Lotes "Promising revenue outlook on faster server growth" (Buy) Su

Research evidence excerpt

Lotes "Promising revenue outlook on faster server growth" (Buy) Su

price target from NT

$2,250 to NT$3,080, based on 22x 2027-28E average PE (previously 19x 2027E PE), at the upper end

of the post-2020 upcycle range of 11-22x. We believe Lotes' strong R&D and IP portfolio will likely

support its market share, drive content expansion and help it capture opportunities in spec upgrades,

liquid cooling and GPU sockets.

Evidence Lotes looks well positioned to maintain its interconnect vertical market share, underpinned by its

robust R&D and vertically integrated production, including ISO17025 certification for product

validation. Its sales CAGR accelerated from 15.5% in 2017-19 to 19% in 2019-24, as competition

between Intel and AMD boosted demand for advanced CPU sockets. Lotes also expects sales growth

in desktops and notebooks, auto and industrial/medical interconnects, as well as AI-related

applications, areas into which the company has been actively expanding.

WHAT´S PRICED IN? Lotes' share price rallied 40% following the Q425 results on improving general server demand, but

later fell 14% from its peak amid concerns about GM pressure from higher raw material costs. It

trades at 22x 12-month forward consensus EPS versus 10-22x in 2020-25, before the recent rally. We

believe the share price does not fully reflect the improving outlook for its server business, or

interconnect and AI content gain opportunities. We believe the stock could continue to trade up on

potential consensus earnings increases.

Upside/Downside

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Value drivers Overall sales Server sales

GM OPM

(2026E/27E) YoY growth YoY growth

NT$3,900 upside 33%/28% 75%/38% 49.9%/52.1% 30.8%/35.1%