Transforming into a Semi-Optics company

Nomura upgrades GIS to Buy from Neutral and raises its target price to TWD97.50 from TWD65.70, implying roughly 27% upside, based on 20x 2H27-1H28F EPS of TWD4.88. The upgrade reflects clear direction in the company's strategic transformation into a Semi-Optics company: it has secured certain customer commitments on high-power (HP) laser packages and added the new iPhone Duo lamination business, which can leverage its existing lamination capacity and skill sets. The HP laser packaging business targets 300mW and 400mW CW lasers, should start contributing revenue from 1H27F, and will ramp meaningfully with rising penetration of CPO and high-end NPO that require external light sources from late 2027F to 2028F. Although the sales contribution from HP laser is low at under 2% of total sales in 2027-28F, because GIS only recognises manufacturing value-adds without raw material costs, the earnings contribution could be significant at 30-50%. GIS has announced TWD8bn of capex through 2027F, of