摩根士丹利-大中华科技硬件散热解决方案：2026年二季度型号切换影响始于四月-Thermal Solutions–2Q26 Model Transition Impact Began in April-20260506

MorganstanleyRESEARCH

May6,202609:00PMGMT

GreaterChinaTechnologyHardware|AsiaPacific

ThermalSolutions–2Q26

ModelTransitionlmpactBeganinApril

Earlier-than-expectedGBrelatedmodeltransitionin2Qcreatesanear-termheadwindbutimplieslikelysooner-than-expectedVRrelatedcontributionfrom3Q26.Thus,wesuggestrevisit

timingafter5-10%sharepricepullbacks,ifany.WestayOWonAVCandFositek,andEWonAurasandSunonwealth.

KeyTakeaways

AVCAprilrevenueofNT$15,631mn(-13%MoM,+72%YoY)was13%belowMSe,reflectingslowerpull-inforGB300coldplatemodules.

AurasAprilrevenueofNT$2,842mn(-15%MoM,+41%YoY)was15%belowMSe;itcitedholidayimpactatitsThailandsite.

FositekAprilrevenueofNT$1,353mn(-15%MoM,+59%YoY)wasinlinewithMSeassmartphonehingeshipmentsenteredthelateproductlifecycle.

SunonwealthAprilrevenueofNT$1,871mn(-2%MoM,+15%YoY)wasinlinewithMSe.

Modeltransitionimpactworthmonitoringbutnotseensignificant:GB300

relatedshipmentslowdownwasthekeydragforthethermalsupplychaininAprilandrecent2Q26outlookdownwardrevisions.However,wenowseeearlierandfasterrampsofVRrelatedshipmentslikelyfrom3Q26,inadditiontonewAIASICprojectrolloutsforAWSTrainium3inJuneandTPUadditionin2H26.

AsiaVitalComponents(AVC,3017.TW)–MarginuptrendboostsPTtoNT

$2,950:Although2Q26revenuemighttrendlowerthanthepriorguidedestimateatflattoslightupQoQ,weseeproductionyieldimprovementandfavorablemix

shiftdrivingprofithigher,especiallyaftervariousnewAIASICprojectrolloutsfrom2H26onward.Welowerour2026EPSestimatesfractionallybutraise2027and

2028by7%each.Ourpricetargetalsorises7%,toNT$2,950,implying23x2027eP/E.

Auras(3324.TWO)–Awaitingnewprojectwins;tweakPTtoNT$1,025:1Q26

earningsresultswereinlinewithourexpectationsformarginexpansionon

favorablemixandscalebenefits.However,weawaitfurtherconfirmationofnewVRrelatedprojectwins(coldplatemodule,manifold,etc.)thatcouldactaskeydriversforitsbusinessstrengthfrom2H26onward.Wereduceour2026earningsestimateby7%,and2027and2028by4%each.Ourpricetargetfalls5%toNT$1,025,

implying16x2027eP/E.

IDEA

MoRGANSTANLEyTAiwANLimiTEd+SharonShih

EquityAnalyst

Sharon.Shih@

+88622730-2865

SamanthaChenResearchAssociate

Samantha.Chen@

+88622730-2876

GREATERCHıNATEcHNoLoGyHARDwARE

AsiaPacific

IndustryViewın.Line

WHAT’sCHANGED

AsiaVitalComponentsCo.

Ltd.(3017.TW)

From

To

PriceTarget

NT$2,750.00

NT$2,950.00

AurasTechnologyCoLtd

(3324.TWO)

From

To

PriceTarget

NT$1,080.00

NT$1,025.00

MorganStanleydoesandseekstodobusinesswith

companiescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanley

Research.InvestorsshouldconsiderMorganStanley

Researchasonlyasinglefactorinmakingtheirinvestmentdecision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionson

communicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

2

Morganstanley

RESEARCH

IDEA

CatalystEventReaction

Company/CatalystDate

Impacttothesis

Catalystversusexpectation

AurasTechnologyCoLtd3324.TWO

1Q26results06May2026

Takeaways:

Unchanged

In-line

•1Q26resultsin-line.

