MediaTek Warns of Weak Q4 but Long-Term Prospects Unchanged. FVE Maintained

Our fair value estimate on MediaTek remains at TWD 1,760 per share, corresponding to 24 times 2023 P/E. We view MediaTek as very undervalued since it is trading under 8 times to our 2023 EPS estimate (under 9 times to PitchBook consensus). The higher implied P/E of our fair value estimate is a result of confidence in MediaTek's ability to take more 5G mobile chipset market share, particularly the high-end; and grow its now-small automotive exposure beyond 2026. The stock is wrongly hammered in our opinion, as 5G transition is a pivotal moment for MediaTek to structurally improve its mobile chipset prices. Such improved pricing also increases the company's capability in funding development for automotive and other non-smartphone applications. We think a reversal of smartphone demand is the biggest and least predictable catalyst, but downside is limited by forward dividend yield of 13%, or 10% excluding special dividends.