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95KB | 真資料圖 | Bull/Bear 圖：Bull NT$1,000（+46%）、Base NT$908（+33%）、Bear NT$500（-27%）；股價線 Oct-25 約 200 升至 Oct-26 現價 NT$683（2026-10-29） |
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205KB | 文字卡 | Citi 評等與目標價歷史（附錄）：3711 TP 由 2024-01 NT$154 逐次調至 2026-07-30 NT$750；Short-Term View 兩組歷史時間點表 |
原始內容
原始內容
Prepared for [訂閱者已遮蔽] citi
29 Oct 2026 12:56:11 ET │ 16 pages
ASE Technology Holding (3711.TW)
LEAP growth to drive margin expansion. Significant CPO ramp in 2027
CITI'S TAKE
ASEH reported an upbeat 3Q26 result with NP reach NT$27bn (up 28% QoQ and 148% YoY) thanks to stronger UTR, and across traditional packaging and testing and a richer product mix as LEAP ramps. Management attributed the latest improvement mainly to LEAP growth and broader utilization gains, with a supportive pricing environment. It expects sequential margin expansion to continue into 2027 and described the previous structural margin ceiling 30% as a new baseline for IC ATM. For 4Q26, consolidated GM is guided to 23-24% (vs 3Q26 22.1%); Looking into 2027, management expects LEAP revenue to double, with further GM expansion. As demand remains ahead of available capacity, we reiterate our positive view on ASEH with higher TP of NT$908.
LEAP, CPO and full-process services - Management now expect its 2026 LEAP revenue to be more than US$4bn and reiterated its expectation for LEAP revenue to double in 2027. Demand is strong across assembly and test, but capacity constraints are limiting how quickly ASEH can meet customer needs. Full-process revenue is expected to reach about US$300m in 2026 and exceed US$1bn in 2027, supported by multiple customer engagements. ASEH expects more than US$500m of CPO revenue in 2027, which would be included within LEAP, with mass production to begin in 4Q26. As Nvidia previously announced the engagement with SPIL (Taiwan News 22 Oct) with aggressive capacity expansion, we see more structural upside for its CPO revenue into 2028 onward.
Capacity expansion and capex go higher - ASEH raised its 2026 capex outlook to US$11.5bn, and expects 2027 capex to be higher than 2026 as it expands capacity and continues its R&D investment; funding may include multiple sources, including customer trade-finance arrangements. ASEH has 22 building projects underway in Taiwan, more than half are expected to begin contributing some revenue by the end of 2027. Management said assembly growth should outpace testing growth next year, with investment priorities favoring assembly and wafer probing over final test under current resource constraints.
Maintaining Buy on positive long term outlook - On the back of its structural GM upside and more LEAP revenue contribution, we lift our 2026/2027/2028 earnings projection by 12%/18%/16%. We maintain Buy with TP NT$908, based on an unchanged 25x 2027 EPS.
Earnings Summary
| Year to 31 Dec | Net Profit (NT$M) | Diluted EPS (NT$) | EPS growth (%) | P/E (x) | P/B (x) | ROE (%) | Yield (%) |
|---|---|---|---|---|---|---|---|
| 2024A | 32,482 | 7.52 | 1.8 | 90.8 | 9.3 | 10.5 | 0.8 |
| 2025A | 40,658 | 9.38 | 24.6 | 72.8 | 8.8 | 12.1 | 0.8 |
| 2026E | 98,821 | 22.76 | 142.8 | 30.0 | 7.3 | 25.7 | 1.0 |
| 2027E | 159,033 | 36.63 | 60.9 | 18.6 | 6.0 | 34.1 | 2.3 |
| 2028E | 207,923 | 47.90 | 30.7 | 14.3 | 5.0 | 36.9 | 3.4 |
Source: Powered by dataCentral
See Appendix A-1 for Analyst Certification, Important Disclosures and Research Analyst Affiliations.
