GigaDevice(603986) 高盛·2025-01-19 15:07Investment Rating - The report maintains a Buy rating for Gigadevice (603986 SS) with a 12-month target price of RMB 136, based on a 37x 2026E P/E ratio [10][12] Core Views - Gigadevice is expected to enter a new growth cycle driven by its expansion into niche DRAM products, with strong EPS growth anticipated as its market share in China's niche DRAM market increases [12] - The company's NOR Flash and MCU businesses are expected to remain stable and show moderate recovery in 2024-25 [12] - The current valuation of Gigadevice is below historical levels, making it attractive [12] 2024 Q4 Performance Outlook - Revenue for Q4 2024 is expected to be RMB 1 883 million, down 8% QoQ but up 38% YoY [1][4] - Gross margin is projected to decline to 39% in Q4 2024, down from 42% in Q3 2024, due to normalized product mix and continued DRAM price pressure [1][2] - Net profit is forecasted to be RMB 276 million, down 12% QoQ but a significant improvement from a loss in the same period last year [1][4] 2025 Q1 Performance Outlook - Revenue for Q1 2025 is expected to remain flat QoQ at RMB 1 866 million, reflecting the typical seasonal weakness in Q1 [2][3] - Net profit is projected to increase slightly by 6% QoQ to RMB 292 million [3][4] DRAM Business Outlook - The DRAM market is expected to remain oversupplied in H1 2025, with a recovery in supply-demand balance anticipated in H2 2025 [6] - Gigadevice's niche DRAM growth will be driven by product expansion, including the mass production of 8Gb DDR4 products in 2025, and increased order share from domestic customers [6] AI Opportunities - The growth of edge AI is expected to benefit Gigadevice's products, including increased NOR Flash chip adoption in AI PCs and AI headphones, and strong growth in AI glasses [7] - The company is exploring customized storage solutions, which could also benefit from edge AI development in areas like AI phones and robotics [7] Financial Forecast Adjustments - Revenue forecasts for 2024-27 have been revised downward by 0%-5%, with gross margin forecasts reduced by up to 3 percentage points, and net profit forecasts lowered by 3%-23% [7][8] - The 2026E revenue is now projected at RMB 11 628 million, with a gross margin of 39 4% and net income of RMB 2 459 million [8]