AirTAC Earnings: Reduce Sales Forecast Amid Headwind From Battery and Solar Industries

AirTAC’s second-quarter result fell short of our expectations. While revenue grew 5% year on year, sales turned negative in June and remained soft in July. AirTAC still aims for high-single-digit percentage sales growth in 2024, with support from potential policy stimulus in China in the second half, but this has been lowered from original double-digit percentage growth guidance. We're not as optimistic as this would necessitate sales growth exceeding 10% year over year in the latter half, which seems unlikely given the continued significant decline in shipments to the battery and solar industries. As such, we reduce our revenue forecasts by 7% to TWD 31.3 billion for 2024 and by 3%-5% for 2025-28, leading to a 7% decline in our 2024 net income estimate and 3%-4% decline for 2025-28. Consequently, we reduce our fair value estimate by 3% to TWD 930. Given the current share price is slightly above our fair value estimate we recommend waiting for a more attractive entry point.