Advantest earnings call provides positive read-through; JPMorgan maintains Hon. Precision at Overweight

Overview

This is a JPMorgan company research/earnings review report on Hon. Precision (7769.TW), centered on the positive read-through to Hon. Precision from Advantest's FY1Q26 earnings call. The report notes that the rapid adoption of AI inference is driving semiconductor demand related to ASICs, CPUs, DRAM, and GPUs. Advantest has therefore raised its expectations for the 2026 SoC and memory tester markets and brought forward capacity expansion, which is positive for Hon. Precision's semiconductor test handler demand.

Core views

The core views include: first, testers and handlers generally have a 1:1 relationship in the final test stage, so expansion of the Advantest tester market can directly translate into Hon. Precision handler demand; second, Hon. Precision holds a leading position in AI and HPC handlers, and its business is not solely dependent on NV GPUs, with improving ASIC and CPU demand strengthening the fundamental growth narrative; third, Advantest disclosed that customer demand visibility has extended to 18 months in many cases, supporting Hon. Precision's previous guidance for equipment shipment value growth of more than 40% year over year in 2026 and more than 50% in 2027; fourth, rising test complexity, longer test times, increased insertion counts, and specification upgrades should drive both shipment and ASP growth.

Analysis framework

The report applies an industry-chain read-through approach, mapping Advantest's demand, capacity, and customer visibility information in the SoC and memory tester markets to Hon. Precision's orders, capacity constraints, ASP increases, and medium-term earnings leverage in final test handlers and system-level test handlers. For valuation, the target price is based on a 2027E P/E multiple, with a bull-case scenario in which the share price could challenge NT$10,000.

Methodology notes

• industry_read_throughIndustry-chain read-through analysis

  Deriving Hon. Precision handler demand from Advantest tester demand and capacity expansion

  Because testers and handlers have a 1:1 configuration relationship in the final test stage, Advantest's upward revision to the SoC tester market and its earlier capacity expansion provide a positive read-through to Hon. Precision's handler orders and shipments.

• Valuation methodsP/E multiple valuation

  Target-price valuation based on 2027E P/E

  JPMorgan's Jun-27 target price of NT$8,000 is based on 38x 2027E P/E, slightly above the approximately 34x mean plus two standard deviations since the company began trading on the Emerging Board in November 2024.

• scenario_analysisbull case scenario

  Bull-case valuation

  If the market valuation rolls forward to 2028E EPS and applies a 35-40x P/E, the report believes Hon. Precision's share price could challenge NT$10,000.

Asset mapping & comparison

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

• Hon. Precision (7769.TW)

  Core covered company

  Strengths

  Global semiconductor test handler leader, with a high AI and HPC revenue mix and strong positions in FT handlers and SLT handlers; benefits from rising AI chip test complexity, shipment growth, and ASP upgrades.

  Weaknesses

  Currently facing tight handler supply; delivery of growth depends on the pace of capacity and production-site expansion.

  Comparison

  While the market views it as primarily tied to NV GPUs, the report emphasizes its ongoing diversification toward ASIC and CPU demand, including the supply of SLT handlers related to MediaTek TPUs and AMD Venice CPUs.

  Risks

  Slowing AI demand, declining test density, intensifying competition, and slower-than-expected adoption of advanced packaging technologies.

• Advantest (6857 JT)

  Upstream/same-industry-chain read-through source

  Strengths

  The FY1Q26 earnings call indicated stronger-than-expected demand in the SoC and memory tester markets, with the V93K capacity expansion target potentially being brought forward.

  Weaknesses

  The report does not primarily cover Advantest; the relevant information is used to derive Hon. Precision demand.

  Comparison

  Advantest's tester capacity expansion is strongly linked to Hon. Precision handler demand in the FT stage because testers and handlers have a 1:1 configuration relationship.

  Risks

  If tester demand or capacity expansion falls short of expectations, the strength of the read-through to Hon. Precision will decline.

• ADVANCED MICRO DEVICES INC

  Downstream AI CPU demand-related customer/ecosystem read-through

  Strengths

  The report mentions that AMD Venice CPUs create CPU-related opportunities for Hon. Precision's SLT handler business.

