Dual Engines Ignite Earnings Upgrades
Yuanta Securities released its latest research report, bullish on quartz-component leader TXC benefiting from artificial intelligence specification upgrades driving rising demand for high-end Photo die, coupled with stronger-than-expected growth in automotive applications, strengthening earnings momentum, comprehensively raising earnings estimates, with a Buy rating and a target price of NT$236.
Third-Quarter Revenue Hits Record NT$4.2 Billion
The report notes TXC 3Q26 revenue reached NT$4.2 billion, up 13% QoQ and 20% YoY, with estimated EPS raised 16% to NT$2.07, up 28% QoQ and 39% YoY. The better-than-expected earnings were mainly driven by AI and automotive revenue beating expectations, accounting for 16% and 29% of revenue respectively, up 76% and 44% YoY. Looking to 4Q26, revenue is forecast at NT$4.0 billion, up 20% YoY, with EPS raised 12% to NT$1.86, up 41% YoY, mainly on a 10% upward revision to automotive revenue to 35% YoY growth, with AI applications estimated at 16% share, up 75% YoY, keeping operations at a high level.
High-Speed Transmission Upgrade, Capacity Expansion by 5x
Facing AI high-speed transmission demand, hardware specifications are being upgraded in parallel. Optical transceiver modules mainly use 156.25MHz products in the 800G generation, upgrading to 312.5MHz quartz components with photolithography processes in the 1.6T generation. For switches, below-25.6T older-generation switches use 156.25MHz, while 51.2T mainstream AI switches and 102.4T next-generation switches both upgrade to 312.5MHz quartz oscillators. To meet demand, TXC plans to expand Photo die capacity from the current 8KK per month to 24KK per month by mid-2027, reaching 40KK by end-2028, about 5 times the current level.
AI Share Overtakes Handsets as Key Driver
Yuanta Securities further forecasts TXC 2026 revenue raised 5% and EPS raised 7% to NT$6.86, up 30% YoY; 2027 revenue raised 2% to NT$16.5 billion, EPS raised 5% to NT$8.44, up 23% YoY. 2027 AI revenue share is revised up from 22% to 23%, up 64% YoY, higher than 10% in 2025 and 15% in 2026, surpassing the 19% handset share to become the main growth driver. Referring to optical-communication cum handset-parts peers trading at 10 to 50 times P/E, based on 2027 EPS of NT$8.44 and 28x P/E, a target price of NT$236 is given with a Buy rating maintained.