Hon Hai Precision: March Revenue Slight Miss; 2Q26 Seen Growing QoQ and YoY
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Morgan Stanley maintains an Overweight rating on Hon Hai Precision (2317.TW) with a target price of NT$290.00, offering approximately 50% upside from the current NT$193.00. March revenue reached NT$804 billion, increasing 35% month-over-month and 46% year-over-year, though missing estimates by 5%. Total 1Q26 revenue of NT$2,130 billion surpassed historical seasonal trends, declining only 18% sequentially but growing 30% year-over-year, bolstered by iPhone restocking and AI server rack deliveries.
The firm delivered approximately 8,500 GB200/300 NVL72 systems in 1Q26, with AI server revenue surging over 15% sequentially. For 2Q26, Morgan Stanley projects revenue of NT$2,254 billion, representing 6% sequential and 26% year-over-year growth to achieve a record second-quarter high. This resilience is driven by continued AI server shipment growth offsetting seasonal IT product softness.
Valuation remains attractive at 12 times 2026 estimated price-to-earnings, aligning with original design manufacturer peers at 10-12 times, alongside a 5% dividend yield. Investors will closely monitor the May 14 1Q26 margin details to evaluate scale benefits on operating margin expansion. Key downside risks include weaker iPhone sales and geopolitical impacts on foreign investment.