Our TP for ASMedia of NT$2,500 is based on SOTP with 38x 2026E EPS from ASMedia’s core business plus 15x on Techpoint's (subsidiary) 2026E EPS and 12x 2026E EPS from equity-method investment. Our TP implies blended 36x/28x 2025/26E EPS, which is lower than the stock’s historical 5-year average of 32x. We believe our PE is justified by its customer's market share gain in the desktop market + booming gaming demand, clear visibility of USB 4.0 schedule and potential upside from China’s tender project. Further, we believe investors are willing to pay a premium for this name given ASMedia’s leadership in high-speed interface like USB 4.0, evidenced by premium PE (>50x) paid in 2021-1H22 despite weak results posted.

Key downside risks that could mean the shares trade below our target price include: Slower-than-expected recovery of PC demand, failure in pass-through of material price hikes to its customer, further delay in the new USB 4.0 product schedule or lower-than-expected USB 4.0 adoption rate.