J.P. Morgan Asia Technology Tracker 15 May 26 Asia Vital Components; Hon Hai Precision; Lotes; Pegatron Corp; Quanta Computer Inc. and More

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J.P. Morgan Asia Technology Tracker 15 May 26 Asia Vital Components; Hon Hai Precision; Lotes; Pegatron Corp; Quanta Computer Inc. and More

Asia Pacific Equity Research AC Asia Pacific Equity Research

15 May 2026 J P M O R G A N

aprr.publications@jpmorgan.com

Key takeaways from Lotes’ 1Q26 earnings call included: 1) 1Q26 margin dip due to raw material cost hikes

and lower yields; 2) management expects margin pressure to persist into 2Q26, with improvement in 2H26

on new product ramps; 3) toned up industry server shipment growth to ~20% and Lotes server revenue

growth to 30%+ this year, with demand materially exceeding supply; 4) strong demand visibility into next

year, with initial customer feedback indicating 20%+ server growth; and 5) CPO-related projects to enter

mass production next year, which could drive a valuation re-rating. Overall, we see continued upside in

Lotes’s server business on stronger-than-expected demand. While near-term margins are likely to remain

under pressure, we expect a rebound in 2H26 driven by new product ramps, a more favorable mix, and

positive OP leverage. We trim our 2026 earnings by 6% to reflect 1H26 margin headwinds, but keep our

2027 earnings largely unchanged as stronger server demand outlook offsets the PC downside. Lotes’ stock

has outperformed TAIEX by 45% YTD. We expect continued outperformance over the next 6–12 months,

supported by the general server super-cycle and a recovering margin profile. We introduce our 2028

forecast and extend our PT horizon to Jun-27 with a PT of NT$3070 (based on 20x 12-month forward EPS

on continued earnings upgrades and networking-related re-rating potential). We maintain OW.

Pegatron Corp (Neutral), Taiwan

Earnings visibility remains challenged amid smartphone headwinds; N (Albert Hung)