Goldman Sachs maintains AVC Buy rating, raises 12-month target price to NT$1,516

Overview

This is a Goldman Sachs company research report on AVC (3017.TW). The central view is that AVC continues to benefit from stronger AI server liquid cooling demand, rising adoption of VC thermal solutions in consumer electronics, and expansion of its foldable-phone hinge business, supporting ongoing revenue growth and product-mix improvement.

Core views

Goldman Sachs maintains its Buy rating on AVC and raises the target price. Key reasons include: strong 3Q25 revenue; continued high growth expectations for 4Q25E and 2026E/2027E revenue; higher gross margins on liquid cooling products, which help expand gross margin; improved operating efficiency from a larger revenue base; and ongoing R&D investment supporting product development for AI servers and consumer electronics thermal solutions.

Analysis framework

The report uses a company fundamentals forecast, earnings estimate revisions, product-mix analysis, and a relative valuation framework. On revenue, it focuses on AI server liquid cooling, VC penetration in consumer electronics, foldable-phone hinge business, and server demand; on profit, it focuses on gross margin, expense ratio, and R&D investment; on valuation, it uses a target P/E based on 2026E EPS and refers to the relationship between P/E and EPS growth among technology hardware peers.

Methodology notes

• Valuation methodsTarget P/E valuation

  12-month target price based on 28.4x 2026E P/E

  Goldman Sachs sets AVC's 12-month target price at NT$1,516. The target multiple comes from the relationship between P/E and EPS growth among technology hardware peers, and sits at the high end of AVC's historical trading P/E range, reflecting earnings growth from product-mix upgrading.

• Fundamental forecastEarnings estimate revisions

  Raise revenue, gross margin, and net profit assumptions

  Goldman Sachs raises its 2026E/2027E net profit, revenue, and gross margin forecasts on demand for liquid cooling in new AI server ASIC models, expansion in consumer electronics VC, and better operating efficiency.

• Factor frameworkGS Factor Profile

  Growth, Financial Returns, Multiple, and Integrated

  Goldman Sachs discloses that its factor framework compares individual stocks with the market and industry peers using growth, financial returns, valuation multiples, and integrated factors, but the investment conclusion in this report is driven mainly by company fundamentals and P/E valuation.

Asset mapping & comparison

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

• AVC (3017.TW)

  The report covers the company and the main investment target.

  Strengths

  Liquid cooling, VC, and hinge businesses all have growth catalysts; 3Q25 revenue was strong; liquid cooling products carry higher gross margins; the target price was raised and the Buy rating was maintained.

  Weaknesses

  Valuation sits at the high end of its historical P/E range; growth depends on AI server liquid cooling penetration, consumer electronics demand, and customer new-product cycles.

  Comparison

  The target P/E is derived from the relationship between EPS growth and P/E multiples among PC/server peers, and the report argues that AVC's product-mix upgrading supports a premium valuation.

  Risks

  Liquid cooling adoption, AI server demand, competition intensity, and general server recovery could all be weaker than expected.

• AI server liquid cooling industry chain

  A key growth driver and source of product-mix upgrading for AVC.

  Strengths

  AI server liquid cooling penetration continues to rise, and AVC's liquid cooling revenue is expected to contribute about 47% by 2027E.

  Weaknesses

  Sensitive to AI server capital expenditure, ASIC new-model rollout timing, and customer adoption speed.

  Comparison

  Compared with traditional consumer electronics cooling, liquid cooling has higher gross margins and contributes more clearly to gross margin expansion.

  Risks

  Weaker-than-expected AI server demand or slower liquid cooling adoption would pressure revenue and gross margin improvement.

• Consumer electronics VC and foldable-phone hinge business

  A growth source for AVC in smartphones, tablets, and other consumer electronics devices.

  Strengths

  VC provides better thermal efficiency, helping maintain performance under heavy workloads; ultra-thin design suits slim devices; new foldable-phone launches can drive hinge business growth.

  Weaknesses

  Demand is affected by smartphone and broader consumer electronics cycles.

  Comparison

  Compared with a single-server liquid cooling exposure, consumer electronics VC and hinges give AVC more diversified growth sources.

  Risks

  A slower recovery in consumer electronics demand or delayed adoption by brand customers.

Key data

• 3Q25 revenueNT$38.9bnUp 32% QoQ and 104% YoY.
• 4Q25E revenue growth forecastQoQ +7%, YoY +99%Goldman Sachs expects liquid cooling and smartphone components to continue supporting growth.
• 2026E/2027E revenue growth forecastYoY +16% / +12%Growth drivers include new liquid cooling models for ASIC AI servers, consumer electronics cooling demand, and foldable-phone hinge business.
• 2026E/2027E net profit forecast revision+15% / +9%Driven by higher revenue, better gross margin, and lower expense ratio assumptions.
• 2026E/2027E revenue forecast revision+7% / +2%Supported by liquid cooling growth and expansion in consumer electronics VC business.
• 2026E/2027E gross margin forecast revision+0.5ppt / +0.3pptHigher gross margins on liquid cooling products drive product-mix improvement.
• Liquid cooling revenue contributionabout 47% in 2027EGoldman Sachs expects liquid cooling revenue to account for about 47% of AVC's total revenue.
• Liquid cooling revenue CAGRabout 40% CAGR from 2025E to 2027EReflects rising AI server liquid cooling penetration.
• Target priceNT$1,516Previous target price was NT$1,324; rating maintained at Buy.
• Target valuation multiple28.4x 2026E P/EValuation multiple is unchanged.

Impact & implications

The report is positive for AVC from an investment perspective: AI server liquid cooling is gradually shifting from a thematic demand story to a meaningful revenue and profit contributor, while consumer electronics VC and foldable-phone hinge businesses provide a second growth engine. The higher mix of high-gross-margin products should improve earnings quality. The higher target price indicates that Goldman Sachs has incorporated greater growth certainty and product-mix upgrading into higher profit forecasts, while leaving the valuation multiple unchanged, meaning the target price increase is driven mainly by earnings upgrades.

Risks

• Liquid cooling adoption is slower than expected.
• AI server demand is weaker than expected.
• Competition is more intense than expected.
• General server recovery is slower than expected.
• If the share of high-gross-margin liquid cooling products does not increase as expected, gross margin expansion may be limited.
• If consumer electronics VC or foldable-phone hinge demand slows, revenue growth may fall short of forecasts.

What to watch

• Whether AVC monthly revenue can sustain the strong growth trend seen after 3Q25.
• Whether 4Q25E revenue can achieve Goldman Sachs' forecast of 7% QoQ and 99% YoY growth.
• AI server liquid cooling penetration and the rollout pace of new ASIC AI server models.
• Whether liquid cooling revenue can rise to about 47% in 2027E as expected.
• Whether 2026E/2027E gross margin is boosted by mix improvement from higher-gross-margin liquid cooling products.
• Adoption rates of VC in smartphones, tablets, and other devices.
• The contribution of new foldable-phone launches to hinge business growth.
• Whether the competitive landscape worsens and whether general server demand recovers.