Nomura Orient International Securities: Nomura Orient: GigaDevice’s third-quarter operating performance beats expectations; earnings forecasts raised but target price cut

What drove the third-quarter beat?

In the third quarter of 2026, GigaDevice reported revenue of 8.732 billion yuan, up 225.7% year on year and 18.4% quarter on quarter. Gross margin was 70.3%, up 29.6 percentage points year on year and 3.8 percentage points quarter on quarter. Revenue, gross margin and net profit all exceeded Nomura Orient’s previous forecasts.
According to the company’s third-quarter report, tight supply in the memory chip industry drove increases in both prices and sales volumes of its memory products. Higher shipments of products including microcontrollers (MCUs) also contributed to performance growth.

Third-quarter net profit attributable to the parent was 4.209 billion yuan, up 728.9% year on year but down 22.0% quarter on quarter. The report attributed the sequential decline mainly to fair-value changes.
Excluding non-recurring gains and losses, third-quarter net profit was 4.55 billion yuan, up 814.4% year on year and 31.0% quarter on quarter. On this basis, the change in operating-related earnings for the quarter was stronger than the trend indicated by reported net profit.

Following stronger-than-expected revenue growth and gross margin improvement, Nomura Orient raised its revenue forecasts for 2026–2028 by 25%, 22% and 17%, respectively, to 27.918 billion yuan, 40.514 billion yuan and 46.557 billion yuan. It raised its forecasts for net profit attributable to the parent by 40%, 23% and 20%, respectively, to 14.299 billion yuan, 17.196 billion yuan and 18.318 billion yuan.
The revisions came mainly from the memory business: the bank raised its 2026 memory chip revenue forecast by 26% to 23.9 billion yuan and its gross margin forecast from 66% to 70%. Higher revenue also led it to lower its forecast for operating expenses as a proportion of total revenue.
However, the model does not assume that the high gross margin will continue to rise: overall gross margin is forecast to fall from 65.5% in 2026 to 55.8% in 2027 and 53.2% in 2028. Corresponding net profit growth is forecast to slow from 768% in 2026 to 20% in 2027 and 7% in 2028.

Nomura Orient shifted its valuation base from 2026 to 2027 and cut its target price-to-earnings ratio from 50 times to 20 times. The bank expects GigaDevice’s compound earnings growth in 2027–2028 to be below that of its peers, and therefore assigned it a valuation below the peers’ average 2027 price-to-earnings ratio of 23.5 times.
Based on forecast 2027 earnings per share of 24.43 yuan and a price-to-earnings ratio of 20 times, the bank cut its target price from 730 yuan to 489 yuan and maintained its buy rating. This implies upside of approximately 84.1% from the closing price of 265.67 yuan on 2 November 2026.