Aprilrevenueresults06May2026

Takeaways:

Unchanged

Meaningfuldownsidesurprise

•Aprilrevenuewas15%belowMSe.

AsiaVitalComponentsCo.Ltd.3017.TW

Aprilrevenueresults06May2026

Takeaways:

Unchanged

Meaningfuldownsidesurprise

•Aprilrevenuewas13%belowMSe.

FositekCorp6805.TW

Aprilrevenueresults06May2026

Takeaways:

Unchanged

In-line

•Aprilrevenuecameinin-linewithMSe.

SunonwealthElectricMachineIndustryCo2421

.TW

Aprilrevenueresults06May2026

Takeaways:

Unchanged

In-line

•Aprilrevenuecameinin-linewithMSe.

Source:Companydata,MorganStanleyResearch

Morganstanley

RESEARCH

IDEA

RiskReward–AsiaVitalComponentsCo.Ltd.(3017.TW)

CompleteproductofferingtocaptureAItrend

PRICETARGETNT$2,950.00

Basecase,derivedfromourmulti-stageresidualincome(RI)valuationmodel,similartotherestofourtechhardwarecoverageuniverse.Weassumeacostofequityof10%,amedium-termgrowthrateof13%andaterminalgrowthrateof3%.

NT$3,151.75

ConsensusPriceTargetDistribution

Source:Refinitiv,MorganStanleyResearch

NT$2,150.00◆令NT$3,610.00

MSPT

MeanMorganStanleyEstimates

RISKREWARDCHART

NT$4,126.00(+69.45%)

NT$2,950.00(+21.15%)

NT$1,774.00(-27.15%)

0

MAY'25NOV'25MAY'26MAY'27

TWD

4000

3000

2000

1000

NT$2,435.00

Key:HistoricalStockPerformanceCurrentStockPricePriceTarget

Source:Refinitiv,MorganStanleyResearch

OVERWEIGHTTHESIS

.WeexpectAVCtobenefitfromAIserverandliquidcoolingupgradesinviewof

theincreasingcontentvalueofthermalmodules.

.Weviewmarketconcernsaboutorderchangeimpactasoverdoneandseeprofitgrowthpotentialfromitsleadership

positioninserverthermalcomponents(2.5D/3DVCandcoldplatemodules).

.PotentialstandardizeddesignforVera

RubincomputingtrayslikelybodeswellforAVCasadirectconsignedNVIDIAvendor.

.Ourpricetargetimpliesthat2026eP/Eexpandsto31x,vs.itsone-yearaverageof21x.

ConsensusRatingDistribution

100%Overweight

0%

Equal-weight

0%

Underweight

MSRating

Source:Refinitiv,MorganStanleyResearch

RiskRewardThemes

SecularGrowth:Positive

Self-help:Positive

ViewdescriptionsofRiskRewardsThemeshere

BULLCASENT$4,126.00

44x2026ebase-caseEPS

Fastergrowthfromserver/datacenter

businesswithmarginexpansion:1)Faster-than-expectedthermaldesignupgradesfordatacenters,includingserversandswitchdesigns.2)Accelerating5Gnetwork

deploymentmomentum.3)Fastermarginexpansionfrombetterproductmix.

BASECASENT$2,950.00

31x2026ebase-caseEPS

Growthinliquidcoolingbusiness:1)Serverupgradesandsharegainstodriveserverbusinessrevenuegrowth.2)Dominant

supplyofcoldplatemodulesforNVIDIAserverracksandASICAIservers.3)2026revenueandgrossmarginareexpectedtogrowquarterbyquarterfrom1Q26.

NT$1,774.00

BEARCASE

19x2026ebase-caseEPS

Slowergrowthfromdatacenter/5G

businesswithmargincontraction:1)Slower-than-expectedthermaldesignupgradesfordatacenters,includingserversandswitchdesigns.2)Decelerating5Gnetwork

deploymentmomentum.3)Margin

contractionfromaworseningproductmix.

