Montage Technology(SH:688008) Goldman Sachs·2025-07-15 01:58Investment Rating - The report maintains a "Buy" rating for Montage with a 12-month target price of Rmb106.00, indicating an upside potential of 27.7% from the current price of Rmb83.03 [17][15]. Core Insights - Montage's 2Q25 revenue is expected to grow by 52% year-over-year (YoY) to Rmb1.4 billion, driven by the increasing demand for DDR5 and Gen-3 interface integrated circuits (ICs) [1][4]. - The net income (NI) guidance for 2Q25 is projected to be between Rmb575 million and Rmb675 million, representing a YoY growth of 62% to 90%, which is 18% higher than previous estimates [1][4]. - The company's profitability is improving due to a shift towards higher-margin DDR5 interface ICs and enhanced operating leverage [1][4]. Revenue and Earnings Projections - The report revises earnings estimates upward by 5% for 2025, 3% for 2026, and 3% for 2027, reflecting higher revenues from DDR5 interface ICs and an improved product mix [5][8]. - Revenue projections for Montage are Rmb5.775 billion for 2025, Rmb8.366 billion for 2026, and Rmb10.926 billion for 2027, with corresponding gross profits of Rmb3.489 billion, Rmb5.059 billion, and Rmb6.613 billion respectively [8][17]. Margin Analysis - The report anticipates an increase in gross margin from 60.4% in 2025 to 60.5% in 2027, alongside an improvement in operating margin from 38.9% to 45.1% over the same period [8][9]. - The net margin is expected to rise from 41.4% in 2025 to 43.4% in 2027, indicating a positive trend in profitability [8][9]. Market Dynamics - The strong revenue growth is attributed to the rising penetration of DDR5 interface ICs and the increasing contribution from Gen-2 and Gen-3 products, with expectations that Gen-3 shipments will surpass Gen-2 by 4Q25/1Q26 [4][5]. - The company is set to begin production of Gen-4 DDR5 interface ICs, which are anticipated to offer better pricing and margins [4][5].