兆易创新（A）：尽管第三季度业绩强劲，DRAM涨价预期已基本反映，下调评级至中性

Downgrade to Neutral as DRAM price hikelargely priced in despite strong Q3 results Rating Change: NEUTRAL | PO: 267.00 CNY | Price: 232.00 CNY 31 October 2025 Positives largely priced in; Downgrade to Neutral Equity We downgrade GigaDevice (GD) from Buy to Neutral (from Buy) given we see1)limitedfundamental upside potential from further DRAM price hike given lack of enoughcapacity and risks of rising fabrication costs from its supplier (CXMT) which may make itdifficult to hold the high GPM of DRAM biz,2)valuation is getting close to the historicalaverage of 12mth Fwd P/E at c.70x vs. current 68x, although we like GD as the keybeneficiary in China semis localization. Following its strong 3Q25 results and DRAMprice hike potential, we raise FY26-27E earnings forecasts by 7-8%. Accordingly, our POis raised to Rmb267 (from Rm2A09) based on 60x 2H26-1H27E P/E (from 50x), which isset at c. 20% higher than the avg P/E of China fabless names as GD is benefiting fromthe memory up-cycle. DRAM price hike may continue, but less contributionAccording to our Global Memory Tech Team (report link), DDR4 DRAM contract prices surged c. 150% QoQ in 3Q25 (Exhibit 8), with conventional DRAM ASP forecast tofurther rise 20%/10% QoQ in 4Q25/1Q26E driven by solid chip demand (for both DDR4& DDR5) and ongoing supply tightness (esp. for legacy DDR3/4) as capacity shifts toHBM. If more DDR3/4 DRAM price hike in next 1-2 quarters, we think earnings upsidesfor GD will be partly offset by 1) softer GPM on fabrication costs rise, 2) modest growthof capacity to be secured from its partner CXMT in 2026E, and 3) potential DDR4 toDDR5 migration among customers (e.g., some high-end AIoT vendors are upgrading toDDR5 from DDR4, per our industry check), while GD doesn’t supply DDR5 products. Daley Li, CFA>>Research AnalystMerrill Lynch (Hong Kong)+852 3508 5365daley.li2@bofa.com Owen Wang>>Research AnalystMerrill Lynch (Hong Kong)owen.wang2@bofa.com Solid 3Q25 results; key focus in 2026EIn 3Q25, total rev reached Rmb2.68bn (+31% YoY /+ 20% QoQ), 5% above consensus Harry Zhuang>>Research AnalystMerrill Lynch (Hong Kong)harry.zhuang@bofa.com estimates. Net profit surged to Rmb508mn (+61% YoY / +49% QoQ), 2% aboveconsensus. Mgmt attributed the strong QoQ rev growth to strong DRAM rev on strongershipment and price rising. Looking into 2026E, key biz focus will include launching morecustomized DRAM products, achieving similar rev growth for MCU (vs. FY25), LPDDR4 tohave mass production in 2H26E, per mgmt. >> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analystunder the FINRA rules.Refer to "Other Important Disclosures" for information on certain BofA Securities entities that take responsibility for the information herein in particular jurisdictions.BofA Securities does and seeks to do business with issuers covered in its research See list of abbreviations on Page 11. reports. As a result, investors should be aware that the firm may have a conflict ofinterest that could affect the objectivity of this report. Investors should consider thisreport as only a single factor in making their investment decision.Refer to important disclosures on page 9 to 11. Analyst Certification on page 7. Price Objective Basis/Risk on page 7.12894478 Timestamp: 30 October 2025 04:30PM EDT Company SectorSemiconductors Company Description Founded in 2005 and headquartered in Beijing, GigaDeviceoperates in fabless model and is the biggest local vendor inmainland China for NOR Flash and MCU. Its major productlines include flash memory, MCU and sensor. Investment Rationale We rate GigaDevice at Neutral given (1) solid recovery ofNOR from well-progressed inventory destocking anddemand recovery, (2) market share gain potential in ChinaMCU / DRAM market and promising long-term growthoutlook for its auto MCU business, while we think furtherprice upside could be limited given valuation is close to thehistorical avg. and potential capacity constraint for DRAM tolimit the upsides from further specialty DRAM price hikes. Stock Data Price to Book Value Our PO of Rmb267 is based on 60x 2H26-1H27E P/E, which is set 20% higher thanaverage valuation of Chinese fabless companies as it can benefit from the memoryupcycle. As a cross-check, our PO implies 1.6x PEG (based on 37% EPS CAGR in 2025-27E), which is largely in-line with its peers’1.5x PEG in China fabless space. Source:Bloomberg, BofA Global Research estimates Exhibit 5: Valuation comparisons - China fablessChina fabless companies have a FY26E P/E of 51x on average Memory spot price trend Exhibit 6:Unprecedented spot price rally with record-high level for current mainstream DRAM 16Gb DDR5 at US$12.5 and 16Gb DDR4 at $20; DRAMprice hit the highest levels in the past 25 years. Previous high level was hit in Oct-17, but only $10 level vs current $20DRAM spot price – long-term trend (2000-2025) Memory contract price trend Exhibit 8: According to TrendForce, DDR4 price u