MediaTek Earnings: Dimensity Auto Comes in Time To Soothe Concerns of Stagnant Smartphone Outlook

We cut our fair value estimate for MediaTek to TWD 1,460 per share from TWD 1,600 mainly as a result of lower mobile chip average selling prices and market share. However, we still see MediaTek as undervalued since its resilient gross margin illustrates its ability to defend ASP with its moat backed by intangible assets. Smartphone recovery in the second half is a reason to buy the stock for the short term, while its newly released Dimensity Auto platform for cars paves the way to prolong double-digit revenue CAGR beyond 2024. Downside is limited by its 7.8% dividend yield (reflecting bottom of cycle 2023 earnings) to be paid in June 2024.