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Airtac International Group 1590

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Morningstar’s Analysis

Currency in TWD
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AirTAC’s Q1 Above Expectation on Strong Demand; FVE Lifted but Shares Remain Overvalued

Chokwai Lee, CFA Senior Equity Analyst

Analyst Note

| Chokwai Lee, CFA |

We increase narrow-moat AirTAC’s fair value estimate to TWD 910 from TWD 750 after incorporating stronger guidance from management. However, we think the shares are not attractive at the current price as the market seems to extrapolate current strong demand trends into the future. We have already factored in a longer industry upcycle in our forecasts (versus the normal duration of 6-8 quarters) due to robust demand from diverse industries such as 5G, new infrastructure and smart city, with AirTAC’s revenue to see single-digit growth only in 2024. AirTAC’s current share price is close to our bull case fair value estimate of TWD 1,210, which has already imputed a five-year revenue CAGR of 24.2% and an average operating margin of 36.1%. As a comparison, in the past 10 years, the firm’s revenue CAGR was 16.1% with average operating margin of 27.9%. AirTAC is now trading at around 33.4 times 2021 P/E, at the high end of its historical trading range of 10 times to 40 times.

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Company Profile

Business Description

Established in Taiwan in 1989, AirTAC International Group specializes in producing actuators, control components, air preparation products, and accessories, which are widely used in industrial automation, including industries such as automotive, machinery manufacturing, electronics, lighting and textile, medical equipment and food and packaging. The firm is the second-largest pneumatic equipment manufacturer in China, with more than 20% market share. AirTAC reported revenue of TWD 19.1 billion in 2020 with more than 90% of sales generated from China.

Minsheng E. Road, 4th Floor, No 129, Sec 3
Taipei City, Taiwan
T +886 227197538
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 3,302

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