Investment Rating - The report maintains a "Buy" rating for Fositek with a 12-month price target of NT$836, representing an upside of 45.6% from the current price of NT$574 [10]. Core Insights - Fositek is expected to benefit from rising demand for ASIC AI servers, which is driving the penetration of liquid cooling components. The company's gross margin (GM) is projected to improve from 22% in 1Q25 to 27% by 2027 [1]. - The shift from air cooling to liquid cooling in ASIC AI servers is anticipated to enhance market opportunities, with next-generation rack-level AI servers potentially utilizing three times more quick disconnects (QDs) per tray compared to previous models [4]. - The foldable phone market is also on the rise, with significant shipments expected, including Huawei's foldable phones, which are projected to support Fositek's revenue growth in 2Q25 [7]. Summary by Sections ASIC AI Servers - The demand for ASIC AI servers is increasing, leading to a higher penetration rate of liquid cooling components. Fositek is expanding its product offerings to include rail kits and liquid cooling components, which are expected to positively impact its gross margin [1][4]. - The company's quick disconnect (QD) technology has gained traction among leading US cloud service providers, with mass production expected to start in 4Q25 [4]. Foldable Phones - The report highlights a growing trend in foldable phones, with significant shipments from major brands like Huawei and Lenovo. This trend is expected to contribute positively to Fositek's revenue in the upcoming quarters [5][7]. - The anticipated launch of more high-end foldable phones in 2H25 is expected to further support revenue growth for Fositek [7]. Financial Projections - Fositek's revenue is projected to grow from NT$8.19 billion in 2025 to NT$22.36 billion by 2027, with corresponding EBITDA and EPS growth [10]. - The report outlines a target P/E multiple of 19.2x based on peer comparisons, indicating a favorable valuation relative to its growth prospects [8].