MoRGANSTANLEyREsEARcH3

4

Morganstanley

RESEARCH

IDEA

RiskReward–AsiaVitalComponentsCo.Ltd.(3017.TW)

KEYEARNINGSINPUTS

Drivers

Telecomrevenuecontribution(%)

2025

5.3

2026e

2.1

2027e

1.7

2028e

1.4

Server/datacenterrevenuecontribution(%)

39.4

42.7

46.4

50.7

BlendedthermalASP(%)

97.3

36.8

(4.0)

8.2

INVESTMENTDRIVERS

·Serverdemand/sharegains

·Accelerating5Ginfrastructureconstruction·Marginexpansion

,Newcustomersandprojectwins

GLOBALREVENUEEXPOSURE

APAC,exJapan,Mainland

0-10%

10-20%

20-30%

30-40%

Chinaandlndia

EuropeexUK

NorthAmericaMainlandChina

Source:MorganStanleyResearchEstimateViewexplanationofregionalhierarchieshere

MSALPHAMODELS

1/53MonthMOSTHorizon

Source:Refinitiv,FactSet,MorganStanleyResearch;1isthehighestfavoredQuintileand5istheleastfavoredQuintile

RISKSTOPT/RATING

RISKSTOUPSIDE

·Faster-than-expectedthermalupgrade

trendfordatacenters,includingserverandswitchdesigns

·Accelerating5Gnetworkdeploymentmomentum

·Better-than-expectedPC/NBdemandorsharegains

RISKSTODOWNSIDE

·Slower-than-expectedthermaldesigntrendfordatacenters,includingserverandswitch

designs

·Decelerating5Gnetworkdeploymentmomentum

·Intensifyingindustrycompetition

OWNERSHIPPOSITIONING

Inst.Owners,%Active53.5%Source:Refinitiv,MorganStanleyResearch

MSESTIMATESVS.CONSENSUS

FYDec2026e

Sales/Revenue

(NT$,mn)

214,483

236丿924

225,475

Netincome

(NT$,mn)

31丿389

36,911

35,860

38丿719

EPS

(NT$)

80.28

94.60

91.33

99.23

ROE

(%)

43.8

73.0

57.9

MeanMorganStanleyEstimatesSource:Refinitiv,MorganStanleyResearch

MoRGANSTANLEyREsEARcH5

Morganstanley

RESEARCH

IDEA

RiskReward–AurasTechnologyCoLtd(3324.TWO)

Benefitsfromliquidcoolingtrend,butfairlyvalued

PRICETARGETNT$1,025.00

Basecase,derivedfromamulti-stageresidualincome(RI)valuationmodel,similartotherestofourtechhardwarecoverageuniverse.Weassumeacostofequityof10%,amedium-termgrowthrateof12.5%andaterminalgrowthrateof3%.

NT$1,364.08

ConsensusPriceTargetDistribution

Source:Refinitiv,MorganStanleyResearch

NT$1,025.00◆NT$1,740.00

MSPT

MeanMorganStanleyEstimates

RISKREWARDCHART

1200

NT$1,105.00

NT$1,025.00(-7.24%)900

600

NT$577.00(-47.78%)300

0

MAY'25NOV'25MAY'26MAY'27

NT$1,416.00(+28.14%)

TWD

Key:HistoricalStockPerformanceCurrentStockPricePriceTarget

Source:Refinitiv,MorganStanleyResearch

EQUAL-WEIGHTTHESIS

.WethinkAuraswillbenefitfromserverspecupgradesandlong-termAIthermaldemand.

.2026revenueisexpectedtorise50%YoY,drivenmainlybytheliquidcoolingofferingincrease.

.WestayEWasweawaitliquidcoolingprojectkickofftimingandcontribution.

ConsensusRatingDistribution

75%Overweight25%Equal-weight

0%UnderweightMSRating

Source:Refinitiv,MorganStanleyResearch

RiskRewardThemes

PricingPower:Negative

SecularGrowth:Positive

Self-help:Positive

ViewdescriptionsofRiskRewardsThemeshere

NT$1,416.00

BULLCASE

24x2026ebase-caseEPS

Fasterheatpipe/VCadoptiondrivingASP

upside:Weassume:1)faster-than-expectedthermaldesignupgradesfordatacenters,includingbothserverandswitchdesigns;2)ASPupgradesinNB/PCandVGAthermalmodules;and3)increasingpenetrationofvaporchambersinsmartphones.

