Goldman Sachs: Maintains "Buy" Rating for INNOSCIENCE (02577) with a Target Price of HK$114, Optimistic about GaN Benefiting Data Centers and Automotive Applications

Goldman Sachs released a research report maintaining a "Buy" rating on INNOSCIENCE (02577), based on a discounted EV/EBITDA valuation forecast for 2030. The target valuation multiple of 30.1 times is derived from the trading EV/EBITDA multiples of comparable companies, relative to INNOSCIENCE's expected EBITDA growth rate and EBITDA margin for the next year. The 12-month target price is HKD 114, which corresponds to an upside potential of 163.9% based on the closing price of HKD 43.20 on September 8. During the AI roadshow in China, the bank engaged with INNOSCIENCE's management on September 7 in Suzhou, focusing on the adoption of GaN in data centers and product expansion, the business models for GaN wafers/devices/modules, as well as potential competition. The bank maintains a positive view on INNOSCIENCE's comprehensive GaN product portfolio covering 15V to 1200V and its diverse end applications. Management highlighted that the company has accelerated the expansion of its GaN production capacity, aiming to increase GaN output to 70,000 wafers per month in the coming years to seize the growing demand for GaN in automotive and data center applications, as well as the mid-to-long-term GaN demand in the Siasun Robot & Automation sector. They noted that the adoption of GaN in data centers is still in its early stages, and the company is exploring different business models, including collaboration with power device suppliers or establishing direct partnerships with cloud service providers (CSPs). Management emphasized that GaN products are mainly used in three stages of an 800 VDC power rack architecture, including from 800V to 54V, from 54V to 12V, and from 12V/6V to 1V, with the lowest voltage level representing a higher value proposition. For the final stage, the company has developed the 15V DrGaN product for powering AI GPUs from 6V to 1V, and samples have been sent to customers, enabling higher switching frequencies, improved conversion efficiency, while also reducing the number of BOM components. The bank is optimistic about INNOSCIENCE as an early entrant, leveraging its accumulated technical experience to capture growth opportunities as NVIDIA's new architecture begins to ramp up production.