Supply-chain checks indicate no loss of share in CPO and GPU heat-sink equipment; Morgan Stanley reiterates its Overweight rating on AllRing

Overview

This report addresses the decline in AllRing's share price amid uncertainty over equipment share, CoW dispensing qualification, and Rubin Ultra heat-sink attachment. Morgan Stanley's supply-chain checks found no impairment to the company's core equipment share, leading it to reiterate its Overweight rating and remain positive on the company's long-term advanced-packaging and CPO opportunities.

Core views

Market concerns center on three areas: AllRing may lose CPO coupling equipment share to MRSI, a subsidiary of Mycronic AB Group (MYCR.ST, NC); CoW dispensing may have already lost qualification; and uncertainty may exist over its share of heat-sink attachment equipment for the next-generation Rubin Ultra GPU. These comments drove AllRing down 5.5% last Friday, while the Taiwan Weighted Index rose 0.65% over the same period, indicating marked underperformance by the stock. Morgan Stanley's supply-chain checks do not support these most pessimistic conclusions. The report believes AllRing's share in CPO coupling equipment remains intact, with no confirmed share loss to MRSI; its share in heat-sink attachment for next-generation GPUs also remains unchanged. The report therefore attributes the recent volatility more to market concerns over potential changes in share than to confirmed business losses. There is also an important distinction between the status of CoW dispensing and having "lost qualification." The report notes that the business remains in the qualification stage and is not described as having been disqualified, with a further update expected later in the fourth quarter. This means the opportunity has not yet translated into confirmed orders, but there is also no evidence that AllRing has exited the competition. Subsequent qualification progress remains critical to assessing the business's commercialization. Beyond existing CPO- and GPU-related opportunities, Morgan Stanley remains confident in AllRing's collaboration with a US advanced-packaging supplier and expects the company to provide further details at its in-person earnings briefing on August 27, 2026. The report therefore believes the company can continue participating in long-tail growth opportunities in advanced packaging and CPO, although qualification results and progress in customer collaboration require further validation in the near term. On valuation, AllRing trades at 20x 2027e EPS, which Morgan Stanley views as an attractive level for exposure to the company's advanced-packaging and CPO opportunities. It reiterates its Overweight rating, Attractive industry view, and NT$1,580.00 target price; the closing price on August 21, 2026 was NT$1,195.00. The report uses a residual income model for its base-case valuation, with key assumptions including an 8% cost of equity, comprising a 2.0% risk-free rate, a beta of 1.0, and a 6.0% market risk premium; a 16% medium-term growth rate, a 65% cash dividend payout ratio, and a 4.5% perpetual growth rate. Upside factors listed in the report include stronger-than-expected CoWoS capacity expansion, faster-than-expected silicon photonics adoption, and continued R&D and China's localization trend enabling the company to gain share from peers. Downside factors include slower CoWoS capacity expansion, a decline in AllRing's "WoS" market share, and slower technological migration toward SoIC and silicon photonics.

Analysis framework

The report begins with the stock's unusual decline relative to the broader market and three market concerns, then uses supply-chain checks to verify the actual status of CPO coupling equipment, CoW dispensing, and GPU heat-sink attachment. It subsequently assesses the business and valuation implications in light of the collaboration with a US advanced-packaging supplier, the timing of subsequent disclosures, and 20x 2027e P/E. Finally, it supports the target price with a residual income model and explicit assumptions for the cost of equity, growth, and dividends, while outlining upside and downside risks.

Methodology notes

• Valuation MethodRIM Residual Income Model

  Base-Case Residual Income Model

  The model values the company based on book capital and future residual income exceeding the cost of equity. The report uses an 8% cost of equity, a 16% medium-term growth rate, a 65% cash dividend payout ratio, and a 4.5% perpetual growth rate as its key assumptions.

