KIOXIA Holdings (285A)：3月季度业绩：探索长期协议与股东回报

KIOXIA Holdings(285A)| Japan Mar-Q Results: Exploring LTAand Shareholder Returns Hidetaka SuzukiResearch AssociateHidetaka.Suzuki@morganstanleymufg.com+81 3 6836-8402 KIOXIA Holdings (285A.T, 285A JP) What’s Changed KIOXIA Holdings (285A.T)Price TargetTop Pick Added Stock RatingOverweightIndustry ViewIn-LinePrice target¥70,000Up/downside to price target (%)57Shr price, close (May 15, 2026)¥44,450Mkt cap, curr, basic (bn)¥24,273.5Div yld (03/27e) (%)3.4 We designate the stock as the Top Pick within our coverage,given its solid FCF and shareholders return potential. Mar-Q non-GAAP results:GB shipments QoQ-10%, while ASP (US$-based) morethan QoQ++100%. Revenue at ¥1.0trn (QoQ+85%), adj. gross margin (excluding JVsales and R&D adj.) was 69.9% (QoQ+29.7ppt), and OP at ¥599.1bn. Jun-Q guidance:Revenue of ¥1.75trn (QoQ+75%) and OP of ¥1.3trn (OPM 74%).CFO Kawamura's comments:“We are approaching LTA discussions cautiously butpositively, based on a fundamentally different perspective from the past. Someagreements have already been concluded”; “We are considering shareholder returnmeasures. Our priority is dividends, although we may also consider flexible buybacksdepending on the stock price.” We raise our forecasts:We raise our CY26 US$-based ASP forecast from YoY+100% to more than YoY+240%. For CY27, while there are no clear negative datapoints, we conservatively assume a high-teens % decline. Our take:We expect AI inference to continue expanding, while lean supply-chaininventory (Ex. 7) and depressed NAND WFE capex (Ex. 8-10) suggest thatacceleration of supply growth is unlikely . That said, after two consecutive quartersof exceptional price jump (Ex. 11), the pace of price increase may moderate, andperiods of modest price declines are possible. Such deterioration in the secondderivative has often led to multiple contraction for memory stocks. This time, even ifit deteriorates, as long as the degree of deterioration remains moderate, the focus islikely to shift to FCF. We estimate KIOXIA’s FCF at ~¥4trn annually for FY3/27-28,with a substantial portion of the accumulated cash eventually returned toshareholders (Ex. 12–13), which should support the stock price. Morgan Stanley does and seeks to do business withcompanies covered in Morgan Stanley Research. As a result,investors should be aware that the firm may have a conflict ofinterest that could affect the objectivity of Morgan StanleyResearch. Investors should consider Morgan StanleyResearch as only a single factor in making their investmentdecision. For analyst certification and other important disclosures,refer to the Disclosure Section, located at the end of thisreport. The current implied FCF yield is ~20%. We believe the factors behind the stock’sunderperformance relative to a peer - (1) concerns over ASP hikes and LTA, and (2)the lack of clarity on shareholder return and stock overhang - have been addressedin the earnings call. We designate KIOXIA as our Top Pick in our coverage. We revisethe basis of our target price from ~9x our FY3/27e EPS to 9x our FY3/28e EPS. += Analysts employed by non-U.S. affiliates are not registeredwith FINRA, may not be associated persons of the memberand may not be subject to FINRA restrictions oncommunications with a subject company, public appearancesand trading securities held by a research analyst account. Risk Reward - KIOXIA Holdings (285A.T)Risk Reward – KIOXIA Holdings (285A.T)Top Pick AI inference drives NAND demand; we expect solid FCF generation in 2026-27 OVERWEIGHT THESIS ¥70,000PRICE TARGET We expect solid supply–demand conditionsfor 2026–27, supported by expandingdemand for AI inference–related storage andcontinued discipline on the supply side,which should enable strong FCF generation. FY3/28e EPS x 9: 10% premium to the multiple of other memory makers during marketexpansion phase (8x), which we based on the solid storage demand outlook for AI inferenceand QLC-SSD, as well as favorable NAND supply outkook due to HDD shortages andexpectations for robust HBM demand. Source: Refinitiv, Morgan Stanley Research Risk Reward ThemesNew Data Era:Positive View descriptions of Risk Rewards Themeshere ¥22,000 FY3/28e BPS x 4BEAR CASE ¥95,000 FY3/28e EPS x 9.0BASE CASE ¥70,000 BULL CASE FY3/28e EPS x 10; higher than base case Outlook for tight supply/demand in 2026-27.FY3/28 sales Y7.8trn, non-GAAP OP Y5.9trn,EPS Y7,633 NAND shortage to continue in 2026-27, andKIOXIA's share in eSSD grows meaningfully. NAND demand deteriorates rapidly andearnings peaks out FY3/28 sales Y9.1trn, non-GAAP OP Y7.2trn,EPS Y9,521 Risk Reward – KIOXIA Holdings (285A.T) RISKS TO PT/RATING INVESTMENT DRIVERS MS ESTIMATES VS. CONSENSUS RISKS TO UPSIDE NANDflash GB demand growth Stronger than expected AI-driven end demandgrowth, and supply-side adjustment leading totight supply/demand of NANDflashKIOXIA's market share gain in SSD market GB ASPGB cost reductionMarket share RISKS TO DOWNSIDE Deterioration of