Summary of Shenzhen Longsys Electronics Co Ltd Conference Call Company Overview - **Company**: Shenzhen Longsys Electronics Co Ltd (301308.SZ) - **Industry**: Technology Semiconductors, specifically NAND memory products - **Date of Call**: September 10, 2025 Key Points Industry Outlook - **NAND Cycle**: The NAND cycle is expected to improve in 4Q25 and 1H26, driven by accelerating AI inference adoption, leading to strong growth momentum in the NAND industry in 2H26 [2][6] - **Pricing Trends**: 2Q results exceeded market expectations due to favorable pricing trends, with a projected mid-single digit percentage increase in blended average selling price (ASP) for 3Q25 [3][6] - **Consumer Electronics Demand**: 4Q pricing hikes may slow due to lukewarm consumer electronics demand, but strong CSP orders could mitigate this impact [3][4] Financial Projections - **Revenue Growth**: Longsys's enterprise business is projected to grow by 50-100% in 2026, with revenue contribution expected to reach Rmb10 billion by 2027, up from Rmb3.6 billion in 2025 [5][14] - **Earnings Estimates**: EPS estimates have been revised to reflect a -4% change for 2025, +22% for 2026, and +29% for 2027, with a 2026 EPS estimate of Rmb3.3, which is approximately 30% higher than consensus [32][34] Business Model and Strategy - **TCM Model**: The Technology-Contract-Manufacture (TCM) model is expected to start contributing revenue from 4Q25, focusing on long-term agreements with clients to stabilize gross margins above 20% in the long term [22][25] - **Market Share**: Longsys aims to increase its market share in the eSSD market, which was 2% in 2024, with significant orders from major CSPs expected to contribute to revenue starting from 2H25 [14][22] Market Dynamics - **AI Demand**: The AI NAND market is projected to account for 34% of the global NAND market by 2029, adding an incremental US$29 billion to the total addressable market (TAM) [12] - **Supply Constraints**: A NAND shortage is anticipated entering 2027 due to strong AI inference demand and limited supply growth [12][14] Price Target and Ratings - **Price Target Increase**: The price target for Longsys has been raised from Rmb100 to Rmb122, reflecting a bullish outlook on the NAND up-cycle and the company's leadership in eSSD [2][6] - **Investment Rating**: The company maintains an "Overweight" rating, indicating a positive investment outlook despite potential near-term NAND cycle weakness [6][32] Additional Insights - **Revenue Recognition Change**: Longsys plans to change its revenue recognition method from gross to net for its TCM business, which may slow top-line growth but enhance gross profit margins [24][25] - **Embedded Storage Market**: Global suppliers are exiting the mobile NAND market in China, prompting Longsys to collaborate with suppliers like SanDisk to serve Tier 1 clients [23] This summary encapsulates the critical insights and projections discussed during the conference call, highlighting the company's strategic direction and market positioning within the NAND industry.