ITEQ（6213 TT）：ITEQ（6213 TT）持有，2025年第一季度毛利率表现优于预期；边缘人工智能仍是关键关注点

EquitiesElectronicEquipment &Instruments Hold:1Q25 beat with better GM; edge AI remains keyto watch Taiwan ◆1Q25gross marginbeaton better utilization;we continue toexpectsequentialrevenuegrowthin 2Q25 MAINTAIN HOLD ◆Near-term impactoftariffsand FXarekey to monitor; edgeAI likely to remain main driver ◆Retain Hold;cuttarget priceto TWD76(from TWD81) 1Q25 GM beat with improving utilization:Revenuedeclined1% q-o-q toTWD7.6bn,which was 4%higher thanour estimate and6%higher than consensus,with smartphone (5% ofrevenue) outgrowingother segment (smartphonegrowth was24% QoQ) due to pull in from China’sstimulus program. We believe improving UTR(utilization) from high 60s to mid 70s led to ITEQ’s GM improvingto14.2%in 1Q25(from 13.3% in 4Q24), vsour and consensus estimates both of13.3%. Along withlower OPEX, 1Q25 EPS of TWD0.93 was higher thanour and consensus estimatesof TWD0.77andTWD0.68, respectively. We continue to expectsequentialgrowthin2Q25e; whiletheimpactoftariffsand FX remain key to monitor:Wecontinue to expect10% QoQ revenue growth in2Q25e as we believe that ITEQ should see demand from its infrastructure segment.With improving UTR, GM should reach 15.2% in 2Q25 vstheconsensus expectationof 14.1%.We believethemajority ofITEQ’srevenue isinRMB,while manufacturingcostsconsist of RMB, TWD, and USD.Whether the recent TWD appreciation andotherFXvolatilitywill haveasignificant impact to ITEQ remains key to watch.Wecontinue toviewthe opportunity foredge AI productsto be a considerableopportunity for ITEQasedge AI couldadoptmore mid-tohigh-endproducts,whilepeers focus on higher-endproducts(M7 and above) for applicationssuch as AIGPU’s/ASIC and AI switches. While ITEQhasexposure to M7equivalent products,we believecontribution isrelativelysmallerin thesingle-digitpercentage range. MaintainHoldrating;cutTP to TWD76(from TWD81):Weraiseour 2025-26eEPSestimatesby6%/3%to reflectbetterrevenue growth andmarginassumptionsdue to improving UTR.Our TP is based on alower15x(from 17x)targetPE,whichreflectsthemost recent5-year average. We believe this lower target PE isappropriategiven increasing macro uncertainty due to both tariffsand FX volatility.Our TP implies c15% upsideandwe maintainourHold ratingbecause webelievethecurrent share price fairly reflects the gradual GM improvement,and with ITEQdepending more on Edge AI and lackingASP upsidevspeers, we continue tomonitor demandinto 2H25. Ted Lin*Analyst, Taiwan TechnologyHSBC Securities (Taiwan)Corporation Limitedted.ht.lin@hsbc.com.tw+886 2 6631 2870 * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and isnot registered/ qualified pursuant to FINRA regulations HSBC Taiwan Conference 2025 19 - 20 May 2025 | Grand Hyatt Taipei Register Issuer of report:HSBC Securities (Taiwan)Corporation Limited This report must be read with the disclosures and the analystcertifications inthe Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Research at:https://www.research.hsbc.com Financials & valuation:ITEQ Corporation Source: HSBCNote:Priced at close of 06 May 2025 Valuation Risks to our view Upside risks:1) stronger AI server contribution in thenear term; 2) better adoption of Intel and AMD’s newplatform products; and 3) slowdown in the expansionplan. Downside risks:1) weaker-than-expected server or5G base station demand; 2)stronger-than-expectedprice competition among industry participants; and 3)weaker-than-expected product mix drags down grossmargin. Disclosure appendix Analyst Certification The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s)whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the coveringanalyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) orissuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), andany otherviews or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflecttheir personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to thespecificrecommendation(s) or views contained in this research report: Ted Lin Important disclosures Equities: Stock ratings and basis for financial analysis HSBC and its affiliates, including the issuer of this report (“HSBC”) believes an investor's decision to buy or sell a stockshoulddepend on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations and thatinvestors utilise various disciplines and investment horizons when making investment decisions. Ratings should not be used orrelied on in isolation as investment advice. Different securities firms use a variety of ratings terms as well as different ratingsystems to describ