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2026-10-05 16:26:25 G Sachs said in a research report that it remains positive on AAC TECH (02018.HK)'s focus on high-end smartphone models and component expansion, namely from acoustics to cameras and vapor chamber cooling, as well as its extension into automotive electronics, AI data centers such as cooling and lenses for CPO applications, and edge AI devices. However, amid high memory costs, the slowdown in the smartphone market continues to weigh on growth in the company's consumer electronics segment. The current share price is trading at about 14x projected 2027 PE, corresponding to average YoY net profit growth of about 14% for 2027-2028, close to the broker's target PE of 15.8x, indicating that positive factors have largely been reflected in the stock price. The broker could turn more positive if the smartphone market outperforms expectations, AI data center products ramp up faster than expected, or smartphone competition becomes healthier than expected. The broker noted that AI data centers and edge AI devices offer long-term upside potential. In AI data centers, cooling and lenses are major expansion areas, including coolant distribution units (CDU), cold plates, quantum dots (QD), vapor chambers, cooling housings for optical modules, and lenses for co-packaged optics fiber array units (CPO FAU). In September, AAC TECH became a partner in Intel DCG China's Ecosystem Liquid Cooling Innovation Acceleration Program, aimed at advancing liquid cooling technology innovation for high-density servers and rack-level architectures. Edge AI devices could also become new consumer-oriented technology devices, expanding the company's components market, including acoustics, cameras, RF structural components and casings. On earnings forecasts, the broker lowered its profit forecast for this year by 1% while largely maintaining forecasts for the next two years, mainly due to lower revenue projections reflecting a slowdown in the smartphone market under high memory costs, leading to reduced smartphone shipments and component shipments, including handset lenses, camera modules, RF structural components, haptics and acoustics. The broker also cut its 2026 gross margin forecast by 0.2 ppts due to lower gross margin assumptions for handset lenses. The updated operating profit forecasts are broadly in line with market expectations for 2026 and 2027. On valuation, the broker continues to derive the TP based on forward PE, using 15.8x projected 2027 PE, versus the previous target multiple of 15.6x, based on the correlation between peers' PE and YoY net profit growth. Accordingly, the TP was raised from HKD50 to HKD51, while the Neutral rating was maintained. (da/ad)~ AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |