Advantech Earnings: Shares Not Pricing in China Competition and Risks in 2024 Recovery

We lowered our fair value estimate on narrow-moat Advantech to TWD 290 per share from TWD 337, given another quarter of downbeat guidance, more-intense competition, and uncertainty in its plan to acquire point-of-sale machinemaker Aures. Our valuation corresponds to 27.4 times 2024 P/E, close to the stock’s five-year average. We are less bullish than the market on Advantech’s ability to capture incremental China customers in industrial automation, and generative artificial intelligence is unlikely to benefit the company’s bottom line. Our earnings per share compound annual growth rate up to 2028 is now 8% instead of 10.2%.