• Quantitative/Factor/Portfolio TheoryCAPM Capital Asset Pricing Model

  Derivation of Cost of Equity

  The report derives an 8% cost of equity from a 2.0% risk-free rate, a beta of 1.0, and a 6.0% market risk premium, and applies it in the residual income model.

• Valuation MethodPE/PEG valuation

  2027e P/E

  The report assesses the current valuation based on the share price equating to 20x 2027e EPS and therefore considers the valuation level attractive for exposure to long-term advanced-packaging and CPO opportunities.

• Industry/Sector Analysis Framework

  Supply-Chain Checks

  The report uses supply-chain channels to verify equipment share, qualification status, and customer collaboration, distinguishing market rumors from validated business changes.

Asset mapping & comparison

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

• AllRing Tech Co. (6187.TWO, 6187 TT)

  The core company covered by the report, which is considered a potential beneficiary of demand for advanced packaging, CPO, CoWoS, and next-generation GPU equipment.

  Strengths

  Supply-chain checks indicate that shares in CPO coupling equipment and next-generation GPU heat-sink attachment remain intact; the company is also advancing a collaboration with a US advanced-packaging supplier.

  Weaknesses

  CoW dispensing remains in the qualification stage, and the related business has not yet received final confirmation.

  Comparison

  The market is concerned that its CPO coupling equipment share will shift to MRSI, but the report's supply-chain checks did not confirm any share loss.

  Risks

  Slower CoWoS capacity expansion, a decline in "WoS" market share, and slower migration toward SoIC and silicon photonics technologies.

Key data

• Share Price Performance Last Friday-5.5%The Taiwan Weighted Index rose 0.65% over the same period.
• Stock RatingOverweightThe report explicitly states that this rating is reiterated.
• Industry ViewAttractiveGreater China Technology Semiconductors industry view.
• Target PriceNT$1,580.00Target price stated in the report.
• Closing PriceNT$1,195.00Closing price on August 21, 2026.
• 2027e P/E20xThe report considers this valuation level attractive.
• 52-Week Price RangeNT$1,490.00-307.50As of the market data date stated in the report.
• Current Diluted Shares Outstanding96 million sharesData stated in the report's table.
• Current Market CapitalizationNT$114,808 millionData stated in the report's table.
• Current Enterprise ValueNT$110,912 millionData stated in the report's table.
• Average Daily Trading ValueNT$1,918 millionData stated in the report's table.
• Cost of Equity8%Derived from a 2.0% risk-free rate, a beta of 1.0, and a 6.0% market risk premium.
• Medium-Term Growth Rate16%Base-case assumption in the residual income model.
• Cash Dividend Payout Ratio65%Base-case assumption in the residual income model.
• Perpetual Growth Rate4.5%Terminal-value assumption in the residual income model.

Impact & implications

Morgan Stanley believes that supply-chain evidence has not substantiated the concerns about equipment share loss and qualification failure reflected in the recent share-price decline. If shares in CPO coupling equipment and GPU heat-sink attachment remain stable, CoW dispensing completes qualification, and more information is disclosed about collaboration with the US advanced-packaging supplier, the case for the company's participation in long-term advanced-packaging and CPO opportunities will be further validated. Conversely, weaker capacity expansion, technological migration, or market share would undermine this view.

Risks

• An upside risk is stronger-than-expected CoWoS capacity expansion.
• An upside risk is faster-than-expected adoption of silicon photonics.
• Continued R&D and China's localization trend may enable AllRing to gain additional market share from peers.
• A downside risk is slower CoWoS capacity expansion.
• A downside risk is a decline in AllRing's "WoS" market share.
• Slower migration toward technologies such as SoIC and silicon photonics may weaken business growth opportunities.

What to watch

• Monitor the progress of CoW dispensing qualification and further updates expected later in the fourth quarter.
• Monitor further details about the collaboration with the US advanced-packaging supplier to be disclosed at the in-person earnings briefing on August 27, 2026.
• Monitor whether shares in CPO coupling equipment and Rubin Ultra next-generation GPU heat-sink attachment remain stable.