NT$1,025.00

BASECASE

18x2026ebase-caseEPS

2026revenuetogrow>50%YoYforliquidcoolingofferings:Weexpectserverbusinessandliquidcoolingtocontinuetobethe

majordriverin2026.Grossmarginis

indicatedbymanagementtowidenfurtherYoY,thankstoafavorableproductmix.

NT$577.00

BEARCASE

10x2026ebase-caseEPS

SlowerPC/NBandVGAdemandrecovery,whileindustrycompetitionintensifies:Weassume:1)slower-than-expectedthermaldesignupgradesfordatacenters,includingbothserverandswitchdesign;2)severepricingpressurefromintensifiedindustrycompetition;and3)aslowdowninPCorVGA/graphiccardmarkets.

6

Morganstanley

RESEARCH

IDEA

RiskReward–AurasTechnologyCoLtd(3324.TWO)

KEYEARNINGSINPUTS

Drivers

Smartphonerevenuecontribution(%)

2025

1.2

2026e

0.4

2027e

0.4

2028e

0.3

BlendedASPYoY(%)

63.7

88.9

11.3

7.1

INVESTMENTDRIVERS

·Heatpipe/VCadoptioninsmartphones·Serverdemand/sharegains

·GamingPC/NBdemandstrength·Newcustomersandprojectwins

EuropeexUK

NorthAmerica

APAC,exJapan,Mainland

GLOBALREVENUEEXPOSURE

Chinaandlndia

MainlandChina

0-10%0-10%

20-30%50-60%

Source:MorganStanleyResearchEstimateViewexplanationofregionalhierarchieshere

MSALPHAMODELS

3/53MonthMOSTHorizon

Source:Refinitiv,FactSet,MorganStanleyResearch;1isthehighestfavoredQuintileand5istheleastfavoredQuintile

FYDec2026e

Sales/Revenue

(NT$,mn)

38,920

34,18140,729

35,925

Netincome

(NT$,mn)

5,407

4,5935,714

5,213

EPS

(NT$)

50.30

58.09

56.90

62.42

ROE

(%)

35.4

41.8

47.0

47.3

RISKSTOPT/RATING

RISKSTOUPSIDE

·Faster-than-expectedthermaldesignupgradesfordatacenters,includingbothserverand

switchdesigns.

·ASPupgradesinNB/PCandVGAthermalmodules.

·lncreasingpenetrationofvaporchambersinsmartphones.

RISKSTODOWNSIDE

·Slower-than-expectedthermaldesignupgradesfordatacenters.

·Severepricingpressurefromintensifiedindustrycompetition.

,AslowdowninPCorVGA/graphiccardmarket.

OWNERSHIPPOSITIONING

Inst.Owners,%Active49.1%Source:Refinitiv,MorganStanleyResearch

MSESTIMATESVS.CONSENSUS

MeanMorganStanleyEstimatesSource:Refinitiv,MorganStanleyResearch

MoRGANSTANLEyREsEARcH7

Morganstanley

RESEARCH

IDEA

AVC:EstimateChanges

Our2026earningsestimatefallsfractionally,while2027and2028rise7%eachduetohighergrossmarginassumptionsonabetterproductmix.

Exhibit1:AVC:Estimatechanges

NT$mn

2026eEarningsEstimates

2027eEarningsEstimates

2028eEarningsEstimates

New

Old

Variance

New

Old

Variance

New

Old

Variance

Netsales

214,483

220,065

-3%

270,597

267,246

1%

333,193

329,717

1%

COGS

-150,671

-155,208

-3%

-185,899

-185,596

0%

-224,212

-225,185

0%

Grossprofit

63,812

64,857

-2%

84,698

81,650

4%

108,981

104,532

4%

Operatingexpenses

-11,011

-11,826

-7%

-12,639

-13,827

-9%

-14,693

-16,105

-9%

Operatingincome

52,801

53,031

0%

72,059

67,823

6%

94,288

88,427

7%

Non-operatingincome

675

675

0%

675

675

0%

675

675

0%

Pre-taxincome

53,476

53,706

0%

72,734

68,498

6%

94,963

89,102

7%

Incometax

-14,425

-14,498

-1%

-19,664

-18,522

6%

-25,664

-24,080

7%

Netincome

36,911

37,068

0%

50,502

47,408

7%

66,217

61,941

7%

EPS(NT$)