| n Buy Short-Term View: Upside Price (29 Oct 26 13:30) | NT$683.00 |
|---|---|
| Target price from NT$750.00 | NT$908.00↑ |
| Expected share price return | 32.9% |
| Expected dividend yield | 2.2% |
| Expected total return | |
| 35.1% | |
| Market Cap | NT$3,065,365M US$94,645M |
Price Performance (RIC: 3711.TW, BB: 3711 TT)
TWD
Laura (Chia Yi) Chen AC
+886-2-8726-9090 laura.cy.chen@citi.com
Jack Chen +886-2-8726-9091 jack1.chen@citi.com
Nicholas Lai +886-2-8726-9093 nicholas.lai@citi.com Prepared for [訂閱者已遮蔽] Prepared for [訂閱者已遮蔽] Stable traditional businesses and EMS outlook - Traditional packaging and test demand is improving, supported by utilization gains and a recovery in automotive and industrial, as well as AI-adjacent chips. Management expects general-market business to grow again in 2027, despite softer smartphone and PC demand. For 2027, ASEH expects further EMS growth, led by high-performance computing, and is pursuing system-level solutions that combine EMS capabilities with ATM technologies.
| 3711.TW: - Profit & Loss (NT$m) | Fiscal year end 31-Dec - 2024 | Fiscal year end 31-Dec - 2025 | Fiscal year end 31-Dec - 2026E | Fiscal year end 31-Dec - 2027E | Fiscal year end 31-Dec - 2028E | Price: NT$683.00; TP: NT$908.00; Market Cap: NT$3,065,365m; Recomm: Buy - Valuation ratios | Price: NT$683.00; TP: NT$908.00; Market Cap: NT$3,065,365m; Recomm: Buy - 2024 | Price: NT$683.00; TP: NT$908.00; Market Cap: NT$3,065,365m; Recomm: Buy - 2025 | Price: NT$683.00; TP: NT$908.00; Market Cap: NT$3,065,365m; Recomm: Buy - 2026E | Price: NT$683.00; TP: NT$908.00; Market Cap: NT$3,065,365m; Recomm: Buy - 2027E | Price: NT$683.00; TP: NT$908.00; Market Cap: NT$3,065,365m; Recomm: Buy - 2028E |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Sales revenue | 595,410 | 645,388 | 873,893 | 1,113,339 | 1,347,515 | PE (x) | 90.8 | 72.8 | 30.0 | 18.6 | 14.3 |
| Cost of sales | -498,478 | -531,195 | -682,370 | -833,319 | -995,526 | PB (x) | 9.3 | 8.8 | 7.3 | 6.0 | 5.0 |
| Gross profit | 96,932 | 114,193 | 191,523 | 280,020 | 351,989 | EV/EBITDA (x) | 33.3 | 27.9 | 16.5 | 9.9 | 7.6 |
| Gross Margin (%) | 16.3 | 17.7 | 21.9 | 25.2 | 26.1 | FCF yield (%) | 0.1 | -2.0 | -4.5 | 3.3 | 0.8 |
| EBITDA (Adj) | 95,162 | 114,363 | 199,453 | 338,596 | 442,431 | Dividend yield (%) | 0.8 | 0.8 | 1.0 | 2.3 | 3.4 |
| EBITDA Margin (Adj) (%) | 16.0 | 17.7 | 22.8 | 30.4 | 32.8 | Payout ratio (%) | 69 | 56 | 31 | 42 | 48 |
| Depreciation | -55,995 | -63,607 | -87,622 | -162,686 | -220,733 | ROE (%) | 10.5 | 12.1 | 25.7 | 34.1 | 36.9 |
| Amortisation | 0 | 0 | 0 | 0 | 0 | Cashflow (NT$m) | 2024 | 2025 | 2026E | 2027E | 2028E |
