GigaDevice(SH:603986)2025-10-14 14:44Summary of Gigadevice (603986.SS) 3Q Preview Conference Call Company Overview - Company: Gigadevice - Ticker: 603986.SS - Industry: Semiconductor design, focusing on NOR flash, MCU, and specialty DRAM products for consumer electronics, industrial, and automotive markets [14][15] Key Financial Estimates for 3Q25 - Expected Net Profit: Rmb520 million (+65% YoY, +52% QoQ) [1][3] - Expected Revenue: Approximately Rmb2.6 billion (+26% YoY, +15% QoQ) [3] - Gross Margin: 42.3% (+0.5 percentage points YoY, +5.3 percentage points QoQ) [1][3] Core Focus Areas for 3Q Results 1. Pricing Outlook into 2026: - Anticipation of continued price strength for specialty DRAM into 2026, influenced by the exit of incumbents from the legacy DRAM market and increased demand from AI applications [3][11] - OpenAI's partnership with Korean memory majors and expected demand of 900k DRAM wpm could significantly impact advanced DRAM capacity [3] 2. Customized DRAM Development: - Focus on customized DRAM for edge devices (AI PCs, robotics, automobiles) as a new growth segment [4][6] - Expected revenue contribution from this segment to begin towards the end of 2026, with a more significant ramp-up in 2027 [6] 3. NOR Flash Price Outlook: - NOR flash products account for nearly 50% of revenue; prices have started to see mild increases due to tight supply [7] - Strong setup for NOR flash into 2026, with expectations of continued tight supply as peers prioritize SLC NAND and DRAM improvements [7] Earnings Revisions - Revised Net Profit Estimates: Increased by 1% to 14% for 2025E-2027E due to sustainable pricing strength in the niche memory market [8] - New 12-Month Target Price: Rmb225 (up from Rmb198), based on a 2026E P/E multiple of 50x [8][15] Investment Thesis - Growth Cycle: Anticipation of a new growth cycle driven by product expansion into specialty DRAM and stable performance in NOR flash and MCU segments [14] - Valuation: Stock is considered attractive, trading below historical P/E levels during similar cycle stages [14] Risks to Consider - Potential Risks: 1. Slower-than-expected ramp in DRAM production 2. Geopolitical tensions affecting supply chains 3. Weaker-than-expected price and volume growth in NOR and MCU segments 4. Slower-than-expected wafer cost reductions impacting margins [15] Conclusion - Recommendation: Maintain a "Buy" rating on Gigadevice, with a focus on the promising outlook for specialty DRAM and NOR flash products, alongside the anticipated growth from customized DRAM applications [1][14]