  Weaknesses

  Not a core valuation subject of this report.

  Comparison

  Compared with GPU demand, improving CPU and ASIC demand is used to demonstrate that Hon. Precision's demand sources are becoming more diversified.

  Risks

  A slower-than-expected CPU project schedule or weaker demand would weaken the diversification narrative.

• MediaTek TPUs

  Downstream AI ASIC application read-through

  Strengths

  The report notes that Hon. Precision supplies MediaTek TPUs, demonstrating its dominant share in AI ASIC SLT handlers.

  Weaknesses

  Specific order and revenue scale are not disclosed in the text.

  Comparison

  Compared with NV GPUs, MediaTek TPUs represent evidence of Hon. Precision's expansion into the ASIC field.

  Risks

  AI ASIC project timelines and customer capital expenditures remain uncertain.

Key data

• Current priceNT$5,175.00Price as of July 29, 2026.
• Target priceNT$8,000.00Jun-27 Price Target.
• Implied upsideApproximately 54.6%Calculated based on the NT$8,000 target price and NT$5,175 current price.
• RatingOverweightJPMorgan maintains a positive rating; OW is classified as a Buy rating.
• Hon. Precision market positionGlobal No. 1 semiconductor test handler manufacturer, with a market share of 35%+The report states that the company holds a dominant share in AI and HPC final test handlers.
• AI and HPC revenue mixApproximately 80%The report states that AI and HPC account for approximately 80% of the company's revenue mix.
• AI GPU / ASIC demand mixApproximately 75-80% / 25-30% in 2025, approximately 50% / 50% in 2026Used to illustrate that demand sources are diversifying from GPUs toward ASICs, CPUs, and other areas.
• Equipment shipment value growth guidance2026 YoY >40%, 2027 YoY >50%The report states that Advantest's approximately 18-month customer demand visibility supports Hon. Precision's existing guidance.
• 2025-2028 handler shipment volume CAGR38%JPMorgan model forecast.
• 2025-2028 handler ASP CAGR15%Driven by specification upgrades including enhanced thermal capabilities for ATC handlers, optical inspection integration, CPO test insertion, and large-package platforms.
• 2025-2028 revenue and EPS CAGR61% for bothDriven jointly by shipment volume and ASP growth.
• Advantest customer demand visibilityApproximately 18 months in many casesHistorically, customer forecasts were typically approximately six months.

Impact & implications

The investment implications for Hon. Precision are positive: Advantest's upward revision to tester demand and earlier capacity expansion reinforce the strength of the AI/HPC test equipment chain; improving ASIC, CPU, and DRAM demand reduces the risk of the market overly associating Hon. Precision with the NV GPU cycle; and rising test complexity and specification upgrades provide room for ASP expansion and earnings re-rating. If the company can secure additional production sites in a timely manner to alleviate handler supply constraints, there remains room for upward revisions to growth guidance.

Risks

• Slowing AI demand.
• Declining test density, resulting in test times or test insertion counts falling below expectations.
• Intensifying competition among semiconductor test handlers.
• Slower-than-expected migration to advanced packaging technologies.
• If Hon. Precision cannot secure additional production sites in a timely manner, supply constraints could limit shipment delivery.
• If the market continues to overly associate the company with NV GPU developments, the share price could be affected by fluctuations in the single-GPU narrative.

What to watch

• Hon. Precision's July 30, 2026 earnings release and 14:30 Taiwan-time earnings call.
• The pace at which Advantest brings forward its 5,000-unit and 10,000-unit V93K tester capacity targets.
• Further upward revisions to the SoC tester and memory tester markets in 2026.
• Whether the AI GPU, ASIC, and CPU demand mix evolves toward approximately 50%/50% in 2026 in line with company guidance.
• Whether ATC handler ASPs continue to rise, driven by enhanced thermal capabilities, optical inspection integration, CPO optoelectronic co-testing, and ultra-large-package platforms.
• Global AI/AI semiconductor capital expenditures, advanced packaging migration, and wins for key projects.