| EBIT (Adj) | 39,166 | 50,756 | 111,830 | 175,909 | 221,697 | EBITDA | 95,162 | 114,363 | 199,453 | 338,596 | 442,431 |
| EBIT Margin (Adj) (%) | 6.6 | 7.9 | 12.8 | 15.8 | 16.5 | Working capital | 16,383 | 6,233 | 51,246 | 214,587 | 32,070 |
| Net interest | -4,965 | -6,070 | -6,089 | -10,988 | -12,898 | Other | -5,241 | -8,915 | -10,854 | -15,322 | -12,206 |
| Associates | 0 | 0 | 0 | 0 | 0 | Operating cashflow | 106,304 | 111,681 | 239,845 | 537,860 | 462,295 |
| Non-Op/Except/Other Adj | 7,482 | 6,615 | 15,998 | 30,917 | 46,678 | Capex | -103,655 | -172,191 | -373,417 | -440,000 | -440,000 |
| Pre-tax profit | 41,683 | 51,301 | 121,739 | 195,838 | 255,478 | Net acq/disposals | -12,916 | -4,451 | -37,043 | -36,484 | -53,416 |
| Tax | -7,758 | -9,460 | -20,763 | -35,251 | -45,986 | Other | 534 | 2,909 | -16,610 | 0 | 0 |
| Extraord./Min.Int./Pref.div. | -1,443 | -1,182 | -2,155 | -1,554 | -1,568 | Investing cashflow | -116,038 | -173,733 | -427,070 | -476,484 | -493,416 |
| Reported net profit | 32,482 | 40,658 | 98,821 | 159,033 | 207,923 | Dividends paid | -22,459 | -23,034 | -31,713 | -69,175 | -103,371 |
| Net Margin (%) | 5.5 | 6.3 | 11.3 | 14.3 | 15.4 | Financing cashflow | 18,943 | 78,028 | 114,494 | -29,025 | -5,997 |
| Core NPAT | 32,482 | 40,658 | 98,821 | 159,033 | 207,923 | Net change in cash | 9,208 | 15,976 | -72,731 | 32,351 | -37,118 |
| Per share data | 2024 | 2025 | 2026E | 2027E | 2028E | Free cashflow to s/holders | 2,648 | -60,510 | -133,573 | 97,860 | 22,295 |
| Reported EPS ($) | 7.52 | 9.38 | 22.76 | 36.63 | 47.90 | ||||||
| Core EPS ($) | 7.52 | 9.38 | 22.76 | 36.63 | 47.90 | ||||||
| DPS ($) | 5.21 | 5.30 | 7.13 | 15.47 | 23.12 | ||||||
| CFPS ($) | 24.62 | 25.76 | 55.25 | 123.90 | 106.49 | ||||||
| FCFPS ($) | 0.61 | -13.95 | -30.77 | 22.54 | 5.14 | ||||||
| BVPS ($) | 73.27 | 77.99 | 94.20 | 114.30 | 137.68 | ||||||
| Wtd avg ord shares (m) | 4,318 | 4,336 | 4,341 | 4,341 | 4,341 | ||||||
| Wtd avg diluted shares (m) | 4,318 | 4,336 | 4,341 | 4,341 | 4,341 | ||||||
| Growth rates | 2024 | 2025 | 2026E | 2027E | 2028E | ||||||
| Sales revenue (%) | 2.3 | 8.4 | 35.4 | 27.4 | 21.0 | ||||||
| EBIT (Adj) (%) | -2.9 | 29.6 | 120.3 | 57.3 | 26.0 | ||||||
| Core NPAT (%) | 2.4 | 25.2 | 143.1 | 60.9 | 30.7 | ||||||
| Core EPS (%) | 1.8 | 24.6 | 142.8 | 60.9 | 30.7 | ||||||
| Balance Sheet (NT$m) | 2024 | 2025 | 2026E | 2027E | 2028E | ||||||
| Cash & cash equiv. | 76,493 | 92,469 | 19,738 | 52,089 | 14,971 | ||||||
| Accounts receivables | 113,420 | 125,042 | 198,782 | 202,167 | 195,347 | ||||||
| Inventory | 61,181 | 69,383 | 119,655 | 146,131 | 178,855 | ||||||
| Net fixed & other tangibles | 428,295 | 533,969 | 836,374 | 1,113,688 | 1,332,954 | ||||||
