GaN-ning动量，一步一个脚印

GaN-ningmomentumone step at a time InnoScience released its FY25 earnings. Revenue increased by 46.4% YoY toRMB1.2bn, 9% below our estimate and 11% below BBG consensus. GPMturned positive from-19.5% in FY24 to 7.3% in FY25, 3.3pcts/4.3pcts below ourestimate and BBG consensus, while adj.EBITDA also turned positive, markingtheCompany’s first meaningful operating inflection. The improvement wassupported by continued capacity expansion, with wafer capacity reaching 20kwfpmby2025, alongside higher utilization and better yield.Beyond earnings,FY25 was also a year of important commercial milestones, including1)deeperengagement in 800VDC power architecture with leading AI customers such as Target Price(Previous TPUp/DownsideCurrent Price China Semiconductors Kevin ZHANG(852) 3761 8727kevinzhang@cmbi.com.hkAaron GUO (852) 3916 3715aaronguo@cmbi.com.hk Steady capacity expansion, improving product mix and broader end-market diversification.Consumer remained the largest end market inFY25, accounting forc.50% of totalsales, down fromc.60% in FY24, whileindustrial rose to 43%, up fromc.30%in FY24. Data center revenue grew50.2% YoY to RMB63mn(5.2% of totalsales), whileautomore than doubledto RMB58mn(4.8%of total sales).Product mix also continued toimprove:Wafer sales declined 10% YoY and accounted for 21% of totalsales,while chip+IC and module revenue grew 41%/143%YoY,contributing 42%/37% of total sales, respectively. In our view, this shift isstrategically important as it suggests theCompany is moving beyond a Capacity scale isthekey bridge between the Company’s technologyleadership and LT earnings power.Pure-play GaN peers remain limitedglobally, and scaled IDM players are rarer still, which leavesInnoSciencewell-placed as adoption broadens across higher-value applications, in ourview.The Company is targetingfull production of80k wfpm by 2028E, Maintain BUY, with TP raised to HK$75, based on35.0x 2030E P/Eanddiscount back to 26E usingCOEof12%.We raise ourtarget multiplefrom 30x to reflect growing investor attention on AI DC power opportunities,wherethe Company is gaining earlier and more credible exposure,reinforcing confidence that its manufacturing scale and execution cantranslate into stronger LT earnings potential.We benchmark theCompanyagainst agroup of domesticthird-gen power semi playerstrading atan Source: FactSet Disclosures& Disclaimers Analyst Certification The research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuerthat the analyst covered in this report: (1) allof the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report. Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer of any of the HongKong listedcompanies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report. CMBIGM Ratings BUY: Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential returnof +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM OUTPERFORM:Industry expected to outperform the relevant broad market benchmark over next 12monthsMARKET-PERFORM:Industry expected to perform in-line with the relevant broad market benchmark over next 12 monthsUNDERPERFORM:Industry expected to underperform the relevant broad market benchmark over next 12 months Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholly owned subsidiary of CMB International CapitalCorporation Limited (a wholly ownedsubsidiary of China Merchants Bank) Important Disclosures There are risks involved in transacting in any securities. The information contained in this report may not be suitable forthe purposes of all investors.CMBIGMdoes not provide individually tailored investment advice. This report has been prepared without regard to the individual investment objectives, financial positionor special requirements. Past performance has no indication of future performance, and actual events may differ materially from that which is contained in thereport.The value of, and returns from, any investments are uncertain and are not guaranteed and may fluctuate as a result of their dependence on the or its affiliate(s) to whom it is distributed. This report is not and should not be construed as an offer or solicitation tobuy or sell any security