Compal (2324): AI server ramp is expected to lift Compal’s 4Q26E and 1Q27E growth despite an August PC-driven revenue miss.

Overview

This update reviews Compal’s August revenue shortfall and near-term outlook. Goldman Sachs expects AI-server ramp-up to drive stronger growth into 4Q26E and 1Q27E, but retains a Neutral rating because PC demand remains pressured and valuation is considered fair.

Core views

Compal’s August revenue rose 15% year on year but fell 17% month on month to NT$67bn, 20% below Goldman Sachs’ estimate. The miss reflected a decline in PC shipments, which fell 22% month on month to 1.4m units. The report attributes the weaker PC demand to a pull-in during 1H26 ahead of rising memory costs, alongside generally weak consumer-electronics demand. Goldman Sachs nevertheless expects sequential revenue growth from September through December. Its 3Q26E and 4Q26E revenue forecasts imply growth of 1% and 16% quarter on quarter, respectively, with 3Q26E revenue of NT$239.614bn and 4Q26E revenue of NT$278.767bn. The expected acceleration is driven by rising AI-server rack shipments, AI-server capacity expansion, and Compal’s progression from L6 motherboard production toward L10/L11 system-level work. The institution also remains positive on business diversification supported by capacity expansion across the US, Taiwan, Vietnam and China. Consumer electronics, however, still account for most revenue, leaving the company exposed to demand pressure from higher memory and CPU costs. Following the August miss, Goldman Sachs lowered 2026E/2027E/2028E revenue estimates by 1% each to NT$957.979bn, NT$1,109.578bn and NT$1,205.082bn. It cut net-income estimates by 5%/1%/1% to NT$10.667bn, NT$13.610bn and NT$15.622bn, mainly because of lower PC revenue and a higher 2026E operating-expense ratio reflecting increased R&D spending. Gross-margin forecasts are broadly unchanged at 4.8% for 2026E and 2027E and 4.9% for 2028E, while the revised 2026E operating-expense ratio is 3.5%. The institution raised its 12-month target price to NT$46.1 from NT$41.3 despite the earnings reductions. It increased the 2027E target P/E to 14.7x from 13.1x, using a refreshed correlation between forward P/E and EPS growth among PC and server peers. The 14.7x multiple sits within Compal’s historical average to average-plus-one-standard-deviation forward P/E range. Goldman Sachs maintains Neutral, stating that the valuation is fair; it identifies EPS growth and market re-rating among ODM companies as major drivers of share performance.

Analysis framework

Goldman Sachs starts with the monthly revenue and PC-shipment miss, then projects monthly and quarterly revenue using expected AI-server shipment growth, capacity expansion and product-mix changes. It revises earnings for lower PC revenue and higher R&D expenses, then values Compal on a near-term 2027E P/E multiple derived from the observed relationship between peer EPS growth and forward P/E.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  Near-term P/E target-price valuation

  The target price is calculated using a 14.7x 2027E P/E multiple, selected from the relationship between peer EPS-growth expectations and forward trading P/E multiples and checked against Compal’s historical trading range.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  AI-server value-chain upgrade from L6 motherboards to L10/L11 systems

  The report links Compal’s move to higher-level system production and growing AI-server rack shipments to revenue growth, while tracing memory and CPU cost inflation into PC-demand pressure.

Asset mapping & comparison

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

• Compal (2324.TW)

  Primary covered company; expected to benefit from AI-server rack ramp-up, capacity expansion and an upgrade from L6 motherboards to L10/L11 systems.

  Strengths

  AI-server shipment growth, system-level product expansion and diversified capacity in the US, Taiwan, Vietnam and China.

  Weaknesses

  Consumer electronics remain the majority of revenue, and the PC business faces weak demand and component-cost pressure.

  Comparison

  The target P/E is derived from the correlation between EPS growth and forward P/E among PC and server peers.

  Risks

  PC-market recovery, AI-server ramp-up and tablet demand could be stronger or weaker than expected.

Key data

• August 2026 revenueNT$67bnUp 15% YoY and down 17% MoM; 20% below Goldman Sachs’ estimate.
• August PC shipments1.4m unitsDown 22% MoM.
• 3Q26E revenueNT$239.614bnExpected to grow 1% QoQ and 28% YoY.
• 4Q26E revenueNT$278.767bnExpected to grow 16% QoQ and 46% YoY.
• 2026E net incomeNT$10.667bnRevised down 5% from NT$11.239bn.
• 2027E target P/E14.7xRaised from 13.1x previously.
• 12-month target priceNT$46.1Raised from NT$41.3; based on 14.7x 2027E P/E.

Impact & implications

The report expects AI servers to increasingly offset weakness in Compal’s PC and consumer-electronics operations, producing a stronger 4Q26E growth profile. However, the August miss led to lower earnings estimates, and Goldman Sachs considers the updated valuation fair despite the higher target price.

Risks

• PC market recovery may be stronger or weaker than expected.
• AI-server ramp-up may be faster or slower than expected.
• Tablet demand may be stronger or weaker than expected.

What to watch

• Monthly revenue progression from September through December and delivery of the projected 16% QoQ 4Q26E revenue growth.
• AI-server rack shipments, capacity expansion and progress toward L10/L11 system production.
• PC shipments, memory and CPU cost inflation, and consumer-electronics demand.
• R&D spending and the operating-expense ratio after the 2026E revision.