Novatek (3034.TW): Resilient 1H but early pull-in demand fading now; Neutral

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06 Aug 2026 13:13:22 ET │ 14 pages

Novatek (3034.TW)

Resilient 1H but early pull-in demand fading now; Neutral

CITI'S TAKE

Despite limited exposure to AI server, Novatek benefited from early pull-in

demand and new product launches (eg, SoC), resulting in resilient 1H26

performance. However, looking forward, we think consumer demand could

gradually fade away from 3Q26 onward. On the bright side, Novatek’s

market share gain in its US smartphone customer could help partially offset

2H headwinds. Overall, we still see limited catalysts in 2H for Novatek and

stay at a Neutral rating with lifted TP of NT$555 (15x 2027E EPS).

2Q26 GM beat — 2Q26 sales grew 24% QoQ with strong growth from SoC (>40%

QoQ), followed by milder growth in LDDIC (+8% QoQ) and SMDDIC (+5% QoQ).

2Q26 GM of 42.4% surprised to the upside, beating Citi/consensus forecasts by

5.2ppt/2.8ppt, due to price adjustment, more low-cost inventory and favorable

product mix. OP also saw better leverage given increasing sales scale. Overall OP

levels beat Citi/consensus forecasts by 28%/24%.

3Q26 on high season but early pull-in demand fading now — The company guided

3Q26 sales to grow 7% QoQ at the mid-point, mostly thanks to high season for

smartphone. By application, mgmt. sees fading early pull-in demand, resulting in

QoQ decline in TV, NB, monitor and LDDIC, while SoC demand would be flat QoQ

backed by edge AI/image vision products. 2Q26 GM is guided to decline 2.4ppt QoQ

at the midpoint due to rising material and OSAT costs. The company continuously

negotiates with clients to reflect inflation.

n

Neutral

Price (06 Aug 26 13:30)

NT$543.00

Target price

NT$555.00↑

from NT$460.00

Expected share price return

2.2%

Expected dividend yield

5.3%

Expected total return

7.6%

Market Cap

NT$330,422M

US$10,237M

Price Performance

(RIC: 3034.TW, BB: 3034 TT)

Conservatism over consumer demand; share gain in its US smartphone customer

— Due to the memory shortage and rising costs, mgmt. is conservative with 2H 26

end demand, given early pull-in in 1H. The company still targets introduction of more

new products to maintain its sales growth and GM profile, such as edge AI, machine

…