JPMorgan maintains Hon. Precision at Overweight as AI test equipment drivers strengthen in 2027

Overview

This is a JPMorgan earnings review and company research report on Hon. Precision (7769.TW). The report's core conclusion is that the 2Q26 earnings call revealed stronger 2027 growth drivers, particularly from large-package ATC handlers, China AI and HPC demand, CPO test insertion 4 optoelectronic co-test handlers, OSAT reshoring expansion in the United States, and the FT/SLT handler project pipeline. JPMorgan maintains an Overweight rating and raises the Jun-27 target price from NT$8,000 to NT$8,350.

Core views

JPMorgan believes Hon. Precision is a global leader in semiconductor test handlers, with market share above 35% and approximately 80% of revenue derived from AI and HPC. As AI/HPC chip testing specifications advance, package sizes increase, and thermal-management requirements rise, the company's handler shipments and ASPs are expected to maintain strong growth from 2025 to 2028. The report particularly emphasizes that the market may underestimate the company's multiyear ASP expansion potential, EPS elasticity, and key enabling role in future AI chip testing.

Analysis framework

The report combines earnings review, order and capacity pipeline analysis, assessment of product specification upgrades, and relative valuation. The short-term analysis focuses on 2Q26 revenue, gross margin, expenses, and EPS performance; the medium-term analysis focuses on large-package products, China orders, CPO co-testing, OSAT expansion, and SLT/FT order progress in 2027. Valuation derives the target price from 2027E EPS and a P/E multiple, and compares it with historical trading multiples and peer valuations.

Methodology notes

• Valuation frameworkP/E target price method

  Estimate the Jun-27 target price by multiplying 2027E EPS by the target P/E multiple

  JPMorgan's Jun-27 target price of NT$8,350 is based on 38x 2027E P/E, close to approximately +1 standard deviation above the historical average P/E since the company transferred to trading on the TWSE Main Board in December 2025.

• Earnings forecastEarnings revision and CAGR analysis

  Assess growth through compound growth rates in revenue, EPS, shipments, and ASP

  The report expects handler shipments and ASPs to achieve CAGRs of approximately 41% and 17%, respectively, from 2025 to 2028, driving revenue and EPS CAGRs of approximately 64% and 66%-68%, respectively, over the same period.

• Industry-chain analysisAI/HPC test equipment specification upgrade framework

  Assess equipment demand based on chip size, thermal management, FT/SLT testing, CPO co-testing, and OSAT expansion

  The report identifies large-package products, approximately 10kW thermal-management capability, CPO O/E co-testing, US-based OSAT expansion, and China AI orders as core sources of demand in 2027.

Asset mapping & comparison

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

• Hon. Precision (7769.TW)

  Research subject; Taiwan-listed semiconductor test-handler company

  Strengths

  Global leader in semiconductor test handlers, with market share above 35%; approximately 80% of revenue from AI/HPC; thermal-control and thermal-management technology barriers; benefits from large-package products, CPO co-testing, China AI orders, and OSAT expansion.

  Weaknesses

  Capacity constraints have deferred some 2H26 deliveries to 1Q27; the timing of CPO orders remains unclear; GPU SLT handlers have not yet secured confirmed key wins or win-backs.

  Comparison

  The report states that the company's market share in China's high-end FT and SLT handler markets is 90%-100%; the valuation target uses 38x 2027E P/E and references historical trading multiples of approximately +1 standard deviation since its listing.

  Risks

  A slowdown in AI demand, lower test density, intensified competition, slow progress in new advanced packaging technologies, and failure to realize orders from key projects.

• AI/HPC semiconductor test equipment chain

  The company's main sources of demand and growth drivers

  Strengths

  Upgrades in AI/HPC chip specifications are driving greater thermal capacity, larger package sizes, and higher testing complexity, supporting handler shipment and ASP expansion.

  Weaknesses

  Demand is highly dependent on the AI capital expenditure cycle and the timing of customer projects.

  Comparison

  The report expects ASICs to exceed GPUs in Hon. Precision's AI order exposure in 2027.

  Risks

  If AI/AI semiconductor capital expenditures cool or customer roadmaps are delayed, equipment orders and valuation re-rating could come under pressure.

Key data

• RatingOverweightJPMorgan maintains its rating.
• Target priceNT$8,350.00Jun-27 target price, versus NT$8,000.00 previously.
• Current priceNT$5,620.00As of 2026-07-30.
• 2026E revenueNT$55,004mnRaised 5.4% from the previous forecast.
• 2027E revenueNT$87,693mnRaised 4.3% from the previous forecast.
• 2026E adjusted EPSNT$128.53Raised 3.1% from the previous forecast.
• 2027E adjusted EPSNT$219.79Raised 4.4% from the previous forecast.
• 2028E adjusted EPSNT$347.47The report states that 2028E EPS was raised by 9%.
• 2Q26 revenueNT$13.8bnUp 29% quarter-over-quarter and 100% year-over-year.
• 2Q26 EPSNT$30.4Approximately 4%-5% above JPMorgan's and consensus estimates.
• 2Q26 gross margin56.1%Within the company's 55%-60% target range but below the approximately 57% expectation.
• Large-package handler price premium20%-25%Relative to existing FT handlers.
• China order growthFT >60% YoY; SLT >80% YoYDriven by AI, HPC, and automotive applications.
• China high-end FT/SLT market share90%-100%Management's view.
• 2027E P/E valuation basis38xUsed to derive the Jun-27 target price.

Impact & implications

The report's investment implications are positive: following the recent share-price correction, 25x 2027E P/E is viewed as a better entry point, while multiple 2027 growth drivers could support EPS upgrades and a valuation re-rating. If the market rolls the valuation basis forward to 2028E EPS and assigns a 35-40x P/E, the report believes the share price could challenge NT$10,000 in a bull-case scenario. However, earnings realization depends on sustained AI demand, testing specification upgrades, progress in CPO and SLT projects, and the implementation of OSAT expansion.

Risks

• A slowdown in AI demand could weaken orders for AI/HPC test equipment.
• Lower test density could reduce the intensity of handler demand.
• Intensifying competition could compress ASPs and margins.
• Slower-than-expected progress in new advanced packaging technologies could affect CPO- and large-package-related revenue.
• The GPU SLT handler project has no confirmed win or win-back order, creating uncertainty over medium- to long-term order realization.
• Capacity constraints have deferred some 2H26 deliveries to 1Q27; if expansion falls short of expectations, revenue recognition could be affected.

What to watch

• Shipment progress for large-package ATC handlers starting in October 2026 and their penetration in AI customer shipments in 2027.
• Growth in China FT and SLT handler orders, margin improvement, and progress in local manufacturing.
• The formal order timing, ASP, and customer adoption pace for CPO test insertion 4 O/E co-test handlers.
• The impact of OSAT expansion projects in the United States, Thailand, Singapore, mainland China, and other locations on the company's equipment demand.
• Mass-production shipment timing for Tesla AI chips, TPU projects, and server CPU projects within FT handlers.
• Qualification and order conversion for SLT handlers in Nvidia GPU, US CSP ASIC, and Austin-based GPU customer projects.
• Whether customer thermal-management roadmaps upgrade as scheduled toward approximately 10kW capability.