Asia Vital Components_ Near-term outlook impacted by GB200 delay. Thu Dec 26 2024

Summary of the Conference Call Company and Industry - The report focuses on Asia Vital Components (AVC), a company involved in the thermal solutions industry, particularly in air and liquid cooling products. Core Points and Arguments 1. Revised Estimates for 1Q25: The estimates for 1Q25 have been revised downwards due to delays in the shipment schedule of GB200 components, predicting a 5% quarter-over-quarter decline compared to the Bloomberg consensus of +2% [2][10] 2. Long-term Outlook: Despite the near-term challenges, the outlook for 2H25 and 2026 remains positive, with estimates largely unchanged at this moment, pending further monitoring of potential delays in GB200 shipments [2][10] 3. Earnings Growth Potential: The price target for December 2025 is set at NT$888**, based on a **23x 2026E P/E**, reflecting stronger earnings growth potential and design wins in both air and liquid cooling projects [7][10] 4. **Financial Performance**: - **2023A**: Revenue of **NT$59,194 million - 2024E: Revenue of NT$71,728 million** - **2025E**: Revenue of **NT$100,476 million - 2026E: Revenue of NT$115,514 million [3][10] 5. Profit Margins: - EBIT margin is projected to improve from 12.5% in FY23A to 19.6% in FY26E. - Net margin is expected to rise from 9.0% in FY23A to 12.9% in FY26E [10][11] 6. Growth Rates: - Revenue growth year-over-year is expected to be 5.7% in FY23A, 21.2% in FY24E, 40.1% in FY25E, and 15.0% in FY26E [10][11] - Adjusted EPS growth is projected at 20.8% in FY23A, 52.5% in FY24E, 43.2% in FY25E, and 23.9% in FY26E [10][11] Important but Overlooked Content 1. Key Risks: - Potential cooling-off of AI sentiment impacting valuation - Yield issues for new capacity/products - Delays in new product launches by customers - Increasing competition as the thermal market expands [16][10] 2. Market Performance: The company has shown a YTD performance of 89.0% and a 12-month performance of 105.5%, indicating strong market interest [5][10] 3. Valuation Metrics: - The FCFF yield is projected to increase from 2.5% in FY23A to 6.8% in FY26E. - The dividend yield is expected to rise from 0.9% in FY23A to 2.1% in FY26E [10][11] This summary encapsulates the key insights from the conference call regarding AVC's financial outlook, growth potential, and associated risks in the thermal solutions industry.