EV and Data Centers Drive Long-Term Outlook for Delta Electronics; FVE Lifted to TWD 342

We raise our fair value estimate on narrow-moat Delta Electronics to TWD 342 from TWD 300, corresponding to 24 times 2023 P/E, after finetuning operating expenses assumptions and making small adjustments to our model. We still find Delta undervalued, as it continues to benefit from fast-growing businesses like electric vehicles, or EVs, data centers, and networking. In particular, we see accelerating investments in artificial intelligence spurred by ChatGPT’s popularity will drive Delta’s sales in cooling and energy management systems. We prefer Delta to fellow automation vendors like Han’s Laser and Hikvision because it is more exposed to data centers and EVs and its revenue less concentrated in China.