94.60

95.00

0%

129.43

121.50

7%

169.71

158.75

7%

Margins(%)

ppt

ppt

ppt

Grossmargin

29.8%

29.5%

0.3

31.3%

30.6%

0.7

32.7%

31.7%

1.0

Operatingmargin

24.6%

24.1%

0.5

26.6%

25.4%

1.3

28.3%

26.8%

1.5

Pre-taxmargin

24.9%

24.4%

0.5

26.9%

25.6%

1.2

28.5%

27.0%

1.5

Netmargin

17.2%

16.8%

0.4

18.7%

17.7%

0.9

19.9%

18.8%

1.1

Source:Companydata,MorganStanleyResearch(e)estimates

PriceTargetandValuationMethodology

WeraiseourpricetargetforAVCfromNT$2,750toNT$2,950(+7%),reflectingour

estimaterevisionsfor2026-28.Ourpricetargetisourbasecasescenariovaluederivedfromaresidualincome(RI)model,similartotherestofourtechhardwarecoverage

universe.

Ourpricetargetimplies29x2026eP/E.WeexpectAVCtobeoneofthedirectconsignedcoldplatemodulesuppliersforNVIDIA'sRubinplatform.

Ourkeyassumptionsareunchangedatacostofequityof10%(betaof1.3,equityriskpremiumof8%,andrisk-freerateof0.5%),medium-termgrowthrateof13%,and

terminalgrowthrateof3%.

Ourbullandbearcasevaluesrise7%each,toNT$4,126andNT$1,774,inlinewiththeincreaseinourbasecasevalue.

Exhibit2:AVC:ResidualIncome(RI)Model

Source:MorganStanleyResearch(E)estimates

8

RESEARCH

Morganstanley

Financialsummary

Exhibit3:AVC:FinancialsummaryIncomeStatement

NT$mn;FYEndDec

2025

2026E

2027E

2028E

Netsales

139,639

214,483

270,597

333,193

COGS

-103,605

-150,671

-185,899

-224,212

Grossprofit

36,034

63,812

84,698

108,981

Operatingexpenses

-8,292

-10,916

-12,544

-14,598

-Promotion

-1,589

-2,197

-2,467

-2,769

-ADM

-1,311

-1,637

-1,919

-2,214

-R&D

-5,392

-7,082

-8,158

-9,615

Operatingincome

27,742

52,896

72,154

94,383

Non-operatingincome

1173

675

675

675

Interestincome

153

475

475

475

Investmentincome

0

0

0

0

Disposalofinvestment

11

0

0

0

Disposaloffixedassets

-384

0

0

0

Exchangegain

723

0

0

0

Other

670

200

200

200

Pre-taxincome

28,916

53,571

72,829

95,058

Incometax

-9,787

-16,660

-22,326

-28,840

Netincome

19,129

36,911

50,502

66,217

EPS(NT$)

49.03

94.60

129.43

169.71

DilutedEPS(NT$)

