Victory Giant 2Q运营未达预期，3Q后有望重启上行，目标价下调至367元，重申买入

from3Q,visibilityextendedto2027ReiterateRating:BUYIPO:367.00CNYIPrice:263.05CNY 2Q operating income weighed down by weaker margin BofAe/consensus by 10%/4% on higherfair-value gains.As previously expected, revenuegrowthwas relatively slow at 11%QoQ.Operating incomeof CNY1.5bn (-1%QoQ,+8% Gross margin to recover from 3Qon Vera Rubin ramp-up Key Changes (employee numbers rose 30%+ QoQ)and capacity-related depreciation ahead of the new-platform ramp-up from3Q.VGT therefore expects margins to improve QoQ in 2Hand remains confident of maintaining 50%+ market share.Ordervisibilityextendsinto2027;newprojectsbroaden VGT faces near-term pressure during the platform transition, but we expect earningsmomentum to strengthen into 4Q26.Management highlights that order visibility has improved and now extends into 2027, while it aims to raise capacity to CNY100bn byend-2027. Beyond its key customer, VGT is actively expanding into ASIC customers, aswell as mSAP (optical transceiver) and domestic server projectsCut PO to CNY367; reiterate Buy Merill Lynch (Hong Kong)kexin.zhu@bofa.comRobert Cheng >>Research Analyst Merrill Lynch (Taiwan)robert.cheng@bofa.comDoris Kao >>Research Analyst Welower2026E earnings by7%to reflectnear-termpressureand trim2027-28Eby1-3% to reflect competition.We cutPO to CNY367 (25x2027EP/E)from CNY455(30x 2027E P/E).The lower 25x P/E reflects market concerns about rising competition asmore peers enter Nvidia's supply chain.Nevertheless, VGT retains an advantage in fastercapacity ramp-up, which could help sustain its market share. We reiterate Buy, givenVGT's solid position at Nvidia and good progress in customer diversification.Estimates (Dec) (CNY)2024A2025A2026E2027E2028E Merrill Lynch (Taiwan)doris.kao@bofa.com This research report provides general information only. No part of this report may be usedor reproduced or quoted in any manner 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 analyst Forabbreviations,see Exhibit 6 under the FINRA rules.Refer to 'Other Important Disclosures'for information on certain BofA Securities entities that take responsibility for the information herein in particular jurisdictions.BofA Securities does and seeks to do business with issuers covered in its research reports. 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 9 to 11. Analyst Certification on page 6. PriceObjective Basis/Risk on page 6.13012981 iQprofile s"VictoryKey Income Statement Data (Dec)2024A2025A IT Hardware Victory Giant Technology, established in 2006,is a globally leading supplier of high-density printed circuit board,offering a comprehensive range of PCB products. Thecompany's products are widely used in servers (e.g., Nvidia,AMD, Amazon, Microsoft), telecoms (e.g, Cisco, ZTE), autos(e.g., Tesla, Bosch), and consumer electronics (e.g,Samsung, Xiaomi). The company is actively expanding intofast-growing areas such as Al computing, high-end servers,optical transmission etc. We have a Buy rating on Victory Giant, as we see the company is well-positioned to capture the ongoing PCBcontent value upside at Al server, thanks to its industryleading position especilly at Nvidia platform. Stock Data Price to Book Value Key Metrics Victory Giant's forward P/E with -1/+1 standard deviation Exhibit 5: We model 71% earnings CAGR in 2025-28EVictory Giant's quarterly income statement, 2025-28E VictoryGiant (XENEF) We set our PO at CNY367, based on 25x 2027E P/E. Our 25x P/E is around Victory Giant's past 10-year trading average (26x), justified by strong earnings cycle, extendedbusiness visibility and a diversified customer base, while also reflecting a morecompetitive market. GPU platform upgrade, (3) significant market share loss to competitors, (4) supply chainbottleneck that caps server rack shipment, and (5) worsened US/China disputes. GPU platform upgrade, (3) further market share gain at the expense of competitors, and(5) eased US/China disputes. Analyst CertificationI, Katherine Zhu, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject securities and issuers. I alsocertify that no part of my compensation was, is, or will be, directly or indirectly, relatedto the specific recommendations or view expressed in this research report. Special DisclosuresInformation on securities which are listed on the exchanges where ML Securities (Taiwan) Limited is not permitted to trade or solicit trades for clients is forinformational purposes only and is not a recommendation or a solicitation to tradesuch securities. ML Securities (Taiwan) Limited will not exec