Advantech To Be Hurt by China Lockdowns in Q2; Long-Term Outlook and FVE Unchanged

We keep our fair value estimate on Advantech at TWD 357 per share, corresponding to 28 times 2022 P/E, close to the company’s five-year average. Advantech is fairly valued in our view, as reopening outside of China remains on track and the benefits of integrating software with industrial Internet of Things platforms may take longer to surface. Near-term upside catalysts of the stock mainly come from unexpected easing in component supply. Separate disclosure of non-hardware revenue may boost investor confidence (and the stock price) by addressing the difficulty to track how Advantech executes its non-hardware industrial Internet of Things vision, a concern shared by us.