48.86

94.29

129.01

169.15

BalanceSheet

NT$mn

2025

2026E

2027E

2028E

Cash

58,530

79,325

102,942

138,108

Mktsecurities

1,912

1,912

1,912

1,912

Accounts/Notesreceivables

12,133

18,636

23,511

28,950

Inventory

49,572

72,092

88,947

107,279

Othercurrentassets

4,029

4,029

4,029

4,029

CurrentAssets

126,176

175,994

221,342

280,279

Long-terminvestments

986

986

986

986

Fixedassets

17,849

29,603

43,357

57,111

Otherassets

15,125

15,125

15,125

15,125

TotalAssets

160,137

221,708

280,810

353,501

S/Tborrowings

15,111

15,111

15,111

15,111

AP/NP

48,109

69,964

86,322

104,113

OtherSTliabilities

34,275

44,513

51,095

59,399

Otherliabilities

5,128

5,128

5,128

5,128

L/Tdebt

6,949

6,949

6,949

6,949

TotalLiabilities

109,572

141,664

164,605

190,699

Commonshares

3,907

3,983

3,983

3,983

CapitalCollection

76

0

0

0

APIC

2,728

2,728

2,728

2,728

Retainedearnings

35,417

64,896

101,057

147,654

TreasuryStock

0

0

0

0

Othershareholders'equity

8437

8437

8437

8437

Shareholders'equity

50,565

80,043

116,205

162,802

TotalLiab./Shrhldr'sEquity

160,137

221,708

280,810

353,501

IdeA

CashFlowStatement

NT$mn

2025

2026E

2027E

2028E

Cashflowfromoperations

39,415

43,227

54,958

71,788

NetProfits

20,951

36,911

50,502

66,217

Depreciation

3,246

3,246

3,246

3,246

Equityinvestmentlosses(income)

0

0

0

0

Otheradjustments

15,219

3,070

1,209

2,324

Cashflowfrominvesting

-13,336

-15,000

-17,000

-17,000

(Purchases)saleofFA(capex)

-7,264

-15,000

-17,000

-17,000

(Purchases)saleofL/Tinvestment

217

0

0

0

(Purchases)saleofS/Tinvestment

0

0

0

0

Otheradjustments

-6,289

0

0

0

Cashflowfromfinancing

2,620

-7,432

-14,340

-19,621

IncreaseinL/Tdebt

3,677

0

0

0

IncreaseinS/Tdebt

5,777

0

0

0

Issuanceofstock

0

0

0

0

Cashdividends

-3,877

-7,023

-13,552

-18,542

Dir.&Emp.Bonus

0

0

0

0

ChangesinTreasuryStocks

0

0

0

0

Otheradjustments

-2,672

0

0

0

Exchangerateadjustment

-93

0

0

0

Netchangeincash

28,606

20,795

23,617

35,166

FinancialRatios

2025

2026E

2027E

2028E

Margins

Grossmargin

25.8%

29.8%

31.3%

32.7%

Operatingmargin

19.9%

24.7%

26.7%

28.3%

Pretaxmargin

20.7%

25.0%

26.9%

28.5%

Netmargin

13.7%

17.2%

18.7%

19.9%

YoYgrowth

Sales

94.6%

53.6%

26.2%

23.1%

Operatingprofits

155.0%

90.7%

36.4%

30.8%

Pretaxprofits

145.3%

85.3%

35.9%

30.5%

Netprofits

153.2%

93.0%

36.8%

31.1%

EPS

150.0%

93.0%

36.8%

31.1%

NetDebt/Equity(Netofmktsecs.)

-76%

-74%

-71%

-72%

NetDebt/Equity

-72%

-72%

-70%

-71%

Liabilities/Equity

217%

177%

142%

117%

Liabilities/Assets

68%

64%

59%

54%

ROAE

45.5%

56.5%

51.5%

47.5%

ROAA

14.7%

19.3%

20.1%

20.9%

AR/NRTurnover(days)

26

26

28

29

AP/NPTurnover(days)

136

143

153

155

InventoryTurnover(days)

146

147

158

160

Cashconversioncycle(days)

37

31

33

33

Source:Companydata,MorganStanleyResearch(E)estimates.

