AllRing Tech: CoWoS Momentum Overshadows CPO/FOPLP Inflection; 31x 2027e EPS Offers Entry

Core Conclusion

AllRing Tech's near-term revenue is structurally driven by TSMC's aggressive CoWoS capacity expansion (2Q +53% Q/Q, 3Q +12% Q/Q), but the more important catalyst is the 4Q inflection point for CPO and FOPLP dispensing tools. The market is pricing the stock largely on CoWoS visibility alone, while underestimating the multi-year growth runway from CPO, FOPLP, EMIB, SoIC, and CoPoS. At 31x 2027e consensus P/E, with a residual income model target of NT$1,280 (20% upside), the risk/reward is attractive for investors seeking exposure to advanced packaging secular trends.

What the Market Underprices

The market is focused on near-term CoWoS revenue trajectory, but three structural catalysts are being discounted:

1. CPO and FOPLP monetization starting in 4Q – AllRing will ramp CPO-related revenue and FOPLP dispensing tools for Powertech in 4Q. These are higher-margin, emerging packaging segments that are not yet reflected in consensus estimates.
2. EMIB engagement progressing – Updates expected in 3Q. If AllRing gains a position in Intel’s EMIB supply chain, it would open a new revenue stream incremental to TSMC-centric forecasts.
3. 1Q operating margin miss (23% vs. Street 31%) is misleading – The miss was driven by elevated R&D spending to seed these longer-duration catalysts. As CPO and FOPLP scale, R&D intensity should normalize and margins should expand.

Evidence Chain

1. CoWoS-driven revenue growth is accelerating sharply.

• 2Q revenue forecast: +53% Q/Q (Morgan Stanley estimate).
• 3Q revenue forecast: +12% Q/Q.
• April reported revenue: NT$613mn, +16% M/M and +26% Y/Y.
  Investment implication: CoWoS capacity build provides a visible revenue base through 3Q, de-risking near-term estimates.

2. New growth vectors (CPO, FOPLP, EMIB) begin monetizing from 4Q.

• CPO-related revenue ramp and FOPLP dispensing tools for Powertech start in 4Q.
• EMIB engagement ongoing; updates expected in 3Q.
  Investment implication: These represent incremental revenue pools beyond current CoWoS forecasts, with potential upside to 2027–2028 estimates if adoption accelerates.

3. 1Q earnings beat Morgan Stanley estimates but revealed margin pressure from R&D.

• 1Q EPS: NT$3.37, 21% above MSe, in line with consensus.
• Gross margin: 52% (in line with MSe, below Street 53.1%).
• Operating margin: 23% (down 2ppt Q/Q), above MSe but below Street 31% due to higher R&D.
  Investment implication: Margin compression is intentional—R&D spend is building the pipeline for CPO, FOPLP, and EMIB. As these projects commercialize, operating leverage should improve.

Key Risks

• TSMC CoWoS capacity expansion slows or is delayed beyond current build plans, reducing near-term revenue visibility.
• AllRing loses market share in WoS (wafer-on-substrate) to competitors, pressuring revenue and gross margins.
• Technology migration to SoIC, silicon photonics, or CoPoS slower than expected, reducing the long-term growth runway that justifies the current multiple.

Valuation & Trading Implication

The stock trades at 31x 2027e consensus EPS. Our residual income model yields a NT$1,280 target price (20% upside from NT$1,070). Key assumptions: cost of equity 8%, intermediate growth 16%, terminal growth 4.5%, dividend payout 65%.

At 31x forward earnings, the stock is pricing in a significant portion of CoWoS growth but not the incremental contribution from CPO, FOPLP, and EMIB. If any of these vectors exceed expectations, the multiple could expand further. Conversely, if CoWoS growth disappoints, the valuation floor is supported by the emerging packaging pipeline starting in 4Q. Entry is favorable for investors with a 12–18 month horizon seeking exposure to the advanced packaging secular theme.

Appendix: Valuation Model Assumptions (Residual Income)