The demand for AI hard drives is exploding, and domestic target material breakthroughs have propelled Koyo Tech(1785) to suddenly reach 69.3 yuan—Is there still room for further imagination?

On the 23rd, the investment sentiment in Taiwan focused on an industry stock that is rarely in the spotlight of retail investors. Koyo Electronics(1785) showed strong momentum during today’s trading, hitting the daily limit up, with a closing price of NT$69.3. This level is already a new high in over 18 months since July last year. But what’s truly worth deeper analysis is not just the stock reaching a new high, but the three driving forces behind this rally— which one is most sustainable?

Dual Red Flags in Chips and Technicals: Signals of Institutional Reversal and Replenishment

From the candlestick chart, Koyo Electronics’ trend appears very clean. The stock price broke through the 60-64 NT$ consolidation zone in a volume-driven gap-up, forming a beautiful breakout gap. What does this imply? The trapped positions have been cleared, and the bulls’ attacking momentum faces no resistance.

More critically, the chip flow. According to after-hours statistics, foreign investors bought a large amount of Koyo Electronics today, indicating a shift in attitude from previously conservative foreign institutions. Meanwhile, the concentration of major institutional holdings is rising, and margin financing remains low, suggesting a healthy market structure that is not easily shaken by short-term volatility.

On the technical side, the KD and MACD indicators have formed a standard bullish alignment, with trading volume expanding to over 44,000 lots—this is not a false move but genuine capital entering. This constitutes the first support: the chip and technical aspects have already established a short-term bullish pattern.

Revenue and Profit Structure Transformation: Why VAS Business Deserves Attention?

Koyo Electronics recently announced a consolidated revenue of NT$3.816 billion for November, up 14% month-over-month and 26.39% year-over-year, setting a new record for a single month. Cumulative revenue for the first 11 months also hit a near 10-year high. The numbers look impressive, but investors need to look beyond the surface.

The key lies in the VAS business—that is, the actual revenue from technical services after deducting precious metal raw material costs. Compared to simple trading of precious metals, VAS gross margins are much higher and better reflect the company’s core competitiveness. This means Koyo Electronics is not just selling precious metals but selling technology, services, and proprietary craftsmanship.

Why is this important? Because when precious metal prices fluctuate, only the technical service income can provide the company with a stable profit base. In Q3, EPS reached NT$1.17, demonstrating the profit improvement brought by this transformation. The market expects continued strength into Q4 and the first quarter of next year.

AI Data Centers and High-Capacity Storage Demand: The Beginning of the Hard Drive Revolution

During the earnings call, management revealed an industry-changing trend: the demand for high-capacity storage in AI data centers has entered an explosive phase. AI model training and inference generate massive data, maintaining high demand for high-capacity hard drives over 30TB.

Furthermore, the adoption of the new HAMR (Heat-Assisted Magnetic Recording) technology means hard drive manufacturers need to use more precise target materials. Koyo Electronics’ order visibility in this field has been extended beyond 12 months—almost equivalent to confirmed revenue. As the proportion of high-margin products shipped increases, profit margins are expected to continue rising over the coming quarters.

Domestic Production of Semiconductor Front-End Target Materials: From Import Dependence to Key Control

This is the most exciting long-term story for Koyo Electronics. Historically, Taiwan’s semiconductor industry heavily relied on imported sputtering target materials, mainly from Japanese (JX Metals) and American (Honeywell) suppliers. But geopolitical shifts and the leading foundries’ push for localized supply chains are changing the game.

Koyo Electronics has successfully entered Taiwan’s most advanced 3nm and 5nm process nodes, with copper, aluminum, titanium, and tantalum target materials verified and supplied stably. This is not just product substitution but involves high-level certification processes and technical validation for domestic replacement. Once certified by wafer fabs, supply relationships tend to be long-term and stable, meaning Koyo Electronics will secure steady, long-term orders in the future.

The semiconductor division’s spin-off plan starting at the end of 2024 aims to enable more flexible R&D investment and capital operations. Market estimates suggest that as AI chip capacity continues to expand, revenue from the semiconductor front-end segment could double within the next two years.

Precious Metal Circular Economy and Copper Wire Recycling Industry Positioning

In the context of global green supply chain initiatives, Koyo Electronics’ role in the precious metal circular economy becomes increasingly important. The company not only refines precious metals from electronic waste but also involves recycling of base metals like red copper wire. These recycled materials, after purification, can be transformed into raw materials for semiconductor-grade target materials. This “closed-loop supply chain” creates a unique technological barrier in international competition and aligns with the current trend of localized and green supply chains.

Fluctuations in copper wire recycling prices reflect the overall health of the electronics manufacturing sector. As AI data center construction accelerates, the scale of electronic device disposal and recycling will also increase, further expanding Koyo Electronics’ growth potential in the circular economy.

Differentiation from China Sand(1560)

In Taiwan’s semiconductor materials sector, Koyo Electronics is often compared with China Sand(1560). China Sand’s advantage lies in its diamond tools used in CMP (Chemical Mechanical Planarization) processes, with gross margins exceeding 30%, but its revenue scale is relatively limited.

Koyo Electronics’ differentiation is its “broad application of metal materials science”—covering storage devices, displays, semiconductors, and precious metal recycling across multiple fields. Compared to China Sand and TSMC’s close ties to advanced process nodes, Koyo’s investment logic is more resilient, benefiting from multiple industry drivers: semiconductor localization, AI hardware demand, electronic waste recycling and circular economy. Any of these supports can sustain performance growth.

Gold Price Reaching New Highs: A Catalyst for Risk Aversion

International spot gold prices today approached a record high of US$4,500 per ounce. This is no coincidence but a result of geopolitical tensions and major central banks’ gold-buying spree. As Taiwan’s leading precious metal recycler, Koyo Electronics’ stock price is highly correlated with gold prices.

Rising gold prices bring two direct benefits to Koyo Electronics: first, increased value of inventory assets—its maintained precious metal turnover stocks are immediately revalued on the balance sheet during gold price surges; second, expanded recycling profit margins—when gold prices are high, private and corporate recycling willingness increases. With advanced refining and recycling technology, Koyo Electronics can earn higher service fees and trading spreads.

In a risk-averse market environment, capital favors targets with “stable returns + circular economy concept,” and Koyo Electronics perfectly fits this profile.

Outlook: Multi-Factor Resonance or a Passing Fad?

The recent strong breakout of Koyo Electronics is driven by resonance across three levels: established bullish chip and technical signals; improved profitability and extended visibility of VAS and semiconductor orders; and industry-wide AI hardware demand and domestic localization benefits.

Mid to long-term, if the stock price can hold above NT$65-66, the bullish pattern may continue. The key factors are whether foreign and institutional investors maintain net buying and whether international gold prices stay high.

In the short term, since today’s price hit the limit-up and the deviation from the 5-day moving average is large, chasing the rally involves risks of profit-taking and selling pressure.

Looking ahead to 2026, as the semiconductor division spin-off progresses, Koyo Electronics may complete its transformation from a traditional precious metal recycler to a high-tech semiconductor materials and AI hardware supplier. This upgrade in identity also implies an upgrade in valuation framework. At this level, it might just be the beginning of a medium-term story.