Morganstanley

RESEARCH

IDEA

Exhibit4:AVC:Quarterlyfinancialsummary

NT$mn1Q26E2Q26E3Q26E4Q26E1Q27E2Q27E3Q27E4Q27E20252026E2027E

MoRGANSTANLEyREsEARcH9

Sales

49,038

50,058

56,493

58,894

58,258

63,852

72,313

76,175

139,639

214,483

270,597

COGS

-34,738

-35,295

-39,685

-40,953

-40,540

-44,119

-49,340

-51,900

-103,605

-150,671

-185,899

Grossprofit

14,299

14,763

16,808

17,941

17,718

19,733

22,973

24,275

36,034

63,812

84,698

Operatingexpenses

-2,577

-2,619

-2,816

-2,999

-2,831

-2,972

-3,279

-3,557

-8,478

-11,011

-12,639

-Promotion

-524

-524

-562

-586

-568

-579

-643

-677

-1,589

-2,197

-2,467

-ADM

-387

-395

-415

-440

-426

-481

-496

-516

-1,311

-1,637

-1,919

-R&D

-1,642

-1,676

-1,815

-1,949

-1,813

-1,888

-2,116

-2,341

-5,392

-7,082

-8,158

Operatingprofit

11,723

12,144

13,992

14,942

14,887

16,761

19,694

20,717

27,556

52,801

72,059

Non-operatingincome

169

169

169

169

169

169

169

169

1,173

675

675

Interestincome

119

119

119

119

119

119

119

119

153

475

475

Investmentincome

0

0

0

0

0

0

0

0

0

0

0

Disposalofinvestment

0

0

0

0

0

0

0

0

11

0

0

Disposaloffixedassets

0

0

0

0

0

0

0

0

-384

0

0

Exchangegain

0

0

0

0

0

0

0

0

723

0

0

Other

50

50

50

50

50

50

50

50

670

200

200

Pre-taxprofit

11,892

12,313

14,161

15,111

15,055

16,930

19,863

20,886

28,729

53,476

72,734

Incometax

-2,858

-3,392

-3,976

-4,199

-3,618

-4,664

-5,578

-5,804

-7,836

-14,425

-19,664

Netprofit

8,664

8,583

9,500

10,164

10,993

11,861

13,464

14,185

19,129

36,911

50,502

Adj.wtd.avg.shrs(m)

390

390

390

390

390

390

390

390

390

390

390

EPS(NT$)

22.20

22.00

24.35

26.05

28.17

30.40

34.51

36.35

49.03

94.60

129.43

Margins

Grossmargin

29.2%

29.5%

29.8%

30.5%

30.4%

30.9%

31.8%

31.9%

25.8%

29.8%

31.3%

Operatingmargin

23.9%

24.3%

24.8%

25.4%

25.6%

26.2%

27.2%

27.2%

19.7%

24.6%

26.6%

Pre-taxmargin

24.2%

24.6%

25.1%

25.7%

25.8%

26.5%

27.5%

27.4%

20.6%

24.9%

26.9%

Netmargin

17.7%

17.1%

16.8%

17.3%

18.9%

18.6%

18.6%

18.6%

13.7%

17.2%

18.7%

QoQGrowth

Sales

2.6%

2.1%

12.9%

4.3%

-1.1%

9.6%

13.3%

5.3%

Grossprofit

13.4%

3.2%

13.9%

6.7%

-1.2%

11.4%

16.4%

5.7%

Operatingprofit

17.1%

3.6%

15.2%

6.8%

-0.4%

12.6%

17.5%

5.2%

Pre-taxprofit

18.3%

3.5%

15.0%

6.7%

-0.4%

12.4%

17.3%

5.2%

Netprofit

30.6%

-0.9%

10.7%

7.0%

8.2%

7.9%

13.5%

5.4%

YoYGrowth

Sales

110%

69%

45%

23%

19%

28%

28%

29%

95%

54%

26%

Grossprofit

137%

104%

65%

42%

24%

34%

37%

35%

114%

77%

33%

Operatingprofit

169%

138%

73%

49%

27%

38%

41%

39%

155%

92%

36%

Pre-taxprofit

157%

109%

72%

50%

27%

37%

40%

38%

145%

86%

36%

Netprofit

170%

115%

78%

53%

27%

38%

42%

40%

153%

93%

37%

Source:Companydata,MorganStanleyResearch(E)estimates.

10

Morganstanley

RESEARCH

IDEA

Auras:EstimateChanges

Welowerour2026,2027and2028EPSestimatesby7%,4%and4%,respectively,reflectinglowerrevenueforecastsamidVeraRubinprojectuncertainty.

Exhibit5:Auras:Estimatechanges

NT$mn

2026eEarningsEstimates

2027e

EarningsEstimates

2028e

EarningsEstimates

New

Old

Variance

New

Old

Variance

New

Old

Variance

Netsales

38,920

40,729

-4%

44,479

45,989

-3%

51,893

53,924

-4%

COGS

-27,403

-28,681

-4%

-31,269

-32,301

-3%

-36,371

-37,762

-4%

Grossprofit

11,517

12,048

-4%

13,211

13,689

-3%

15,522

16,162

-4%

Operatingexpenses

-4,533

-4,929

-8%

-5,292

-5,845

-9%

-6,300

-6,990

-10%

Operatingincome

6,984

7,119

-2%

7,919

7,844

1%

9,222

9,172

1%

Non-operatingincome

148

130

14%

130

130

0%

130

130

0%

Pre-taxincome

7,132

7,249

-2%

8,049

7,973

1%

9,351

9,302

1%

Incometax

-1,319

-1,366

-3%

-1,495

-1,500

0%

-1,738

-1,752

-1%

Netincome

5,407

5,700

-5%

6,148

6,290

-2%

7,208

7,367

-2%

EPS(NT$)

