JPMorgan maintains Overweight on Hon. Precision; 2Q26 revenue beat expectations by low double digits

Overview

This is a JPMorgan company earnings review report on Hon. Precision. The report notes that Hon. Precision's 2Q26 revenue was meaningfully above expectations, with strong demand for AI/HPC-related test equipment, and that equipment specification upgrades and new platform launches will continue to drive ASP, shipments, and margin improvement. JPMorgan maintains an Overweight rating with a Jun-27 target price of NT$8,000.

Core views

The core view is that Hon. Precision's growth is not just a short-term revenue beat, but is jointly driven by rising AI/HPC chip testing complexity, handler specification upgrades, tight capacity, and customer project expansion. The report believes the market underestimates the company's EPS upside potential in 2027-28, especially in medium-term opportunities such as large-package handlers, CPO testing, temperature-control upgrades, and ATC/thermal chuck.

Analysis framework

The report uses a framework of earnings beat analysis, demand-driver breakdown, product platform iteration, valuation multiples, and risk catalysts. In the short term it focuses on 2Q26 revenue, gross margin, and operating margin; in the medium term on 2H26 orders and capacity; and in the long term on 2025-28 handler shipments, ASP, revenue, and EPS CAGR.

Methodology notes

• Valuation methodsP/E valuation method

  Jun-27 target price is based on 38x 2027E P/E

  JPMorgan sets the NT$8,000 target price based on 38x 2027E P/E, above the company's average of about 34x plus two standard deviations since its emerging stock board listing in November 2024.

• earnings analysisrevenue beat and margin tracking

  2Q26 revenue was 12-13% above expectations

  The report assesses short-term earnings quality through revenue, business mix, equipment ASP, and margin expectations, and believes specification improvements and product expansion remain the core investment thesis.

• industry demandAI/HPC test equipment demand chain

  Rising AI/HPC chip testing complexity drives both shipments and ASP

  The report views ASICs, Tesla AI chips, AMD server CPUs, Google TPUs, CoWoS/FOCoS capacity expansion, and advanced packaging migration as important sources of demand for test equipment.

Asset mapping & comparison

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

• Hon. Precision (7769.TW)

  core covered name

  Strengths

  A global leader in semiconductor test handlers with high AI/HPC revenue exposure and advantages in ATC handlers, cold plates, large-package handlers, CPO optical-electrical co-test, and thermal management technologies.

  Weaknesses

  Valuation is already in a relatively high range, and some investors have taken profits around NT$8,000, so the stock may be affected by valuation digestion in the short term.

  Comparison

  The report states that Hon is the world's No.1 semiconductor test handler company, with market share above 35%, and believes the market underestimates its multi-year ASP expansion potential.

  Risks

  Slowing AI demand, lower testing density, intensifying competition, and slow progress in new advanced packaging technologies.

• ADVANCED MICRO DEVICES INC (AMD.US)

  demand-related asset

  Strengths

  Stronger testing demand for AMD Venice server CPUs is listed in the report as one of the key demand sources for Hon's 2H26 deliveries.

  Weaknesses

  The report does not provide an independent analysis of AMD fundamentals or valuation.

  Comparison

  AMD appears in this report mainly as a downstream demand driver for Hon's test equipment rather than a core covered name.

  Risks

  If testing demand for related CPU projects comes in below expectations, it could weaken momentum in Hon's equipment shipments.

Key data

• 2Q26 revenueNT$13.8bnUp 29% QoQ and 101% YoY, 12-13% above JPMorgan forecasts and market consensus.
• 2Q26 revenue mixabout 75% equipment, low-20% cold platesThe revenue mix was broadly similar to 1Q26.
• 2025-28 revenue/EPS CAGRlow-60% rangeJPMorgan expects both revenue and EPS to post CAGR in the low-60% range and sees upside potential.
• 2025-28 handler shipments/ASP CAGR38%/15%Driven by growth in AI/HPC chip volumes and upgraded testing specifications.
• 2027E/2028E EPSNT$210/NT$320JPMorgan believes capacity additions and product specification upgrades could drive earnings upgrades.
• current valuation32x/21x 2027E/2028E P/EThe report believes the stock's range-bound trading provides a better entry point.
• target priceNT$8,000Jun-27 target price, based on 38x 2027E P/E.
• potential bull-case scenarioNT$10,000If the market rolls forward to 2028E EPS and assigns 35-40x P/E, the stock price could challenge this level.

Impact & implications

The report's implication for Hon. Precision is positive: strong 2Q26 revenue in the short term validates the demand and ASP thesis; new platform showcases at SEMICON Taiwan may strengthen market sentiment in the medium term; and in the long term, upgraded AI/HPC testing specifications and advanced packaging migration may expand the company's addressable market and drive earnings upgrades. For the supply chain, trends in CoWoS, FOCoS, CPO, large-package, and high-temperature-control testing will continue to increase the importance of high-end handlers and thermal management equipment.

Risks

• Slowing AI demand.
• Lower testing density.
• Intensifying competition.
• Slow progress in new advanced packaging technologies.
• High valuation may lead to periodic stock price volatility or profit-taking.
• If capacity expansion or mass production of new platforms falls short of expectations, revenue and ASP upside may be delayed.

What to watch

• Gross margin and operating margin in the formal 2Q26 results.
• 2H26 orders and deliveries from ASICs, Tesla AI chips, AMD Venice server CPUs, Google TPUs, the China market, and CPU testing.
• Progress of multi-bin, large-package, and CPO optical-electrical co-test handler showcases during SEMICON Taiwan 2026.
• Customer adoption after large-package handler shipments begin in 3Q26 and the replacement cycle in 2027-28.
• Progress of CPO test insertion 4 development completion and pilot production in 4Q26.
• The boost from upward revisions to CoWoS and FOCoS capacity on AI/HPC chip output and test equipment demand.
• Commercialization opportunities for thermal chuck, ATC, and more advanced temperature-control demand over the next 12-24 months.