Goldman Sachs maintains Buy on AVC and significantly raises the target price to NT$3,536

Overview

This is a Goldman Sachs company research and target price revision report on AVC (3017.TW). After updating global AI server TAM, incorporating AVC's strong 1Q26 revenue, and reflecting the latest AI server shipment assumptions, the report maintains a Buy rating and significantly raises the 12-month target price and 2026E-2028E earnings forecasts.

Core views

The core view is that growth in AI server demand, increases in rack-level and ASIC AI server shipments, higher liquid cooling penetration driven by rising AI chip power consumption, and AVC's global capacity expansion in Vietnam and mainland China will together drive strong growth in its AI server liquid cooling component revenue. Goldman Sachs expects AVC's liquid cooling business to deliver about 35% revenue CAGR in 2026E-2028E and believes the product mix shift toward AI server liquid cooling components will improve gross margin.

Analysis framework

The report first uses monthly revenue and quarterly revenue preview data to validate short-term demand, then reflects mid-term earnings upgrades through revisions to 2026E-2028E segment revenue, gross margin, operating expense ratio, and net profit forecasts, and finally derives the target P/E and target price using the correlation between peer EPS growth and P/E multiples.

Methodology notes

• Valuation methodsnear-term P/E target price

  Near-term P/E valuation

  Goldman Sachs uses the near-term P/E method within its Taiwan tech coverage, deriving the 12-month target price of NT$3,536 based on 2027E EPS and a target P/E of 26.7x; the target P/E is based on the correlation between technology hardware peers' P/E and EPS growth.

• earnings_revision2026E-2028E forecast revision

  Earnings forecast upgrade

  The report raises 2026E-2028E revenue forecasts by 4%/15%/14% and net profit forecasts by 9%/24%/24%, mainly reflecting stronger AI server liquid cooling demand, capacity expansion, and product mix improvement.

• peer_comparisonGS vs. Bloomberg consensus

  Comparison with market consensus

  Goldman Sachs' 2026E-2027E net profit forecasts are 5%/12% above Bloomberg consensus, mainly due to higher revenue assumptions and lower operating expense ratio assumptions.

Asset mapping & comparison

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

• AVC (3017.TW)

  Core covered name, directly benefiting from growth in AI server liquid cooling demand.

  Strengths

  Customer base covers leading GPU and ASIC AI server suppliers, leading position in the liquid cooling market, capacity expansion in Vietnam and mainland China, and MCCP is in trial production and is expected to contribute revenue in 2026.

  Weaknesses

  Valuation has already risen significantly, with target P/E above the historical average plus one standard deviation; performance is highly dependent on AI server liquid cooling demand and capacity ramp-up.

  Comparison

  Goldman Sachs' 2026E-2027E net profit forecasts are 5%/12% above Bloomberg consensus, reflecting a more optimistic view than the market on revenue and expense ratios.

  Risks

  Slower-than-expected liquid cooling adoption, weaker-than-expected AI server demand, intensified competition, and a slower-than-expected recovery in general-purpose servers.

Key data

• 12-month target priceNT$3,536Raised 57% from the previous NT$2,259.
• Current priceNT$2,945Price disclosed in the report, implying 20.1% upside to the target price.
• 2026E-2028E net profit forecast revision9%/24%/24%From the earnings forecast revision.
• 2026E-2028E revenue forecast revision4%/15%/14%Mainly driven by upward revisions to AI server liquid cooling business assumptions.
• AI server liquid cooling business revenue CAGR+35%Goldman Sachs expects this over 2026E-2028E.
• 1Q26 revenueNT$49bn, up 110% YoYMarch revenue rose 29% QoQ, driving strong 1Q26 revenue growth.
• 2Q26E revenueNT$56bn, up 89% YoYGoldman Sachs expects April-June revenue to grow 1%/2%/3% QoQ, respectively.
• Target P/E26.7x 2027E EPSPreviously 21.2x; implies PEG of 0.8x.
• 2026E/2027E/2028E revenue forecastNT$228,063mn / NT$297,771mn / NT$336,744mnNew forecast values.
• 2026E/2027E/2028E gross margin28.0% / 29.3% / 29.9%Supported by product mix improvement.

Impact & implications

If the report's assumptions materialize, AVC will become a key beneficiary of rising liquid cooling penetration in AI servers, with revenue growth, gross margin improvement, and operating leverage likely to jointly drive earnings upgrades. The target price increase reflects the possibility that the market may reassess the growth quality and valuation premium of its AI server liquid cooling business.

Risks

• Slower-than-expected adoption of liquid cooling in AI servers.
• Weaker-than-expected AI server demand.
• Stronger-than-expected industry competition, compressing gross margin or market share.
• Slower-than-expected recovery in general-purpose servers.
• Capacity expansion or MCCP mass production progress falls short of expectations.

What to watch

• Whether AVC's monthly revenue and 2Q26E revenue can sustain strong YoY growth.
• Changes in AI server liquid cooling component shipments and liquid cooling penetration.
• Progress of capacity expansion in Vietnam and mainland China, especially whether monthly cold plate capacity reaches the year-end 2026 target of 1 million units.
• MCCP trial production and revenue contribution in 2026.
• Whether gross margin can continue to improve as the share of AI server liquid cooling increases.
• Whether the gap versus Bloomberg consensus is validated or revised by subsequent results.