Goldman Sachs maintains GCE at Buy, raises target price to NT$1,585

Overview

This is a Goldman Sachs company research report on GCE (2368.TW). The report's core view is that GCE's growth visibility improves over the next several years, driven by demand for high-end PCBs, ASIC AI servers, and 800G switches; the company's 2027-2029 expansion plan also confirms long-term customer demand and tight industry supply. Goldman Sachs maintains a Buy rating and raises the 12-month target price from NT$1,380 to NT$1,585.

Core views

Goldman Sachs' key views are: first, GCE's 1Q26 results were broadly better than market expectations; although some gross margin pressure from material costs and the new Thailand plant ramp-up came in below Goldman Sachs' forecast, operating trends still support the long-term Buy case. Second, from 2Q26 onward, revenue, gross margin, and operating margin are expected to keep improving, mainly supported by a better pricing environment, a higher mix of high-margin AI server and 800G switch products, and gradual yield improvement at the new Thailand plant. Third, GCE may gain share in CSP customers' ASIC programs, including AWS Trainium 3, Google TPU 8, and META MTIA, with the AI revenue mix potentially rising from about 40% in 2025 to about 70% in 2026. Fourth, the consecutive expansion plan for 2027-2029 indicates strong long-term demand, but HDI technology upgrades and yields remain risks that need monitoring.

Analysis framework

The report analyzes the business through earnings review, quarterly forecasts, customer demand, and capacity planning, combining ASP, gross margin, product mix, capacity expansion, and valuation multiples. Goldman Sachs uses tight supply-demand conditions in high-end AI server PCBs, ASIC customer program ramps, demand for 800G+ switches, and HDI technology upgrades as key variables for assessing GCE's long-term growth, and raises revenue, earnings, and target price accordingly.

Methodology notes

• Valuation methodP/E valuation

  22x 4Q26-3Q27E EPS

  The 12-month target price of NT$1,585 is based on 22x 4Q26-3Q27E EPS, and the report says this multiple is consistent with the valuation level of leading AI PCB names over the past three years.

• Factor frameworkGS Factor Profile

  Growth, Financial Returns, Multiple, and Integrated percentiles

  GS Factor Profile compares individual stocks with the market and industry peers across growth, financial returns, valuation multiples, and combined factors to provide investment context.

• M&A frameworkM&A Rank

  Potential acquisition probability tiers

  Goldman Sachs uses a 1-to-3 M&A Rank to assess the likelihood that a covered company becomes an acquisition target; 1 indicates high probability, 2 medium probability, and 3 low probability.

• Data toolQuantum

  Goldman Sachs proprietary financial database

  Quantum provides historical financial statements, forecasts, and ratio data for single-name deep dives and cross-industry company comparisons.

Asset mapping & comparison

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

• GCE (2368.TW)

  The covered company in the report; rating maintained at Buy and target price raised

  Strengths

  Benefits from CSP ASIC programs, AI server PCB, 800G switches, tight supply of high-end PCBs, and capacity expansion; AI project gross margin is about 40%-50%, above the company's average.

  Weaknesses

  HDI products have historically had relatively low yields, the new Thailand plant faces ramp-up cost and yield-improvement pressure, and FX may also drag on gross margin.

  Comparison

  The report says GCE's share of global cloud server and switch PCB supply exceeded 20% in 2022, and its valuation is above the historical P/E average but below the average for Taiwan AI server peers.

  Risks

  Weaker-than-expected AI server demand, delayed Nvidia OAM/UBB product certifications, weaker-than-expected HDI demand, and higher-than-expected ramp-up costs for new capacity.

• AI server PCB / ASIC supply chain

  Core demand source for GCE growth

  Strengths

  CSP customers' ASIC program demand is strong, and AWS Trainium 3, Google TPU 8, and META MTIA could bring additional share gains.

  Weaknesses

  Customer program timing, certification progress, and technology specification upgrades may create volatility.

  Comparison

  AI project gross margin is about 40%-50%, significantly above the company's average gross margin of about 35%.

  Risks

  AI server market demand falling short of expectations or delays in program ramp-ups.

• 800G+ switch PCB

  Important incremental demand source

  Strengths

  The report says 800G switch demand has improved materially, and demand for 800G+ switch programs remains solid.

  Weaknesses

  Demand still depends on cloud capex and the switch upgrade cycle.

  Comparison

  Cloud PCB demand is growing faster than the overall RPCB+HDI market.

  Risks

  A slower switch upgrade cycle or weaker-than-expected customer demand.

Key data

• 1Q26 core operating profit11% above Bloomberg consensusBut it was 2% below Goldman Sachs' own higher forecast.
• 1Q26 gross margin changeUp 1.1 percentage points quarter on quarter and 3.5 percentage points year on yearIt was 0.5 percentage points above Bloomberg consensus, but 1.5 percentage points below Goldman Sachs' forecast.
• 2Q26 revenue forecastNT$23.9bnUp 73% year on year and 24% quarter on quarter.
• 2Q26 gross margin/operating margin forecast36.8% / 28.6%Above 1Q26's 34.8% / 26.8%.
• AI revenue mix forecastAbout 70% in 2026About 40% in 2025, reflecting stronger demand from CSP ASIC programs.
• Average gross margin for AI projectsAbout 40%-50%Higher than the company's current average gross margin of about 35%.
• 2026/2027/2028E earnings forecast revisions+3% / +4% / +21%Mainly reflects higher ASPs for high-end AI servers and faster-than-expected capacity expansion.
• 2026/2027/2028E revenue forecast revisions+2% / +6% / +20%Reflects a faster capacity expansion plan.
• Target priceNT$1,585Previously NT$1,380.
• Valuation multiple22x 4Q26-3Q27E P/EConsistent with the valuation levels of leading AI PCB names over the past three years.

Impact & implications

The report is positive for GCE's investment case: stronger demand for AI servers and 800G switches, tight supply of high-end PCBs, and upgrades in customer ASIC programs could continue to improve GCE's revenue, ASPs, and gross margin over the coming quarters and years. The consecutive expansion plan reinforces long-term demand visibility, but it also increases market attention on capacity execution, yield, and HDI technology ramp-up. If HDI becomes a production bottleneck, or if ramp-up costs for new capacity are higher than expected, the earnings revision thesis could be challenged.

Risks

• Weaker-than-expected demand in the AI server market.
• Delayed Nvidia OAM/UBB product certifications.
• Weaker-than-expected HDI demand.
• Higher-than-expected ramp-up costs for new capacity.
• If HDI technology upgrades become a production bottleneck, future revenue and gross margin could be affected.
• Adverse FX moves may pressure gross margin.

What to watch

• Whether 2Q26 revenue approaches Goldman Sachs' forecast of NT$23.9bn.
• Whether 2Q26 gross margin and operating margin improve to 36.8% and 28.6%.
• Changes in share for CSP ASIC programs, including AWS Trainium 3, Google TPU 8, and META MTIA.
• Whether the AI revenue mix can rise to about 70% in 2026.
• Expansion progress for new plants in Thailand, Suzhou, and Taiwan during 2027-2029.
• HDI yields, technology upgrades, and whether HDI becomes a capacity bottleneck.
• Ramp-up costs for new capacity and yield improvement at the new Thailand plant.