UBS Genius Electronic Optical (3406.TW): Core Resilience Plus CPO Upside Option
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UBS reiterates its Buy rating on Genius Electronic Optical and raises the target price from NT$700 to NT$1,250. Share gains in periscope lenses are offsetting soft smartphone demand, and the core business is outperforming Largan, supported by a favorable production footprint that helps sustain margins. The company is also moving into co-packaged optics (CPO) components - high-precision prisms, V-grooves and MT ferrules - with samples submitted and an ambition to enter Nvidia's CPO supply chain. UBS sizes the 2028 CPO market at USD 1.85 billion and sees Genius potentially capturing around 10% share. Reflecting stable core earnings plus CPO optionality, UBS switches its valuation methodology from price-to-book to a sum-of-the-parts framework spanning the core and CPO businesses, introduces 2028 EPS estimates and adjusts 2026/2027 EPS. For Q4 2026, UBS models revenue of NT$7.34 billion, down 6% quarter-over-quarter. Potential catalysts include qualification by leading FAU manufacturers and a board-approved private placement. Within the same coverage, UBS rates Largan (3008.TW) Sell with a NT$5,000 target price.
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