Goldman Sachs Unimicron Technology (3037.TW): Margin Expansion as Expected; Raise TP to NT$630
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Goldman Sachs maintains a Neutral rating on Unimicron Technology (3037.TW) while raising the 12-month target price from NT$550 to NT$630. The revised target is based on 17.4 times the 2027 estimated price-to-earnings ratio, implying a 23.6% downside from the current share price of NT$825.
First-quarter core operating profit missed expectations due to a one-time employee stock purchase expense. Excluding this item, the operating margin was 9%. However, gross margin improved sequentially to 18%, and the firm anticipates second-quarter revenue growth of approximately 17% quarter-over-quarter. This acceleration is driven by ABF substrate price increases and capacity expansion.
Goldman Sachs expects second-quarter gross and operating margins to reach 20.1% and 11.8%, respectively. ABF substrate average selling prices are projected to surge 30% to 35% in 2026 and 45% to 50% in 2027, significantly bolstering future profitability. The industry supply shortage is expected to persist until at least the end of 2028.
Long-term agreements (LTAs) with key AI clients now cover over 70% of ABF shipments. While these agreements limit immediate pricing flexibility, associated incentive benefits could lift operating margins by more than 10 percentage points annually over the next five years.
Despite these structural tailwinds, Goldman Sachs maintains a conservative Neutral stance. The company's HDI and PCB business execution remains weaker than peers, with slower capacity expansion potentially limiting its ability to capture surging AI demand. The firm raised its 2026 to 2028 earnings per share estimates by 1% to 30% to reflect the improving substrate pricing environment.