A local investment advisor is optimistic on quartz component leader TXC (3042), maintaining a Buy rating and slightly raising the target price to NT$236. This is mainly due to rising AI and automotive demand, coupled with 800G and 1.6T optical transceiver modules and switches driving demand for high-frequency components, while TXC is also actively expanding capacity, with AI revenue share expected to keep rising.
Q3 Revenue NT$4.2 Billion, EPS Estimated at NT$2.07
The advisor notes that TXC's third-quarter revenue reached NT$4.2 billion, up 13% QoQ and 20% YoY, with estimated EPS revised up to NT$2.07, mainly as AI and automotive revenue beat expectations in the quarter, accounting for 16% and 29% of revenue respectively. Looking to the fourth quarter, revenue is estimated at up to NT$4.0 billion, up 20% YoY, with EPS revised up to NT$1.86, mainly on a 10% upward revision to automotive revenue to 35% YoY growth, while AI applications are estimated at 16% of revenue, up 75% YoY.
1.6T Drives 312.5MHz High-Frequency Demand
In terms of technical specifications, optical transceiver modules in the 800G generation mainly use 156.25MHz products, while the 1.6T generation requires 312.5MHz quartz components paired with photolithography processes. For switches, older-generation models below 25.6T mainly use 156.25MHz quartz components, while mainstream 51.2T AI switches and next-generation 102.4T switches are upgrading to 312.5MHz quartz oscillators.
To meet high-speed transmission demand, TXC plans to increase Photo die capacity from the current 8 million units per month to 24 million units per month by mid-2027, and to 40 million units by the end of 2028. The advisor estimates TXC's revenue this year revised up 5%, with EPS revised up to NT$6.86, on 3% and 8% upward revisions for AI and automotive respectively. 2027 revenue is forecast to be revised up to NT$16.5 billion, with EPS revised up to NT$8.44, mainly on upward revisions for AI and automotive, while handsets are revised down 2%.
2027 AI Share Expected at 23%, Surpassing Handsets
On valuation, the advisor is positive that TXC's 2027 AI revenue share is expected to reach 23%, up over 60% YoY, surpassing handsets at 19%, and higher than AI shares in 2025 and 2026. Referring to P/E ratios of 10 to 50 times for optical-communication companies with handset-component concepts, based on 2027 estimated EPS of NT$8.44 and a 28-times P/E, it gives a target price of NT$236 and maintains a Buy rating. Investors should make independent judgments, carefully evaluate and bear investment risks themselves.