NCE(SH:605111) SPDB International·2025-10-30 11:01Investment Rating - The report maintains a "Buy" rating for the company, with a target price raised to RMB 44.4, indicating a potential upside of 18% from the current price of RMB 37.7 [2][5]. Core Insights - The company's performance is expected to bottom out in Q3 2025, with a gradual recovery anticipated starting from Q4 2025 and continuing into 2026. The company is positioned to benefit from short-term order increases due to its diverse MOSFET product offerings and the upcoming peak season in the automotive sector [2][3]. - The introduction and ramp-up of products in AI servers and automotive ADAS power management are expected to lay a solid foundation for growth in the coming year [2]. - The current price-to-earnings ratio of 24.8x is considered attractive compared to historical averages [2][15]. Financial Performance and Forecast - For Q3 2025, the company reported revenues of RMB 456 million, a year-on-year decline of 6% and a quarter-on-quarter decline of 5%. However, September's revenue showed signs of recovery [3][10]. - The gross margin for Q3 2025 was 30.9%, down 7.2 percentage points year-on-year and 4.2 percentage points quarter-on-quarter, primarily due to rising wafer costs [3][10]. - The report projects revenues of RMB 1.864 billion for 2025, with a modest growth rate of 2%, and anticipates a net profit of RMB 422 million, reflecting a 3% decline from the previous year [4][11]. Valuation - The report employs a DCF valuation method, assuming a risk-free rate of 1.8% and a growth rate of 18%-25% for the company from 2030 to 2034, with a perpetual growth rate of 3% and a WACC of 9.8% [3][12]. - The calculated target price of RMB 44.4 is based on a present value of free cash flows amounting to RMB 16.062 billion, leading to an equity value of RMB 18.431 billion [13].