AI/HPC demand and project ramp-ups drive continued earnings upgrades

Overview

WinWay Technology’s second-quarter gross margin was 38%, below Nomura’s 39% forecast and the market consensus of 40%, and also down significantly from 43% in the first quarter. Nomura believes the gross margin decline was mainly related to rising capacity expansion costs and a higher share of MEMS probe cards, but July revenue was strong and multiple AI/HPC projects will ramp up from the second half of 2026, so the company’s overall growth trajectory remains solid.

Core views

The report’s core view is that the AI/HPC investment boom, rising chip complexity, and CPU demand driven by agentic artificial intelligence will continue to drive demand for high-end test interfaces. Although profitability is unlikely to recover rapidly in the short term, revenue growth, order backlog, and capacity expansion can more than offset the negative impact of gross margin pressure. Based on higher revenue and profit forecasts, Nomura reiterates its Buy rating and believes the risk-reward has improved significantly after the stock pulled back about 40% from its April high while the TAIEX rose about 20% over the same period.

Analysis framework

The report revises the 2026–2028 income statements by combining second-quarter results versus market expectations, July revenue progress, the project ramp-up timetable, capacity expansion plans, and AI/HPC industry demand; valuation uses a 32x P/E multiple on average 2027–2028 EPS, with the TAIEX as the relative performance benchmark.

Methodology notes

• Earnings forecastsIncome statement forecast revisions

  Integrated modeling of revenue growth and gross margin pressure

  Revenue, gross profit, operating profit, net profit, and EPS forecasts for 2026–2028 were raised, while gross margin forecasts for the same period were lowered to 39.6%, 41.3%, and 42.3% to reflect capacity expansion costs and product mix pressure.

• Relative valuationForward P/E multiple valuation

  Applying a 32x P/E multiple to average 2027–2028 EPS

  The TWD 9,000 target price is based on a 32x P/E multiple applied to average 2027–2028 EPS, a multiple in the middle of the company’s historical valuation range; the report states the stock is currently trading at about 24x P/E for the same period.

• Industry and operating analysisDemand, project, and capacity linkage analysis

  Assessing growth sustainability through AI/HPC demand, project ramp-ups, and capacity expansion pace

  The report assesses whether revenue growth can offset profitability pressure through July revenue, project ramp-ups in the second half of 2026 and beyond, order momentum, and test socket capacity expansion.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• WinWay Technology (6515.TW)

  Core recommended name

  Strengths

  Benefits from AI/HPC growth, rising chip complexity, and expanding CPU demand; sufficient project pipeline; relatively comprehensive presence in high-end test sockets, probe cards, and thermal control solutions; continued capacity expansion to meet demand.

  Weaknesses

  Capacity expansion costs and the MEMS probe card product mix have weighed on recent gross margins, and profitability may not recover quickly.

  Comparison

  The target valuation is 32x average 2027–2028 EPS, in the middle of the historical range; the current trading valuation is about 24x.

  Risks

  AI/HPC demand weaker than expected, intensified competition in test interfaces and market share loss, unsmooth capacity ramp-up, or further deterioration in profitability.

• TAIEX

  Relative performance and rating benchmark

  Strengths

  Used to measure WinWay Technology’s relative performance over the next 12 months.

  Weaknesses

  Overall index trends may obscure company-specific operating and valuation risks.

  Comparison

  The report states that the company’s share price has pulled back about 40% from its April 2026 high, while the TAIEX rose about 20% over the same period.

  Risks

  Overall valuation volatility in the Taiwan market, the macro environment, and changes in market risk appetite may affect the achievement of the target price.

Key data

• Second-quarter gross margin38%Below Nomura’s forecast of 39% and market consensus of 40%; the first quarter was 43%.
• 2026–2028 gross margin forecasts39.6% / 41.3% / 42.3%Previous forecasts were 41.0%, 43.6%, and 44.7%, respectively.
• 2026–2028 revenue forecastsTWD 16.425bn / 28.993bn / 48.710bnRaised by 13.6%, 16.2%, and 18.2%, respectively, versus previous forecasts.
• 2026–2028 net profit forecastsTWD 3.377bn / 7.179bn / 13.185bnRaised by 7.0%, 8.1%, and 10.5%, respectively, versus previous forecasts.
• 2026–2028 EPS forecastsTWD 93.40 / 198.55 / 364.67Raised by 5.7%, 6.9%, and 9.2%, respectively, versus previous forecasts.
• July 2026 revenueApproximately TWD 1.6bnEquivalent to about 40% of market consensus third-quarter revenue expectations.
• Capacity expansionTest socket capacity to at least double year on year in 2026 and 2027To meet customer demand and capture AI/HPC growth opportunities.
• Target price and current priceTWD 9,000 / TWD 6,775Corresponding to potential upside of about 32.8%; current price date is August 6, 2026.
• ValuationTarget 32x, current about 24xBoth based on average 2027–2028 EPS.

Impact & implications

If AI/HPC projects ramp up as planned, WinWay Technology’s revenue growth and scale effects are expected to gradually absorb the current gross margin pressure caused by capacity expansion and product mix, and drive rapid earnings growth in 2027–2028. From a valuation perspective, the sharp share price pullback, upward earnings forecast revisions, and the gap between the target valuation and current trading valuation together enhance potential returns, but the investment thesis still depends on order execution, capacity ramp-up, and stabilization of gross margins.

Risks

• AI/HPC market demand is weaker than expected, or artificial intelligence penetration slows.
• Competition in the test interface market intensifies, leading to market share loss.
• Capacity expansion costs, product mix, or execution issues cause profitability to be worse than expected.
• The ramp-up of new projects or customer order fulfillment progresses more slowly than expected.
• Macro and overall market volatility may hinder achievement of the target price.

What to watch

• Whether third-quarter 2026 revenue can sustain July’s strong momentum.
• Mass production and revenue contribution from AI/HPC projects in the second half of 2026.
• Whether gross margin can gradually stabilize from the second-quarter low of 38%.
• Construction, ramp-up, and utilization of the plan to double test socket capacity.
• Changes in the MEMS probe card product mix and their impact on profitability.
• Whether 2027–2028 earnings forecasts and market consensus expectations continue to be revised upward.
• Competitive landscape in the test interface market and changes in the company’s market share.