Cathay Pacific Haitong: From storage boom to Fab expansion order growth to revenue and EPS fulfillment

The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that the current cleanroom industry has been revalued, driven by expectations of Fab's expansion of production, and is gradually entering the phase of order growth towards revenue and EPS fulfillment. The current AI-driven upward trend in the storage boom has been transmitted from the price and profit side to capital expenditure and Fab production expansion. The long construction cycle of the fab factory has clearly lagged behind and continued demand for clean rooms compared to storage profits. Currently, the cleanroom industry has been re-valued, driven by expectations of Fab production expansion, and has gradually entered the stage of order growth towards revenue and EPS fulfillment. The sustainability of the subsequent boom depends on the pace of production expansion, order continuity, and profit fulfillment capacity of fabs.

Cathay Pacific Haitong's main views are as follows:

AI demand is compounded by supply constraints, and the current boom is sustainable

Reviewing the historical storage cycle, the improvement in demand for downstream terminals first drove up the price of storage such as DRAM, which in turn led to an improvement in the revenue and profit of the original storage factory. The current cycle is different from the traditional consumer electronics cycle. AI server volume drives the increase in demand for HBM and high-performance DRAM; at the same time, HBM structurally squeezes wafer production capacity, and the construction cycle of superimposed new clean rooms and fabs is long. The original storage factory further enhances demand visibility through long-term supply agreements, and the tight balance between supply and demand and product structure upgrades jointly support the continuation of the current storage cycle. Storage profit restoration is transmitted to production expansion, and the Fab construction cycle lengthens the clean room boom. Historically, there is usually a certain lag in improving the capital expenditure of original storage manufacturers compared to profit improvement. After profit restoration, manufacturers gradually increased capital expenditure, and the intensity of this round of Micron's capital expenditure is already at a historically high level. After capital expenditure is implemented, it is still necessary to go through investment decisions, civil construction, clean room construction, equipment moving in, and secondary distribution. Therefore, production capacity cannot be released immediately, forming a transmission path for improved storage profits, CAPEX expansion, Fab construction starts, clean room orders are released, and revenue is realized.

Domestic fabs expanded production and built a basic market, storage expansion contributed core increments, and order inflection points were gradually realized towards performance

Domestic cleanroom demand is not simply contributed by storage manufacturers. The continuous expansion of production by wafer manufacturers forms the basic market for industry demand, while the expansion of production by Changxin and Changjiang storage manufacturers contributes to phased demand elasticity. As the Fab project continues to be implemented, new orders signed by clean room companies are the first to reflect the industry boom. Ongoing orders form future revenue reserves, and revenue is gradually confirmed as projects are executed; this round of domestic semiconductor production expansion has begun to be reflected on the cleanroom companies' order side, and the industry is gradually entering the performance fulfillment stage from an inflection point of the order.

Domestic wafer manufacturing took the lead in revaluation, and the market spread to clean rooms, and sector pricing shifted from PE expansion to EPS

Historically, storage stocks outside of Shanghai are usually traded in anticipation of changes in supply and demand and profit, and the inflection point of stock prices may end ahead of high profit levels. The current round of the domestic market shows the characteristics of diffusion from wafer manufacturing to Fab capital expenditure benefits. The 2025Q3 wafer manufacturing sector took the lead in strengthening, and the clean room sector gradually started after 2025Q4. With 2026 cleanroom orders and performance verification, sector pricing is further shifting from early production expansion expectations to order fulfillment and profit growth expectations; currently, it is agreed that EPS will continue to improve, and subsequent market conditions will depend more on the transformation of orders into revenue and profit forecasts and whether profit forecasts can continue to improve.

Risk warning: risk that demand for AI servers and storage will fall short of expectations; risk that storage prices and industry sentiment will fall short of expectations; risk that fab capital expenses and Fab construction progress fall short of expectations; risk that clean room order acquisition and revenue recognition will fall short of expectations; risk that profits will fall short of expectations and that valuations will fall short of expectations.