Morgan Stanley maintains Chenbro Overweight and raises the target price to NT$1,780

Overview

Morgan Stanley issued a Chenbro company research report, with the core conclusion that demand outlook is robust and new business expansion improves medium-to-long-term growth. The report notes that the company benefits from AI and general server demand, server market growth, share gains at existing customers, and incremental contributions from new mechanical component businesses such as customized racks and CDU racks. The company is also expanding its global manufacturing footprint to address geopolitical risks and stay close to customer demand.

Core views

The report maintains an Overweight rating. Main reasons include: first, demand is expected to improve each quarter in 2026, with 2Q26 expected to rise sequentially and large US customer projects ramping in 2H26; second, there is potential in China customer demand, but outcomes depend on geopolitics and key component supply; third, Chenbro may be an important chassis/rack supply partner for AMD Helios, with small shipments starting by end-2026 and rising contribution in 2027; fourth, customized racks and CDU racks bring opportunities for a larger addressable market and margin expansion; fifth, expansion of global manufacturing footprint helps reduce manufacturing and geopolitical risks.

Analysis framework

The report combines management demand guidance, 1Q26 actual performance, Morgan Stanley ModelWare forecasts, FactSet/Refinitiv consensus, regional revenue structure, and valuation multiple framework in its analysis, and evaluates risk-reward through base, bull, and bear scenarios.

Methodology notes

• Valuation methodsP/E multiple valuation

  30x 2027e P/E

  The NT$1,780 target price is based on 2027 expected EPS and a 30x valuation multiple, and the report believes this is supported by a 33% profit CAGR from 2025-2028.

• Valuation methodsPEG comparison

  PEG 0.9

  The 30x target multiple corresponds to about 0.9x PEG, similar to the 2014-2024 average PEG of around 0.9; the current P/E of around 24x corresponds to about 0.7x PEG, so the report believes there is still room for upside.

• scenario_analysisrisk reward scenario

  bull/base/bear case

  Bull case value: NT$2,350, assuming stronger AI capex and winning more new customer projects. Base case target: NT$1,780. Bear case value: NT$750, assuming moderate data center demand and slower ramp of new products.

Asset mapping & comparison

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

• Chenbro (8210.TW)

  covered_company

  Strengths

  Benefits from AI/general server growth, higher content in enclosures and racks, share gains, expansion of new businesses such as customized racks and CDU racks, and a global manufacturing footprint across Taiwan, China, the United States, and Malaysia.

  Weaknesses

  Short-term monthly sales may be affected by customer product switching; China shipments are affected by geopolitics and availability of key components; valuation is already in a historically high range.

  Comparison

  1Q26 revenue, gross margin, operating profit and net profit were all above both Morgan Stanley estimates and market consensus; 2026E EPS of NT$47.77 is also above consensus EPS of NT$44.45.

  Risks

  AI capex slowdown, customer penetration below expectations, intensified competition leading to lower ASP or profitability, and macro and geopolitical uncertainty.

• AI server supply chain

  thematic_exposure

  Strengths

  Growth in AI server deployment and cloud capex increases demand for enclosures, racks and mechanical components.

  Weaknesses

  Demand pace may be affected by GPU/ASIC platform shifts, key component supply, and customer capex budgets.

  Comparison

  The report identifies stronger AI capex as a core assumption in the upside scenario and weaker AI capex as a downside risk.

  Risks

  AI capex expectations being revised lower, project delays, or server shipments below expectations.

Key data

• Target price adjustmentNT$1,280 -> NT$1,780Morgan Stanley raised the target price and maintained Overweight.
• Current stock priceNT$1,415.00The table shows the close price on 2026-05-08.
• Implied upside26%Based on a target price of NT$1,780 and a close of NT$1,415.
• 1Q26 revenueNT$7,107mnUp 5% sequentially and 71% year-on-year, above Morgan Stanley estimate of 8% and above consensus of 4%.
• 1Q26 net profitNT$1,336mnUp 100% year-on-year, 30% above Morgan Stanley estimate and 20% above consensus; EPS was NT$10.73.
• 2026E revenueNT$33,442mnMorgan Stanley estimate; NT$22,001mn in 2025 and NT$41,504mn in 2027E.
• 2026E EPSNT$47.77Above consensus EPS of NT$44.45; 2027E EPS is NT$58.77.
• 2026 capex guidanceNT$2.5-3.0bnUsed to support expansion of global manufacturing footprint.
• New business revenue contribution guidance10%+ in 2026Customized rack/CDU rack and related businesses are expected to contribute above the 2025 level of 5-10%.
• Regional revenue mixUnited States 67%, China 22%The report notes that in 1Q26 revenue, U.S. customers accounted for 67% and China 22%.

Impact & implications

From an investment standpoint, the report positions Chenbro as a beneficiary of mechanical components in the expansion of AI servers and cloud capex. If AI server deployment, cloud customer project ramping, and customized rack penetration proceed as expected, the company’s revenue, margin and valuation multiple could receive support; however, valuation is already clearly above historical averages, so future stock performance will depend more on sustained AI capex, customer project wins, and the commercialization pace of new products.

Risks

• AI capex weakening or data center demand cooling.
• Share gains at existing customers below expectations.
• New customer penetration and new product ramping slower than expected.
• Greater competition leading to lower ASP or weaker profitability.
• Continued macro uncertainty and geopolitical risk.
• China shipments may be affected by geopolitical developments and key component availability.
• Current P/E is already at a historical premium; if earnings are not realized as expected, valuation drawdown risk is high.

What to watch

• Whether 2026 monthly sales and sequential growth in 2Q26 and 2H26 materialize.
• The pace of ramp in U.S. hyperscale cloud customer projects.
• Progress of major Chinese CSP partnerships, key component supply, and geopolitical impacts.
• Whether customized rack and CDU rack revenue contribution reaches the 2026 guidance of 10%+.
• Whether small AMD Helios-related shipments begin in 2H26 and expand in 2027.
• Ramp-up of Malaysia 2H26 capacity and U.S. 2H27 capacity commissioning progress.
• Whether gross margin and operating margin can stay above historical levels.