| Goodwill & intangibles assets | 0 | 0 | 0 | 0 | 0 | ||||||
| Financial & other | 61,309 | 68,470 | 133,427 | 161,330 | 225,100 | ||||||
| Total assets | 740,698 | 889,333 | 1,307,976 | 1,675,405 | 1,947,227 | ||||||
| Accounts payable | 78,221 | 88,754 | 144,001 | 213,348 | 317,081 | ||||||
| Short-term debt | 53,872 | 38,513 | 75,032 | 83,498 | 104,031 | ||||||
| Long-term debt | 139,728 | 214,081 | 280,786 | 312,469 | 389,310 | ||||||
| Provisions & other liab | 123,090 | 174,618 | 355,756 | 522,276 | 486,870 | ||||||
| Total liabilities | 394,911 | 515,966 | 855,574 | 1,131,592 | 1,297,293 | ||||||
| Shareholders' equity Minority interests | 323,523 22,264 | 346,900 26,468 | 421,114 31,288 | 510,971 | 615,524 | ||||||
| 32,842 | 34,411 | ||||||||||
| Total equity Net debt (Adj) | 345,787 117,107 | 373,368 160,125 | 452,401 336,080 | 543,814 343,878 | 649,934 478,370 | ||||||
| Net debt to equity (Adj) (%) | 33.9 | ||||||||||
| For definitions of the | 42.9 | 74.3 | 63.2 | 73.6 | |||||||
| items in this | table, please click here. |
LEAP upside intact; GM upward trend structural
Following the solid 3Q26 result, it expects 4Q26 consolidated revenue to grow 68% QoQ, with gross margin of 23-24% and operating margin of 14.5-15.5%. ATM revenue is forecast to increase 11-13% QoQ, with GM improving 100-200 bps. EMS revenue is expected to be flat QoQ, with an operating margin of about 2%.
Looking into 2027, management expects LEAP revenue to double, with further GM improvement as LEAP ramps and utilization rises across traditional packaging and test. Demand remains ahead of available capacity: assembly is expected to grow faster than test, with investment prioritizing assembly and wafer probing. Fullprocess revenue is projected to exceed US$1bn in 2027, while CPO is expected to contribute more than US$500m. Capacity and facility space remain key constraints; ASE plans to increase capex to US$11.5bn in 2027 given its raised 2026 outlook. It also expects traditional-market growth to continue, supported by automotive, industrial and AI-adjacent demand, despite softer smartphone and PC markets.
On the back of its structural GM upside and more LEAP revenue contribution, we lift our 2026/2027/2028 earnings projection by 12%/18%/16%. We maintain Buy with TP NT$908, based on an unchanged 25x 2027 EPS.
Figure 1. ASEH - Leading Edge Advanced Packaging Revenue
© 2026 Citigroup Inc. No redistribution without Citigroup's written permission. Source: Citi Research Prepared for [訂閱者已遮蔽]
Figure 4. ASEH - Forward P/E band
© 2026 Citigroup Inc. No redistribution without Citigroup's written permission.
