Pegatron Corporation: 1Q Missed, But Stock Now Trading on Server Ramp

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Pegatron Corporation: 1Q Missed, But Stock Now Trading on Server Ramp

UpdateM

RiskRisk RewardReward– Pegatron- PegatronCorporation (4938.TW)Corporation (4938.TW)

Growth hit by iPhone EMS business despite diversification efforts

PRICE TARGET NT$85.00 EQUAL-WEIGHT THESIS

Base case, sum-of-the-parts. Recurring core business earnings: 9x 2027e P/E, within ODMs' ▪We expect Pegatron to not benefit as

historical trading range of 8x to 12x since 2011, and below Pegatron’s five-year average of much vs. its peers (e.g., Hon Hai) from

11.8x. We view our target P/E multiple as fair, reflecting a weaker end demand outlook for increased AI iPhone sales, as its exposure to

Pegatron's smartphone and PC business. We value its stakes in AsRock, Kinsus and iPhone is skewed toward the non-premium

Azure based on their market values in proportion to Pegatron's holdings. models.

competition from Luxshare in NT$77.87 ▪Fierce

iPhone EMS also remains an overhang.

Consensus Price Target Distribution NT$54.00 NT$99.60 business prospects are strong, but MS PT ▪Server

Source: Refinitiv, Morgan Stanley Research Mean Morgan Stanley Estimates the contribution is still not significant

enough to offset the weakness of demand

for consumer electronics.

▪Auto/EV business could continue to

RISK REWARD CHART decelerate in 2026, due to intensifying

competition from Chinese brands.

NT$116.00NT$116.00(+41.81%)NT$116.00(+41.81%)(+41.81%) ▪We view current valuation as insufficiently TWD

attractive.

100 Consensus Rating Distribution

NT$81.80NT$81.80NT$81.80 NT$85.00NT$85.00(+3.91%)NT$85.00(+3.91%)(+3.91%) 0% Overweight

75 73% Equal-weight

27% Underweight

50 NT$61.00NT$61.00(-25.43%)NT$61.00(-25.43%)(-25.43%) MS Rating

Source: Refinitiv, Morgan Stanley Research

Risk Reward Themes

Electric Vehicles: Positive