Why was the target price cut?
- Morgan Stanley cut its target price for AirTAC from 2,000 New Taiwan dollars per share to 1,750 New Taiwan dollars, while maintaining its Overweight rating. The new target price implies a forecast P/E of 25 times for 2027; the previous target price implied 29 times.
- The bank attributed the lower valuation multiple to current market sentiment and noted that 25 times is in line with the company’s average P/E since 2020.
How did the third-quarter results change the earnings forecasts?
- Morgan Stanley incorporated the actual third-quarter results and the company’s guidance for the fourth quarter of 2026 and 2027 into its model. With third-quarter net profit lower, the bank cut its earnings forecast for 2026 by about 3%.
- Under the bank’s model, its EPS forecast for 2026 fell from 60.77 New Taiwan dollars to 58.77 New Taiwan dollars; its forecasts for 2027 and 2028 were unchanged at 68.77 and 77.77 New Taiwan dollars, respectively.
Where will growth come from, and what could constrain it?
- Morgan Stanley expects manufacturing automation trends to support further gains in AirTAC’s pneumatic-component market share, while the linear-guide business will generate additional revenue over the next few years. Its base case assumes revenue growth and modest margin expansion.
- The bank’s model forecasts shipment growth of 21.5% year over year in 2026, slowing to 10.8% in 2027; average selling prices are projected to change by 0.2% and negative 0.5%, respectively, indicating that the model’s growth is supported mainly by shipment volumes.
- The growth outlook depends on industry capital expenditure and progress with new products. If the macroeconomic environment weakens, customer capital expenditure and demand for pneumatic components could decline. Slower-than-expected development of the miniature linear-guide business, or substantial investment in new products alongside weak demand, could also affect the assessment.