Source: Citi Research, company data
Figure 2. ASEH - 3Q26 Results Comparison
| (NT$mn) | 3Q26 Actual | 2Q26 Actual | Q/Q | 3Q25 Actual | 3Q26 Citi | Diff. | 3Q26 Cons | Diff. | |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 244,161 | 191,064 | 28% | 168,569 | 45% | 232,969 | 5% | 234,420 | 4% |
| Gross profit | 53,967 | 40,118 | 35% | 28,877 | 87% | 48,453 | 11% | 49,954 | 8% |
| Grossmargin | 22.1% | 21.0% | +1.1ppt | 17.1% | +5.0ppt | 20.8% | +1.3ppt | 21.3% | +0.8ppt |
| Op.profit | 33,142 | 21,095 | 57% | 13,201 | 151% | 26,321 | 26% | 28,792 | 15% |
| OPmargin | 13.6% | 11.0% | +2.5ppt | 7.8% | +5.7ppt | 11.3% | +2.3ppt | 12.3% | +1.3ppt |
| Net income | 26,996 | 21,052 | 28% | 10,870 | 148% | 23,301 | 16% | 23,806 | 13% |
| EPS (NT$) | 6.22 | 4.85 | 28% | 2.50 | 148% | 5.37 | 16% | 5.35 | 16% |
© 2026 Citigroup Inc. No redistribution without Citigroup's written permission.
Source: Citi Research, Bloomberg
Figure 3. ASEH - Estimates Revisions
| (NT$mn) | 2026E - New | 2026E - Old | 2026E - Chg. | 2027E - New | 2027E - Old | 2027E - Chg. | 2028E - New | 2028E - Old | 2028E - Chg. |
|---|---|---|---|---|---|---|---|---|---|
| Sales | 873,893 | 866,810 | 1% | 1,113,339 | 1,102,855 | 1% | 1,347,515 | 1,319,551 | 2% |
| YoY growth | 35% | 34% | 27% | 27% | 21% | 20% | |||
| Gross profit | 191,523 | 182,737 | 5% | 280,020 | 257,973 | 9% | 351,989 | 318,695 | 10% |
| Opex | 79,692 | 83,501 | -5% | 104,111 | 106,598 | -2% | 130,291 | 126,217 | 3% |
| Operating profit | 111,830 | 99,236 | 13% | 175,909 | 151,376 | 16% | 221,697 | 192,478 | 15% |
| Pre-tax profit | 121,739 | 109,538 | 11% | 195,838 | 166,484 | 18% | 255,478 | 220,258 | 16% |
| Net income | 98,821 | 88,403 | 12% | 159,033 | 135,284 | 18% | 207,923 | 179,363 | 16% |
| EPS (NT$) | 22.76 | 20.36 | 12% | 36.63 | 31.16 | 18% | 47.90 | 41.32 | 16% |
| Gross margin | 21.9% | 21.1% | +0.8 ppt | 25.2% | 23.4% | +1.8 ppt | 26.1% | 24.2% | +2.0 ppt |
| Opex ratio | 9.1% | 9.6% | -0.5 ppt | 9.4% | 9.7% | -0.3 ppt | 9.7% | 9.6% | +0.1 ppt |
| Operating margin | 12.8% | 11.4% | +1.3 ppt | 15.8% | 13.7% | +2.1 ppt | 16.5% | 14.6% | +1.9 ppt |
| Net margin | 11.3% | 10.2% | +1.1 ppt | 14.3% | 12.3% | +2.0 ppt | 15.4% | 13.6% | +1.8 ppt |
© 2026 Citigroup Inc. No redistribution without Citigroup's written permission.
