Operating margins jumped to 8.68% while sequential revenue growth flattened to 1.88%. They are passing through costs but hitting a capacity ceiling.
Thesis: Nan Ya is harvesting a temporary bottleneck in ABF substrates. Q4 margins hit 8.68% on a mix shift toward high-layer AI server and 800G switch products. However the 1.88% sequential revenue growth indicates they are capacity constrained and dependent on TSMC CoWoS yields. They are price-takers reflecting cost pressures rather than capturing scarcity value. The entry of Nittoku capacity in H2 2026 will normalize margins.
Verdict: HOLD — Conviction: MEDIUM
Catalyst: New ABF capacity hitting stride in Kunshan and Suzhou during Q1 2026.
Key Risk: Nittoku capacity expansion in H2 2026 ending the supply crunch.
The Tell: Management admitted pricing discussions are not convenient to detail when asked about the pass-through of cost increases. This reveals they lack the leverage to openly discuss pricing power in a constrained market. (Excerpt 411).
Friction Level: MODERATE_FRICTION — The interpretation of the Q4 margin jump. One side sees structural pricing power from AI server demand. The other sees a temporary pass-through of raw material costs that will evaporate when Japanese capacity opens in H2 2026.
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