Goldman Sachs on Cambricon (688256): China AI Demand and Localization Drive Growth; Target Price Raised to Rmb1,841; Buy Maintained

Goldman Sachs reiterates Buy on Cambricon (688256.SS) and raises its 12-month target price from Rmb1,614.77 to Rmb1,841, implying 77.9% upside from Rmb1,035.00 and 82x 2027E P/E (average 84x since July 2024). The thesis rests on robust China AI chip demand plus localization commitments: 2026-30E EBITDA is raised 1%/41%/69%/71%/82%, revenue climbs from Rmb6,497mn (2025) to Rmb23,980mn (2026E), Rmb91,260mn (2027E) and Rmb172,470mn (2028E), and EPS rises from Rmb4.90 to Rmb43.40 by 2028E (2027-28E average +111% yoy). Customers span foundation-model developers, internet, financials, telecom operators and hospitals, with supermarkets/retail added in 1H26; adapted models include GLM, DeepSeek, Qwen, Kimi and MiniMax, with scaled training achieved in 1H26. R&D headcount recovered from a 727 trough in 1H24 to 1,007 in 1H26. Valuation uses discounted EV/EBITDA (2030E base year, 12.7% cost of equity) with the target multiple cut from 43x to 27x, while gross margin assumptions are trimmed (55.2% in 2025 to 50.0% by 2030E) on CSP bargaining power and volume-discount practices. AI chip shipments are seen rising from 405k units (2025) to 3.12mn by 2029E; 2Q26 inventory rose 83% qoq, signaling strong 3Q26 revenue. Key risks: wafer supply constraints (US Entity List, December 2022), slower cloud chip development and fiercer competition.