兆易创新_2025 年第二季度预览；盈利动能回升；因第三季度增长加速，重申 “买入” 评级Gigadevice (.SS)_ 2Q Preview; earnings momentum is picking up; reiterate Buy on growth acceleration into 3Q25E

Summary of GigaDevice Conference Call Company Overview - Company: GigaDevice (603986.SS) - Industry: Semiconductor design, focusing on NOR flash, MCU, and specialty DRAM products Key Financial Highlights - 2Q25 Revenue: Expected to be Rmb2.37 billion, representing a 20% year-over-year (YoY) increase and a 24% quarter-over-quarter (QoQ) increase [1][4] - Net Profit for 2Q25: Expected to be Rmb380 million, a 22% YoY increase and a 62% QoQ increase [1][6] - Gross Margin (GM): Expected to improve to 39.2% in 2Q25, up 1 percentage point YoY and 1.7 percentage points QoQ [4][6] DRAM Pricing and Market Dynamics - DRAM Price Increase: The increase in DDR4 DRAM prices is a significant driver for GigaDevice's earnings in 2Q25, with spot prices for DDR4 8Gb products rising by 1-2 times compared to the end of 2024 [4][8] - Future Expectations: Anticipated further increases in contract prices for DDR4 DRAM in 3Q25, with gross margins expected to reach 35% [8] - Market Sentiment: Despite strong DRAM pricing trends, GigaDevice's stock price has remained relatively stable, raising concerns about the sustainability of DRAM price increases and the current valuation [1][2] Growth Outlook - 3Q25 Earnings Growth: Expected acceleration in earnings growth driven by continued DRAM price increases [2][10] - Industrial Demand: The industrial end-market accounts for approximately 40% of GigaDevice's MCU segment revenue, with demand expected to remain robust due to low inventory levels and restocking activities [9] Valuation and Investment Thesis - Current Valuation: The stock trades at 51x 2025E P/E and 31x 2026E P/E, which some investors may find demanding [10] - Price Target: The 12-month target price is set at Rmb151, based on a 40x 2026E P/E [19][13] - Investment Recommendation: The company is rated as a Buy, with expectations of entering a new growth cycle driven by specialty DRAM product expansion and stable NOR flash and MCU business [18] Risks and Considerations - Key Risks: Include slower-than-expected DRAM ramp, geopolitical tensions affecting supply chains, and weaker-than-expected growth in NOR and MCU segments [19][20] Conclusion - GigaDevice is positioned for growth with strong earnings momentum driven by DRAM pricing recovery and robust industrial demand, despite concerns regarding valuation and market sustainability. The investment outlook remains positive with a Buy rating and a target price reflecting anticipated earnings growth.