Lite-On Tech: 2Q26 beat; 25% as reasonable GM level; higher capex; margin delivery key: Neutral

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Lite-On Tech

2Q26 beat; 25% as reasonable GM level;

higher capex; margin delivery key: Neutral

Reiterate Rating: NEUTRAL | PO: 250.00 TWD | Price: 209.00 TWD

2Q26 record-high margins on larger scale and better mix

31 July 2026

Lite-On Tech’s (LoT) 2Q26 GM/OPM of 27.2%/15.6% hit historical highs and came well

above BofAe/consensus. Mgmt. attributed the better margins to larger sales scale (+21%

QoQ, +30% YoY; with deferred high-end product shipment from 1Q26) and a more

favorable mix (Cloud & AIoT made up 55% of 2Q26 sales, vs. 53%/41% in 1Q26/2Q25).

Equity

Views 25% GM as reasonable level; targets AI sales 30%+

Mgmt. indicated 25% GM (like 24.7% in 1H26) as a more reasonable level. CEO expects

(1) higher 2H sales vs. 1H (with sufficient key component supply; initial HVDC shipment

from Nov); (2) 2026 AI sales at 30%+; and (3) 2026 cloud computing sales up 70%+ YoY.

We thus project 3Q/4Q26 sales +11%/+9% QoQ and GM of 25.2%/25.1%, resulting in

2026 sales +31% YoY (including server power +83% YoY) and GM/OPM at 25.0%/13.1%.

2026 NT$18bn capex; new CSP clients; optical investment

Mgmt. guided 2026 capex to reach a historical peak of NT$18bn (vs. previous guidance

at NT$13bn), for high-end power-supply capacity expansion in Taiwan/Vietnam/US. CEO

indicated two new CSP customer wins in PSU/BBU/chassis business and targets US$1bn

sales from each in two years (9% each of our 2028E sales). LoT also announced a

US$34.3mn strategic investment in DenseLight for optical communication from 2027.

PO to NT$250; Neutral: ongoing margin delivery as key

We lift our 2026-28E EPS by 10-16% (2Q26 beat, higher sales/margin aided by AI power).

We raise our PO to NT$250 (18x 2027E EPS) from NT$215 (18x 4Q26-3Q27E EPS),

with valuation rollover but multiple unchanged. We expect near-term positive share-price

reaction to 2Q26 results. But, we reiterate Neutral as we recognize LoT as the secondlargest AI server power-supply maker to benefit from clear industry uptrend, while its

ongoing margin expansion and new client/product initiatives remain key watch points.

Estimates (Dec) (NT$)

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