重申增持评级，大幅上调目标价

KIOXIA Holdings(285A)| Japan Morgan Stanley MUFG Securities Co., Ltd.+ Kazuo Yoshikawa, CFAEquity AnalystKazuo.Yoshikawa@morganstanleymufg.com+81 3 6836-8408 Investor Day 2026 Hidetaka SuzukiResearch AssociateHidetaka.Suzuki@morganstanleymufg.com+81 3 6836-8402 Our takeaway was positive. We raise our price target andmaintain our Overweight rating and Top Pick. Japan Semiconductors|Japan Reiterate OW; raise PT significantly:We believe FCF yield (FCF/EV) will become amore important valuation metric, given (1) expected annual FCF generation of¥400-500bn in FY3/27-3/28 even under conservative ASP assumptions, and (2)management's indication that a substantial portion of excess accumulated FCF couldpotentially be returned to shareholders, depending on the operating environmentand growth investment opportunities. While the NAND market is likely to remaincyclical, we believe the strong growth from AI inference should support the stock atan FCF yield of around 10%. Based on our FY3/28e FCF yield of 10%, we raise ourprice target to ¥110,000. Implied P/E of our PT is 11x our FY3/27e EPS. Stock RatingOverweightIndustry ViewIn-LinePrice target¥110,000Up/downside to price target (%)42Shr price, close (Jun 2, 2026)¥77,540Mkt cap, curr, basic (bn)¥42,343.5Div yld (03/27e) (%)2.3 KIOXIA held its Investor Day on June 2:Our overall takeaway was positive.Seenext section for a summary of company's presentation. (1) The company raised its CY25-28 flash memory exabyte (EB) demand CAGRforecast to 22%, up from 20% previously, reflecting stronger demand for AIinference. We view the relatively modest upward revision positively, as it suggestsmanagement is not adopting overly optimistic assumptions. (2) Planned capex for FY3/27-3/29 averages ¥470bn per year, only modestly abovethe FY3/27 plan of ¥450bn, indicating continued investment discipline. (3) The company demonstrated steady progress in developing products targeted ata broad range of AI inference workloads and architectures. (4) Management reiterated a flexible capital allocation approach, suggesting that,depending on business conditions and investment opportunities, a substantialportion of excess accumulated FCF could potentially be returned to shareholders. We raise our earnings forecasts:(1) We increase our US$-based GB ASPassumptions to YoY+215% for FY3/27 from YoY+187%; assuming 2H pricing remainson par with 1H and YoY-10% for FY3/28 from YoY-16%. Based on management'scomments regarding discussions with hyperscale and enterprise customers on LTAsextending into CY29 and beyond, we see limited risk of FY3/28 NAND pricingdeclining faster than cost reductions. Our previous forecast was too conservativeand we thus raise our ASP forecasts. (2) Reflecting Kioxia's updated financial targets,we lower our capex forecasts and raise our R&D forecasts. 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. += 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. Where we differ:Our EPS forecasts are 13% above consensus for FY3/27 and 9%above consensus for FY3/28. Catalyst Event Reaction Takeaways: •Kioxia forecasts CY26–28 NAND flash demand growth of 22% CAGR in exabyte terms, up from itsprevious forecast of 20% made last year. •The company plans to invest an average of ¥470bn per year in capex during FY3/27–3/29,representing only a modest increase from its FY3/27 plan of ¥450bn. •Management indicated that a substantial portion of excess accumulated FCF could be returned toshareholders, depending on business conditions and growth investment opportunities. Investor Day 2026 On June 2, Kioxia Holdings held Investor Day 2026. Key takeaways from management'spresentation are as follows. Flash memory market outlook:At its IR Day in June last year, the company projectedflash memory demand growth of 20% CAGR in exabyte (EB) terms for CY25-29, withinference-related demand (including edge inference applications) growing at 69% CAGR,and AI-related applications accounting for roughly half of total demand by 2029. At this year's Investor Day, Kioxia raised its outlook, forecasting CY25-28 flash memorydemand growth of 22% CAGR, with inference-related demand growing at 86% CAGR. Thecompany expects DC applications to account for approximately half of total demand by2028. Management also stated that supply/demand is likely to remain tight through