Source: Citi Research
© 2026 Citigroup Inc. No redistribution without Citigroup's written permission. Source: Citi Research, company data Prepared for [訂閱者已遮蔽]
Figure 6. ASEH - Forecast Summary
| (NT$ inMn,year-endDec) | 1Q | 2Q | 3Q | 2025 - 4Q | 2025 - 1Q | 2025 - 2026 2Q | 2025 - 3Q | 2025 - 4QE | 2027 - 1QE | 2027 - 2QE | 2027 - 3QE | 2027 - 4QE | 2025 | 2026E | 2027E | 2028E |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 148,153 | 150,750 | 168,569 | 177,915 | 173,662 | 191,064 | 244,161 | 265,006 | 242,822 | 259,985 | 286,887 | 323,645 | 645,388 | 873,893 | 1,113,339 | 1,347,515 |
| COGS | -123,261 | -125,063 | -139,692 | -143,179 | -138,812 | -150,945 | -190,194 | -202,418 | -183,549 | -195,252 | -213,368 | -241,149 | -531,195 | -682,370 | -833,319 | -995,526 |
| Gross Profit | 24,893 | 25,688 | 28,877 | 34,736 | 34,850 | 40,118 | 53,967 | 62,587 | 59,272 | 64,733 | 73,519 | 82,496 | 114,193 | 191,523 | 280,020 | 351,989 |
| Operating Expense | -15,221 | -15,494 | -15,676 | -17,045 | -17,318 | -19,024 | -20,825 | -22,525 | -23,236 | -24,707 | -26,394 | -29,775 | -63,437 | -79,692 | -104,111 | -130,291 |
| SG&A expenses | -7,905 | -7,750 | -7,631 | -8,348 | -8,379 | -9,065 | -10,037 | -10,853 | -11,348 | -11,960 | -12,302 | -13,846 | -31,634 | -8334 | -49,456 | -62,580 |
| R&D expenses | -7,579 | -8,004 | -8,308 | -8,960 | -9,210 | -10,229 | -11,059 | -11,925 | -12,141 | -12,999 | -14,344 | -16,182 | -32,851 | -42,422 | -55,667 | -68,723 |
| EBIT | 9,671 | 10,193 | 13,201 | 17,690 | 17,532 | 21,095 | 33,142 | 40,062 | 36,037 | 40,027 | 47,125 | 52,721 | 50,756 | 111,830 | 175,909 | 221,697 |
| Net Interest Income | -1,309 | -1,310 | -1,590 | -1,861 | -1,735 | -2,039 | -1,441 | -2,653 | -2,724 | -2,691 | -2,920 | -6,070 | -6,089 | -10,988 | -12,898 | |
| Net Other Income | 1,448 | 31 | 2,365 | 2,431 | 2,404 | 6,605 | 442 | 6,547 | 6,647 | 7,347 | 8,078 | 8,845 | 6,615 | 15,998 | 30,917 | 46,678 |
| Pre-TaxProfit | 9,810 | 9,254 | 13,976 | 18,260 | 18,200 | 25,661 | 32,710 | 45,168 | 40,030 | 44,650 | 52,512 | 58,645 | 51,301 | 121,739 | 195,838 | 255,478 |
| Tax | 2,022 | 1,576 | 2,615 | 3,248 | 3,635 | 4,167 | 4,831 | 8,130 | 7,205 | 8,037 | 9,452 | 10,556 | -9,460 | -20,763 | -35,251 | -45,986 |
| Net Profit to Parent | 7,554 | 7,521 | 10,870 | 14,714 | 14,148 | 21,052 | 26,996 | 36,625 | 32,450 | 36,210 | 42,667 | 47,706 | 40,658 | 98,821 | 159,033 | 207,923 |
| EPS (NT$) | 1.75 | 1.74 | 2.50 | 3.39 | 3.26 | 4.85 | 6.22 | 8.44 | 7.47 | 8.34 | 9.83 | 10.99 | 9.38 | 22.76 | 36.63 | 47.90 |
| Margins (%) | ||||||||||||||||
| Gross Margin | 16.8 | 17.0 | 17.1 | 19.5 | 20.1 | 21.0 | 22.1 | 23.6 | 24.4 | 24.9 | 25.6 | 25.5 | 17.7 | 21.9 | 25.2 | 26.1 |
| Operating Margin | 6.5 | 6.8 | 7.8 | 66 | 10.1 | 11.0 | 13.6 | 15.1 | 14.8 | 15.4 | 16.4 | 16.3 | 7.9 | 12.8 | 15.8 | 16.5 |
| Net Margin | 5.1 | 5.0 | 6.4 | 8.3 | 8.1 | 11.0 | 11.1 | 13.8 | 13.4 | 13.9 | 14.9 | 14.7 | 6.3 | 11.3 | 14.3 | 15.4 |
| Sequential Growth (%) | ||||||||||||||||
| Revenue | -8.7 | 1.8 | 11.8 | 5.5 | -2.4 | 10.0 | 27.8 | 8.5 | -8.4 | 7.1 | 10.3 | 12.8 | 8.4 | 35.4 | 27.4 | 21.0 |
| Gross Profit | -6.5 | 3.2 | 12.4 | 20.3 | 0.3 | 15.1 | 34.5 | 16.0 | -5.3 | 9.2 | 13.6 | 12.2 | 17.8 | 67.7 | 46.2 | 25.7 |
