全球集成式氮化镓领导者，具有显著的增长潜力

InnoScience (2577 HK) Global integrated GaN leader with significantgrowth potential InnoScience is a leader in the global GaN power semiconductor industry,ranking firstwithmarket share of33.7% in 2023, per Frost & Sullivan (F&S). TheCompany designs, develops and manufactures different types of GaN products,includingdiscrete chips, ICs, wafers and modules. Their products are widely usedinvariousendmarkets,suchasconsumerelectronics,renewableenergy,industrial applications, automotive electronics and data centers. InnoScience is thefirst worldwide to achievemass production of 8-inch GaN-on-Si wafers, and nowoperates two 8-inch GaN-on-Si wafer fabs with a combined capacity of 13kwpmby the end of 2024. Riding the tailwind of GaN application penetration and marketexpansion (98.5% 2024-28E CAGRper F&S), we expect theCompany’s revenueto grow at 55.2% 2024-27E CAGR andachieve margin improvement driven by theeconomies of scale in production (GPM/NPM to break evenin 2025/27E).Initiateat BUYwithTP at HK$49. Target PriceHK$49.00Up/Downside28.9%Current PriceHK$38.00 China Semiconductors Lily YANG, Ph.D(852) 39163716lilyyang@cmbi.com.hk Kevin ZHANG(852) 3761 8727kevinzhang@cmbi.com.hk Jiahao Jiang(852) 39163739JiangJiahao@cmbi.com.hk The global GaN power semiconductorindustryisexpected to grow at98.5% 2024-28E CAGR, perF&S.The marketexpanded rapidly at a CAGRof 88.5% from RMB139mn in 2019 to RMB1.8bn in 2023, and is expected toreach RMB50.1bn in 2028E (98.5% 2024-28E CAGR), per F&S. Key growthdrivers include 1) risingdemand for higher energy efficiency in computeintensive applications, 2) material upgrade incentive to reduce costs andachieve miniaturization needs, and 3) favorable policies.The GaN power semiconductor market ishighlyconsolidated,with the top threeGaN power semiconductor companiestaking up72%ofshareaccumulatively.As a key representative of IDM business modeland apure-playGaNpowersemiconductorplayer,InnoSciencerankedfirstwithmarket shareof33.7% in 2023, per F&S.InnoScienceholdsanuniquepositionwithintheGaNindustryby leveragingseveralstrengths:1)mass-production capabilitywiththelargestcapacity and first-mover advantage to capture growing opportunities,2)IDMmodel tailored to industry needs withhigh market entrybarriers, 3) a marketleader in 8-inch GaN-on-Si technologies (the only company globally providingproduct R&D covering 15V to 1,200Vand developedtheflagshipV-GaNseries),4) achievement of industrial-scale commercialization with cost benefitsand a yield rate exceeding 95%.The mass production technologies led toan80% increase in die per wafer and a 30% reduction insingle chip costscompared to 6-inch GaN-on-Si wafers,5) owing an experienced team.Initiate at BUY with TP at HK$49based on 30x 2030E P/E(peers’5-yr avg., WACC: 12.0%, RMB/HKD: 1.07)as we expect theCompanyto achieve stableoperations by that time.We project the company’s revenue to grow at 55.2%2024-27E CAGR, driven by capacity expansion and higher ASP of newproducts with accelerating penetration of GaN in downstream applications. Weexpect its GP/NPtobreak evenin 2025E/27Eon economies of scale.Thecompany has recently disclosed its self-developed1,200VGaN productwithzero reverse recovery charge,and it isnow in massproduction for medium-to-high power supplies. The productwill be applicableinsectors like NEVsand data centers while bringing energy efficiency.Keyrisks include:1)weakdemandorlower-than-expected penetration of Source: FactSet GaN solutions in new applications, 2) geopolitical risks and supply chaindisruptions, etc. Contents Industry Overview……………………………………………………………4 GaN emerges as a revolutionarymaterial, outperforming silicon in key areas..............4GaN is positioned as a game-changer across industries..............................................6TAM of GaN is projected to grow at 99% 2024E-28E CAGR........................................8Competitive landscape: A consolidated market, InnoScience rankedfirst with 33.7% market share………………………………………………10Company Overview…………………………………………………………..12A leader in the global power semiconductor revolution..............................................12InnoScience offers various types of GaN products, including discrete chips, ICs,wafers and modules..................................................................................................15Financial Analysis……………………………………………………………17Valuation and comparable universe………………………………………20Target price of HK$49 per share based on 30x 2030E P/E........................................20Potential Risks………………………………………………………………..21Appendix……………………………………………………………………….23 Industry Overview GaN emerges as a revolutionary material, outperforming silicon in keyareas Semiconductor materials can be categorized into three generations: 1) silicon, 2)GaAs,3) SiC and GaN.The three generations play a pivotal role in various applicationsgiven their distinct characteristics and advantages. While silicon remainsa traditional choice of powersemisoluti