Near-Term Hiccups Expected for AirTAC; Positive Long-Term Outlook Intact

AirTAC’s third-quarter 2021 net profit of TWD 1.60 billion was up 4% year on year but down 10% quarter on quarter. The results were below our expectation mainly attributable to one-off rights issue expense and lower-than-expected sales due to logistic disruptions as a result of floods and resurgence of COVID-19 cases in China. We lower our fair value estimate to TWD 920 from TWD 940, after incorporating slightly lower sales and margin guidance from management. We think the shares are not expensive currently but we believe investors have built in high optimism on future earnings and the firm will need to deliver meaningful positive earnings surprise to drive share price outperformance. Our fair value estimate implies a 2022 P/E ratio of 22.1 times, in the middle of its five-year historical trading range of 13.6 times to 40.0 times.