| EBIT | -13.7 | 5.4 | 29.5 | 34.0 | -0.9 | 20.3 | 57.1 | 20.9 | -10.0 | 11.1 | 17.7 | 11.9 | 29.6 | 120.3 | 57.3 | 26.0 |
| Net Profit | -18.9 | -0.4 | 44.5 | 35.4 | -3.8 | 48.8 | 28.2 | 35.7 | -11.4 | 11.6 | 17.8 | 11.8 | 25.2 | 143.1 | 60.9 | 30.7 |
| EPS | -19.1 | -0.5 | 44.2 | 35.4 | -3.8 | 48.8 | 28.2 | 35.7 | -11.4 | 11.6 | 17.8 | 11.8 | 24.6 | 142.8 | 60.9 | 30.7 |
© 2026 Citigroup Inc. No redistribution without Citigroup's written permission.
Source: Citi Research, company data Prepared for [訂閱者已遮蔽]
Adding Upside 90-Day Short-Term View on ASE Technology Holding (3711.TW)
Direction:
Duration:
Upside
Within 90 Days
Category:
Thematic driven
We see its structural GM upside and more LEAP revenue contribution to support its share price performance in the coming months.
Prepared for [訂閱者已遮蔽]
Bull/Bear: ASE Technology Holding (3711.TW)
Spread 73pp
Current Price and expected returns (upside/downside) as of 29 Oct 2026
BULLAssumptions
- Stonger-than-expected margin expansion
- Higher-than-expected utilization rate
BASE Assumptions
- ·Solid development in LEAP business
- Long-term operating margin maintained at >12%
BEAR Assumptions
- Muted revenue growth with margin contraction
- Lower-than-expected utilization rate
Prepared for [訂閱者已遮蔽]
ASE Technology Holding
Company description
Advanced Semiconductor Engineering (ASE), incorporated in 1984 and listed at the TWSE in 1989, is one of the world's leading companies in the semiconductor packaging and testing sector. In June 2016, ASE entered into a Joint Share Exchange Agreement with SPIL under which ASE Industrial was eventually to be formed as a holding company with 100% equity interests in both ASE and SPIL. ASE Industrial was listed on Taiwan's main board on April 30, 2018, the same day on which ASE and SPIL were delisted.
Investment strategy
We have a Buy rating on ASE Holding. The combined ASE-SPIL entity is the highest-quality OSAT worldwide, in our view, with its market share leadership, superior operations, economies of scale, and customer/product diversification. Conditions imposed by the Chinese government on the ASESPIL merger, which required them to operate independently, were lifted in 2020. Consequently, we believe ASE Holding will benefit from further revenue and operating synergies as well as the trend for advanced packaging.
Valuation
Our target price of NT$908 is based on 25x 2027 EPS average. Our PER is higher than its five-year range as we expect ASEH to see accelerating earnings growth in the coming years with GM at upward expansion trend, mainly driven by its promising outlook in LEAP business and strong expansion for long-term AI demand. At our target price, the shares would trade at a 2026/27E P/B of 10x/8x.
Risks
Key downside risks that could prevent ASE shares from reaching our target price include: 1) poor efficiency and less synergy created from merger with SPIL; 2) failure to gain market share in advanced packaging; 3) industry oversupply due to aggressive capacity expansion; 4) severe pricing erosion due to competition; and 5) a longer-than-expected semiconductor inventory correction.
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