58.09

62.42

-7%

66.06

68.89

-4%

77.44

80.68

-4%

Margins(%)

ppt

ppt

ppt

Grossmargin

29.6%

29.6%

0.0

29.7%

29.8%

-0.1

29.9%

30.0%

-0.1

Operatingmargin

17.9%

17.5%

0.5

17.8%

17.1%

0.7

17.8%

17.0%

0.8

Pre-taxmargin

18.3%

17.8%

0.5

18.1%

17.3%

0.8

18.0%

17.3%

0.8

Netmargin

13.9%

14.0%

-0.1

13.8%

13.7%

0.1

13.9%

13.7%

0.2

Source:MorganStanleyResearch(e)estimates.

PriceTargetandValuationMethodology

WelowerourpricetargetforAurasby5%,fromNT$1,080toNT$1,025,reflectingour

reducedearningsestimates.Ourpricetargetisourbasecasescenariovalue,derivedfromaresidualincome(RI)model,similartotherestofourtechhardwarecoverageuniverse.

Ourkeyassumptionsareunchanged:acostofequityof10%(betaof1.3,equityriskpremiumof8%,andrisk-freerateof0.5%),amedium-termgrowthrateof12.5%andaterminalgrowthrateof3%.

Ourpricetargetimplies18x2026eP/E,whichweviewasfairrelativetothestock’stradingaverageof19xsince2023.

Ourbullandbearcasevaluesfall5%each,toNT$1,416andNT$577,inlinewiththedecreaseinourbasecasevalue.

MoRGANSTANLEyREsEARcH11

Morganstanley

RESEARCH

IdeA

Exhibit6:Auras:Residualincome(RI)model

Source:MorganStanleyResearch.MorganStanleyResearch(E)estimates.

FinancialSummary

12

RESEARCH

Morganstanley

Exhibit7:Auras:FinancialsummaryIncomeStatement

NT$mn;FYEndDec

2025

2026E

2027E

2028E

Netsales

23,276

38,920

44,479

51,893

COGS

-16,904

-27,403

-31,269

-36,371

Grossprofit

6,372

11,517

13,211

15,522

Operatingexpenses

-3,111

-4,528

-5,292

-6,300

-Promotion

-827

-1,334

-1,435

-1,715

-ADM

-875

-1,102

-1,120

-1,223

-R&D

-1,410

-2,092

-2,737

-3,362

Operatingincome

3,261

6,989

7,919

9,222

Non-operatingincome

19

148

130

130

Interestincome

-30

-70

-70

-70

Investmentincome

41

0

0

0

Disposalofinvestment

0

0

0

0

Disposaloffixedassets

-20

0

0

0

Exchangegain

-148

0

0

0

Other

176

218

200

200

Pre-taxincome

3,279

7,137

8,049

9,351

Incometax

-707

-1,730

-1,900

-2,144

Netincome

2,572

5,407

6,148

7,208

EPS(NT$)

28.26

58.09

66.06

77.44

DilutedEPS(NT$)

26.84

55.24

62.81

73.64

BalanceSheet

NT$mn

2025

2026E

2027E

2028E

Cash

1,439

1,162

3,706

6,494

Mktsecurities

0

0

0

0

Accounts/Notesreceivables

10,068

16,835

19,240

22,447

Inventory

6,057

9,820

11,205

13,033

Othercurrentassets

1,023

1,023

1,023

1,023

CurrentAssets

18,587

28,840

35,174

42,996

Long-terminvestments

730

730

730

730

Fixedassets

6,150

5,978

5,806

5,634

Otherassets

657

657

657

657

TotalAssets

26,125

36,205

42,367

50,018

S/Tborrowings