Wi-Pro: First quarter performance exceeds expectations, gross margin improves; AI momentum continues, target price raised to NT$200

Reiterate Buy: 1Q beat with better OPM;ongoing AI momentum; lift PO to NT$200 Reiterate Rating:BUY| PO:200.00 TWD| Price:146.50 TWD 1Q beat with better OPM; Apr sales down from Mar peak 11 May 2026 Wistronreported 1Q26 results on 8 May. Sales (+17% QoQ, +144% YoY) were 6%/10%above BofAe/consensus, with rising server mix (79% in 1Q26, vs. 77%/62% in 4Q25/1Q25). GM of 5.21% came largely in line with BofAe of 5.25% but below consensus of5.57%, which should reflect Wiwynn’s lighter GM amid higher memory cost (see alsoourWiwynn note). OPM of 3.44% was above BofAe/consensus of 2.87%/3.28%, withstringent opex control. With non-op. loss of NT$5.6bn (including net interest expense ofNT$5.2bn and FX loss of NT$1.3bn), NP was 14%/4% above BofAe/ consensus. On 8May, Wistron also reported April sales of NT$283bn (-15% MoM, +112% YoY), afterrecord-high sales in March (+17% MoM, +118% YoY). April sales should reflect ongoing Equity AImomentum continues; more upside in addition to Dell We expect 2Q/3Q/4Q26 salesto rise 3%/7%/6% QoQ, mainly driven by strong AI sales,despite weaker NB shipment amid memory price hikes. We believe the AI sales reflectongoing AI server rack ramp-up for key client Dell (see also Wamsi Mohan’s27 Aprilserver industry noteand8 April Dell note). Into 2H26, we see sales/profit upside frommore AI opportunities besides Dell (e.g. LPU, CPU server). In 2026, we expect Wistron’sGM to decline YoY to 5.21% (vs. 6.13% in 2025) but OPM for Wistron standalone (i.e.,excluding Wiwynn) should expand YoY with more new projects and better efficiency. Doris Kao>>Research AnalystMerrill Lynch (Taiwan)+886 2 2376 3722 Robert Cheng>>Research AnalystMerrill Lynch (Taiwan)+886 2 2376 3731 Katherine Zhu>>Research AnalystMerrill Lynch (Hong Kong)+852 3508 3374 LiftPO to NT$200; reiterate Buy Welift our 2026E EPS by 12% but keep 2027-28E EPS roughly unchanged to reflect1Q26 results, our latest forecasts for Wiwynn, ongoing AI strength, operating efficiency.We raise our PO to NT$200 (15x 2H26-1H27E EPS) from NT$180 (15x 2026E EPS), withthe valuation rollover. We reiterate Buy on improving sales/profit mix, beneficiary ofDell’s solid server outlook, and Wiwynn’s robust ASIC/general server momentum. Cindy Lo>>Research AnalystMerrill Lynch (Taiwan)+886 2 23-763-723 This research report provides general information only. No part of this report may be usedor reproduced or quoted in anymanner whatsoever in Taiwan by the press or otherpersons without the express written consent of BofA Securities. >> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analystunder the FINRA rules. Refer to "Other Important Disclosures" for information on certain BofA Securities entities that takeresponsibility for the information herein in particular jurisdictions. BofA Securities does and seeks to do business with issuers covered in its researchreports. As a result, investors should be aware that the firm may have a conflict ofinterest that could affect the objectivity of this report. Investors should consider thisreport as only a single factor in making their investment decision. Refer to important disclosures on page 11 to 13. Analyst Certification on page 8. PriceObjective Basis/Risk on page 8. iQprofileSMWistron Company Description Wistron is one of the top-5 ODMs globally. Server/storageand PC business accounted for 73% and 24% of sales in2025, respectively. Key server/storage customers includeDell, Lenovo, HPE, Cisco, Nvidia, AMD, Intel. Key NBcustomers include Dell, Lenovo, Acer. Wistron was spun offfrom Acer (2353 TT) in 2000 and was incorporated in May Investment Rationale We assign a Buy rating to Wistron in view of improvingsales/profit mix, solid outlook from Wiwynn, high exposureto server business after exiting from low-margin iPhoneassembly business, and improving OPM. We believe Stock Data Acronyms Price objective basis & risk Wistron (WICOF) Our PO of NT$200 is based on 15x 2H26-1H27E EPS. We use 15x valuation multiple(around 1.5SD above historical P/E average since 2022) in view of high server mix, a keyposition in AI server supply chain with exposure both to component/rack business, andongoing OPM improvement. Upside risks to our PO are (1) stronger server market demand, especially for AI, (2)stronger PC demand, (3) share/order win in AI server business, and (4) favorable FXtrend. Downside risks to our PO are (1) softer AI server demand due to AI GPU short supply orsupply chain hiccup, (2) weaker PC market demand amid inflation/macro uncertainties,(3) GM pressure due to higher labor/logistics cost, (4) more intensified competition inNB and server business, and (5) unfavorable FX movement (USD/RMB and/or USD/NTD)to weigh on GM and/or non-operating items. Analyst Certification I, Doris Kao, hereby certify that the views expressed in this research report accuratelyreflect my personal views about the subject securities and issuers. I also certify that nopart of my comp