Q3 ATM Business Beats Guidance
Benefiting from semiconductor advanced packaging and testing demand, 日月光投控 (3711) Q3 ATM revenue grew 20.4% QoQ, better than the original estimate of 11% to 13%. Gross margin reached 30.6%, above the guidance range of 28% to 29% and also above the upper end of the company's structural gross margin of 25% to 30%. Quarterly after-tax EPS was NT$6.05, about 12% higher than analysts' original estimate of NT$5.41.
Q4 Outlook Revised Up
Looking to Q4, benefiting from strong automotive, industrial and AI peripheral demand, analysts revised up revenue forecast by 9.8% to NT$262.1 billion, up 7.4% QoQ and up 47.3% YoY, with EPS revised up 23% to NT$7.44. Among them, ATM revenue is expected to grow 11% to 13% QoQ, with gross margin reaching 31.6% to 32.6%, an operating outlook better than expected.
Raised Capex to Meet Demand
To meet demand, 日月光投控 further raised 2026 capex from US$10.5 billion to US$11.5 billion, an increase of US$1.0 billion, with plant and equipment investment each increasing by US$0.5 billion. For LEAP business, the 2026 revenue target was raised to US$4.0 billion, up 150% YoY, accounting for about 23% of ATM revenue. In-house Full Process (FOCoS) is expected to start contributing revenue in Q4, at a scale of about US$0.3 billion.
LEAP Doubling Drives Profit Growth
Looking to 2027, with 台積電 (2330) CoWoS capacity expansion, increased outsourced share of CP testing, and gradual ramp-up of FOCoS, the company maintains its view that LEAP revenue will double, with its share of ATM revenue expected to rise to 35.4%, of which FOCoS can account for 5.9%. Benefiting from advanced packaging demand and rapid growth in LEAP business, analysts forecast 2026 and 2027 EPS of NT$21.38 and NT$34.04 respectively, up 11% and 23% from previous estimates, with a two-year profit CAGR expected to exceed 40%. Based on 2027 estimated EPS and a 25x P/E ratio, analysts maintain a "Buy" rating and raise the target price to NT$900.