Citigroup: Lanqi Technology (06809)'s initial results for the third quarter far exceeded expectations and reaffirmed the “buy” rating target price of HK$425

The Zhitong Finance App learned that Citi released a research report saying that Lanqi Technology (06809)'s preliminary results guidance for the third quarter far exceeded expectations. The company expects revenue to reach RMB 2.08 billion for the third quarter, up 46% year on year and 11% month on month, higher than market expectations and 3% and 6% respectively; net profit is expected to be RMB 1.2 billion to 1.3 billion yuan, up about 154% to 175% year on year, higher than market expectations and 34% of the bank's forecast. The bank reaffirmed the “buy” rating and gave Lan Qi Technology (688008.SH) a target price of RMB 320 for A-shares and HK$425 for H-shares.

The bank pointed out that benefiting from the improved product portfolio, the gross margin of interconnect chips is expected to be between 65.5% and 68%, which is a positive surprise and helps ease investors' concerns about rising foundry costs. The stock prices of Lanqi Technology's A shares and H shares have been reduced by nearly 50% in the last three months. However, the bank still maintains a positive view and believes that the current valuation is attractive. The bank expects that proxy artificial intelligence will drive an increase in central processing unit shipments and the number of memory channels, bringing strong room for growth in the interface business. The growth of the memory interface business is mainly driven by the number of central processing units and memory channels rather than memory prices. As market sentiment stabilizes, the stock is expected to regain an increase in valuation.