Quanta (2382.TW): AI servers ramp up to drive growth ahead; model transition and PC shipment slowdown could weigh on 4Q26; Neutral

Quanta's September revenues declined 23% MoM, which we attributed to AI server model transition, while PC entered quarter-end at strong MoM of +62%. Looking forward, we expect monthly revenues to resume sequential growth in Oct to Dec, riding on reducing impact of AI servers model transition as new racks ramping up, along with growing general servers on agentic AI, and ASP increase on better specification and high raw material costs. We expect 4Q26E revenues to decline by 4% QoQ, considering the high base in 3Q26 and the gradual ramp up of new AI server racks. We raise revenues by 1%/23%/30% in 2026E-28E to reflect the AI server racks shipment ramp up and higher ASP on better specification; given the much lower GM of AI server racks compared to Quanta's other products, gross profits narrow to 2%/5%/5% in 2026E-28E. Opex ratio remains largely unchanged in 2026E-27E while further improving in 2028E. We continue to use a near-term P/E to derive our 12M TP;