AI Server Slide Rails Boost Output: Japanese Foreign Investment Firm Expects Nan Jun International to Break NT$1,000

A recent report issued by a Japanese foreign investment firm states that Nan Jun International (6584-TW), a server slide rail manufacturer, continues to benefit from the mass production of AI server slide rails and an improved product mix, sustaining its long-term structural growth momentum. Daiwa Securities reaffirms its 'Buy' rating on Nan Jun International and maintains a 12-month target price of NT$1,022.

The foreign investment firm notes that Nan Jun International achieved a net profit after tax of NT$219 million in Q2, with earnings per share reaching NT$3.10, exceeding initial expectations by 5%. This outperformance was primarily driven by non-operating gains, including approximately NT$21 million in foreign exchange profits and government subsidies. Gross margin increased slightly by 0.2 percentage points quarter-on-quarter to 41.8%, while operating margin also rose by 0.2 percentage points to 29.7%. Although contributions from high-priced general-purpose server slide rails were slightly lower, the company's overall operational health remains robust.

Looking ahead to Q3 and beyond, the firm expects shipments of general-purpose servers to a single cloud service provider customer to remain weak. Monthly shipment volumes have declined from over 80,000 units in Q1 to below 30,000 units in Q2. As a result, the 2026 revenue forecast for general-purpose servers has been revised downward from NT$240 million to NT$200 million.

However, in the AI server segment, Nan Jun International has entered mass production for GPU and ASIC projects. The company expects shipments of AI server slide rails to boost Q3 revenues and lift gross margin levels.

Regarding major customer product launches, Nan Jun International’s supply schedule for the 'Vera Rubin' product line to a primary cloud service provider is progressing as planned, with initial shipments targeted for the end of Q3. Driven by ASIC project mass production, the foreign investment firm maintains its forecast that Nan Jun International will secure 20% to 30% of supply share for that generation of ASIC products in the second half of 2026 and into 2027.

Despite a short-term slowdown in general-purpose server orders, the foreign investment firm emphasizes that Nan Jun International's profitability growth trajectory from 2026 to 2028 remains firmly established, supported by structural profit improvements from its Vietnam plant and a shift in product mix toward higher-margin server slide rails.