Auras Maintains Neutral: Short-Term Performance Under Pressure, Recovery in H2 Driven by GB300

Overview

J.P. Morgan issued research on Auras (3324.TW), maintaining a Neutral rating and raising the target price from NT$1,050 to NT$1,200. The report notes that despite 2Q26 gross margin missing expectations, performance in the second half of the year is expected to return to a growth trajectory as GB300 cold plate shipments ramp up in 3Q26 and AWS Trainium 3 liquid cooling products begin contributing revenue in 4Q26. However, because the company's market share in Nvidia's next-generation VR200 and ASIC liquid cooling markets still lags behind top-tier competitors, long-term profit growth ceilings are constrained, hence the Neutral stance remains.

Core views

2Q26 Performance Review: Gross margin below expectations was the main drag. Company 2Q26 EPS was NT$10.4, down 17% QoQ and up 495% YoY, but 20% lower than both J.P. Morgan and consensus estimates. The core reason was a gross margin of only 28.4%, below the expected ~29.5%, primarily due to limited transitional shipments of GB300 cold plates and a negative impact of 1-2 percentage points from new product production scrap. Additionally, with revenue increasing only slightly QoQ, operating leverage weakened, causing the operating expense ratio to rise to 12.4%, higher than the market-expected 11.3%. H2 Outlook: GB300 and Trainium 3接力 Drive Growth. The report believes 3Q26 will be a turning point, with revenue forecast raised to NT$10.3 billion (up 18% QoQ, up 73% YoY), mainly benefiting from concentrated deliveries of delayed June GB300 orders in July-September. Entering 4Q26, although GB300 contribution may weaken, AWS Trainium 3 liquid cooling components (including cold plates, rack manifolds, etc.) will begin generating substantive revenue, supporting continued slight QoQ revenue growth of 1.5%. Regarding gross margin, as the proportion of liquid cooling revenue rises to over 60% starting from 3Q26, it is expected to recover to the 30% level and continue improving. Valuation and Competitive Landscape: Raised earnings forecasts but maintained Neutral. Based on stronger expectations for ASIC liquid cooling growth, J.P. Morgan raised 2026 and 2027 EPS forecasts by 4% and 16% to NT$54.36 and NT$67.15, respectively, but these remain 4% and 11% lower than consensus. This difference stems from the firm's conservative assumptions regarding the company's market share in Nvidia VR200 and ASIC projects. Although the target price increased with the earnings revision, the rating remains Neutral. The core rationale is that the company's future profit growth potential is constrained by the loss of market share in the high-end thermal management market, and the catalyst effect of ASIC liquid cooling, an industry incremental segment, is limited, with competitiveness still inferior to Tier-1 peers like AVC.

Analysis framework

The report adopts a typical 'Quarterly Performance Review + Product Cycle Driver' analytical framework. First, by breaking down the 2Q26 financials, it identifies specific attributions for gross margin deviations (product mix and new yield issues); then, it organizes H2 revenue drivers by product line (GB300, Trainium 3, VR200), verifying order delivery rhythms using monthly revenue data; finally, at the valuation level, it uses historical average P/E as an anchor and treats relative competitive position (market share comparison) as the core constraint for rating decisions, rather than relying solely on absolute growth rates.

Methodology notes

• Valuation MethodPE/PEG valuation

  Historical Average P/E Anchoring Method

  The report uses 18x 2027E P/E as the basis for the target price, which aligns with the company's average P/E since the AI server-driven thermal specification upgrades began in 2023. This method assumes the company's valuation center remains relatively stable under specific industrial trends, making it suitable for growing hardware companies whose business models have not undergone qualitative changes.

• Company Fundamentals & Financial FrameworkEarnings Quality Analysis

  Gross Margin Attribution Analysis

  When analyzing 2Q26 performance, the report did not stop at the conclusion of 'gross margin below expectations,' but further broke it down into two specific factors: 'product structure' (GB300 transition period) and 'production loss' (new product scrap). This analytical approach helps distinguish between temporary disturbances and structural deterioration, thereby more accurately judging the repair elasticity in subsequent quarters.

• Competition & Strategy FrameworkMoat / competitive advantage

  Market Share Linked to Rating

  Despite raising earnings forecasts and the target price, the report insists on a Neutral rating. The core logic is that the company lags behind Tier-1 rivals in key projects (VR200/ASIC). This reflects an analytical paradigm where 'relative competitive advantage determines the rating ceiling,' meaning that in high-growth tracks, targets lacking share-leading advantages often struggle to obtain premium ratings.

Asset mapping & comparison

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

• Auras Technology (3324.TW)

  Analysis Subject: Liquid cooling component supplier, benefiting from AI server thermal demand but constrained by market share

  Strengths

  GB300 shipments resume from 3Q26; AWS Trainium 3 liquid cooling products begin contributing revenue in 4Q26; Rising proportion of liquid cooling revenue drives gross margin recovery

  Weaknesses

  Lags behind Tier-1 peers in market share for Nvidia VR200 and ASIC cold plates; New product yield ramp-up impacts short-term profits; Operating leverage is weak during revenue troughs

  Comparison

  Compared to Tier-1 manufacturers like AVC, it is at a disadvantage in share allocation for next-generation platform projects, leading to long-term profit forecasts lower than market consensus

  Risks

  Cooling of AI sentiment affects valuation; New capacity/product yield issues; Delays in customer new product launches; Intensifying competition in thermal management market

Key data

• 2Q26 EPSNT$10.4Down 17% QoQ, Up 495% YoY, 20% below consensus
• 2Q26 Gross Margin28.4%Below JPMe (29.9%) and BBGe (29.3%), impacted by 1-2pct from new product scrap
• 3Q26E Revenue ForecastNT$10.3bnUp 18% QoQ, Up 73% YoY, reflecting delayed GB300 shipments
• 2026E Adj. EPSNT$54.36Raised 4% from previous forecast, still 4% below consensus
• 2027E Adj. EPSNT$67.15Raised 16% from previous forecast, still 11% below consensus
• Target Price P/E Multiple18x 2027EConsistent with historical average P/E since 2023

Impact & implications

For Auras, short-term stock performance will heavily depend on whether 3Q26 GB300 shipments materialize as scheduled and the validation progress of 4Q26 Trainium 3 products. Although the upward revision in earnings forecasts provides fundamental support, the structural disadvantage in market share limits valuation expansion space. This means that even as industry liquid cooling penetration continues to rise, Auras may primarily exhibit Beta gains following the industry trend, rather than achieving excess returns through Alpha. Investors should focus on its design wins in new ASIC projects, which are the key variables to break the current Neutral rating.

Risks

• Cooling of AI market sentiment may lead to valuation compression
• New capacity or new product yield ramp-up may fall short of expectations
• Delays in customer new product release schedules
• Profit erosion due to intensified competition accompanying the expansion of the thermal management market size
• MCL product certification or ASIC project share acquisition slower than expected

What to watch

• Actual shipment volume and rhythm of 3Q26 GB300 cold plates
• Mass production progress of 4Q26 AWS Trainium 3 liquid cooling components
• Design wins and share changes in Nvidia VR200 and new ASIC projects
• Monthly revenue data to verify order delivery status
• Whether gross margin recovers to the 30% level as scheduled in 3Q26