Buy Rating Unchanged, Target Price NT$88
Local brokerage maintains a Buy rating on TECO (1504) with a target price of NT$88. The brokerage forecasts TECO EPS of NT$3.27 in 2026, NT$3.67 in 2027, and NT$4.45 in 2028. As AI data center buildouts continue to expand, TECO is actively pursuing Southeast Asia AIDC opportunities and expanding its power infrastructure layout, with the brokerage still positive on its overseas market expansion potential.
Third Quarter Hits Record High, Fourth Quarter Expected to Rebound
TECO reported third-quarter 2026 revenue of NT$16.85 billion, up 15.9% year-on-year and 1.5% quarter-on-quarter, a record high for the same period, but below the originally expected NT$18.9 billion. The brokerage noted continued growth momentum in electromechanical systems in Asian and North American markets, along with contributions from power and energy and data center-related businesses, though the time lag from order to shipment for AI data center projects affected near-term revenue recognition.
The brokerage forecasts TECO fourth-quarter revenue of NT$17.96 billion, up 17.1% year-on-year and 6.6% quarter-on-quarter, with a gross margin of 23.7% and quarterly EPS of NT$0.77, as operations are expected to rebound with project progress. Considering competition in traditional electromechanical businesses and initial costs in data center business development, the brokerage cut its 2026 and 2027 earnings forecasts by 10.6% and 10.4% respectively, lowering the target price to NT$88.
MDC Shortens Build Time, Targets Southeast Asia
For AI data center development, TECO is strengthening its one-stop solution capabilities in power systems, cooling equipment and prefabricated electromechanical modules, and plans to expand into Singapore, Thailand, Indonesia and the Philippines and other Southeast Asian markets. Its 2.7MW modular data center proof of concept is expected to ship this quarter, cutting data center build time from 15 to 20 months to within 9 months and reducing capital expenditure by 15% to 20%. The brokerage expects the related business to gradually contribute from the fourth quarter of 2026 to 2027 and become a key future driver, while noting risks including delayed contribution from U.S. data centers.