Hon Precision: Third-quarter profit beats expectations as CPO and new tray design expand value per machine

Where did third-quarter results beat expectations?

In the third quarter of 2026, Hon Precision posted record quarterly revenue of NT$16 billion and net profit of NT$6.717 billion, up 23% quarter on quarter and 86% year on year and 8%–16% above Citi and Bloomberg market expectations.
Gross margin and operating margin for the quarter were 57% and 50%, respectively, broadly in line with market expectations. Citi consequently raised its 2026 earnings forecast by 7% and left its forecasts for 2027 and 2028 broadly unchanged.

Citi says Hon Precision is the only supplier to have reached the final validation stage for CPO INS4 optoelectronic testing equipment. The combined testing equipment is currently in the data collection stage. The company expects validation of the complete system by the end of 2026, and the end customer plans to start mass production in the first quarter of 2027.
The new equipment requires separate temperature-control systems for the main chip and optoelectronic devices, as well as mechanical components for optical devices and optical alignment instruments. Citi estimates its price could reach about NT$30 million per machine, above the NT$12 million–15 million for existing models.
The mass-production ramp-up schedule is tight, and the company has prepared long-lead-time components in advance. Final system validation and the customer’s mass-production progress are key stages in converting this new business into revenue.

The new Mega Tray design offers greater automation, automated optical inspection and higher temperature-control requirements. The company expects the average selling price of the new test handlers to be 30% higher than existing models; Citi has observed that customers have allocated 20%–30% of their 2027 orders to the new design.
The company’s automated temperature-control product roadmap now extends to 12 kilowatts and even 25 kilowatts to accommodate next-generation high-power chips. Citi expects CPO equipment, Mega Tray and upgraded temperature-control specifications together to increase value per machine by about 15% in 2027.
Citi believes capacity is the main constraint on near-term growth, and the company plans to expand capacity by 50%. The speed of the new facility’s ramp-up and progress in developing the CPO business will affect the realization of growth.

Citi cut its target price from NT$11,000 to NT$10,000 while maintaining its buy rating. Uncertainty in the macroeconomic outlook has compressed industry valuation multiples, and the bank lowered its target price-to-earnings multiple from 35 times to 31 times, applied to the average of its forecast earnings per share for 2027 and 2028.
Citi forecasts Hon Precision’s 2027 revenue at NT$95.658 billion and net profit at NT$42.117 billion, up approximately 67% and 77%, respectively, from its 2026 forecasts. This outlook also faces risks including loss of share in major AI projects, a slower-than-expected ramp-up of new capacity and slower CPO development.