Goldman Sachs: E-Town Semis (688729.SS): Riding on Memory and Advanced Node Capacity Expansion in Local Market; Maintain Neutral on Fair Valuation
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Key Views
In 1Q26, gross margin exceeded expectations, surpassing 40% for three consecutive quarters, though revenue fell short due to extended new product ramp timelines. Goldman Sachs cut its 2026 net profit forecast by 5% on lower revenue but raised 2027-28 estimates by 4% and 6% respectively, reflecting capacity expansion in memory and advanced nodes. Gross margin estimates for 2026-28 were lifted on supply chain localization trends.
The revised target price applies a target P/E of 49.9x (previously 45.9x) on 2027E EPS, derived from the correlation between peer P/E multiples and average EPS growth for 2027-28, capturing sector re-rating from AI demand and domestic capacity buildout.
Outlook
At the current price of RMB 37.57, the stock trades at 57.9x 2027E P/E, above the target P/E of 49.9x, with a PEG of 1.3x within the peer range of 0.9-1.8x. Positive catalysts appear largely priced in.
Recommended Securities
- E-Town Semis (688729.SS): Neutral; 12-month target price RMB 32.9; downside 12.4%.
Key risks include China semiconductor capex pacing, competitive intensity, and RTP and dry
Key exhibits
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