Raising PO on improved outlook and transformation; reiterate Neutral

研报英文原文证据摘录

Raising PO on improved outlook and transformation; reiterate Neutral

Visible earnings recovery in 2026 amid panel upcycle and

diversification progress

Since entering 2026, Innolux has demonstrated a meaningful recovery in both

profitability and operating efficiency. Beyond the improvement in panel pricing,

management’s diversification efforts, particularly in automotive business, have started

to contribute more visibly to revenue and earnings growth.

The company’s latest reported quarter highlighted this trend, as Innolux returned to

profitability in 1Q26, reporting a net income of NT$1.63bn, with EPS of NT$0.2. Core

operations also showed clear sequential improvement, with operating income turning

positive at NT$1.50bn, while GPM expanded to 14.4%, up 5.4ppt QoQ and 6.9ppt YoY,

reflecting a healthier pricing environment, pull-in demand and continued product mix

optimization toward higher-value-added segments.

Revenue momentum also strengthened in early-2026. In 1Q26, revenue reached

NT$66.64bn, growing 17.5% QoQ and 19.2% YoY, driven by solid panel demand ahead of

major sport events and potential memory price hikes, as well as continued expansion in

the auto segment following the integration of Pioneer and CarUX. Notably, Innolux

continued to drive business diversification, with non-display revenue rising 49% QoQ

amid strong development in the auto business, lifting revenue contribution to 44% from

35% in 4Q25. Non-commodity display revenue also rose 5% QoQ, but grew at a slower

pace than the non-display segment, resulting in lower revenue contributions of 13%.

Management is cautiously constructive on 2Q26 despite ongoing macro uncertainties.

Commodity display revenue is expected to grow by a low-single-digit % QoQ, supported