.6% | 28.9% | 6.9% | 5.0% |
Source: BofA Global research estimates, Company data
Exhibit 5: Terms and definitions
Glossary of abbreviations/acronyms
| Term | Definition |
|---|---|
| DDIC | Display driver IC |
| LDDIC | Large Display driver IC |
| NB | Notebook |
| OLED | Organic Light-Emitting Diode |
| PC | Personal Computer |
| SoC | System-on-Chip |
| TDDI | Touch and Display Driver Integration |
| TV | Television |
Source:
BofA Global research
BofA GLOBAL RESEARCH
BofA GLOBAL RESEARCH
Price objective basis & risk
Novatek (NVKMF)
Our PO of NT$550 is based on 15x 2027E P/E, which is in the upper half of the historical trading range of 5-21x over the past ten years, with firmer recovery from the cycle bottom in the foreseeable future. The 15x target multiple is underpinned by (1) its market-share gain across most of its product lines, including TV SoC, LDDIC and OLED DDI, (2) solid position in high-end TDDI, (3) new business opportunities like ASIC, and (4) solid cashflow generation and balance sheet, with NT$80+ net cash/share on hand.
Upside risks to our PO are 1) better-than-expected demand in smartphone/PC/TV endmarkets, 2) faster progress into the new businesses with higher ASP.
Downside risks to our PO are 1) tougher-than-expected competition in OLED DDI as competitors catch up in technology, 2) faster-than-expected commoditization of TDDI squeezing profit margins.