TD Synnex's (SNX) Hyve contract manufacturing asset is still underappreciated amid the stock's year-to-date outperformance, Morgan Stanley said in a note Wednesday.

The company's current valuation implies that Hyve trades at a 25% discount to its peers, despite a stronger margin and growth profile, the report said.

The note said Hyve is a "differentiated" asset, counting five US hyperscalers as its customers. It also has "premium" margins compared with its peers, and accounts for 27% of TD Synnex's operating income.

"We view TD Synnex as an underappreciated special situations story," the report said, pointing to market "mis-modeling" its growth prospects and valuing it like a pure-play technology distributor.

Morgan Stanley raised its price target to $271 from $218 while reaffirming its overweight rating.

Price: 221.37, Change: +6.18, Percent Change: +2.87