Nanya Technology: The upcycle in specialty DRAM may extend to 2028, Morgan Stanley maintains Overweight

Overview

This is a company research and earnings review report on Nanya Technology Corp. (2408.TW). Morgan Stanley believes that 2Q26 results were broadly in line with its expectations but significantly above market consensus, with the core driver being gross margin expansion from rising DRAM prices. The report maintains an Overweight rating and raises the target price from NT$550 to NT$580.

Core views

The core view is that the DDR4 supply-demand structure is becoming more favorable, as major memory makers gradually exit the DDR4 market, benefiting Taiwanese memory suppliers. Nanya Technology's short-term earnings leverage comes from rising ASPs and high gross margins, while long-term growth will come from new capacity in 2027-2029, AI infrastructure demand, and support from long-term agreements. The report believes that even looking ahead to 2028, oversupply should not be an excessive concern.

Analysis framework

The report evaluates Nanya Technology's earnings upgrades and target price potential by combining actual 2Q26 results, the 3Q26 outlook, DDR4/DDR5 supply-demand and pricing trends, global DRAM peer valuation comparisons, the P/B and ROE framework, EPS revisions, and scenario valuation.

Methodology notes

• Valuation methodsP/B and ROE valuation framework

  Assess reasonable valuation using 2026-2028 BVPS multiples and ROE levels.

  The report sets the base-case target price at NT$580, corresponding to 4.77x 2026 BVPS, 2.36x 2027 BVPS, and 1.77x 2028 BVPS, and explains the valuation premium through high ROE and DDR4 shortages.

• Scenario analysisBull/Base/Bear Case

  Measure risk-reward through bull, base, and bear scenarios.

  The bull-case scenario is NT$1,230, the base-case scenario is NT$580, and the bear-case scenario is NT$320. Key variables include DRAM prices, process ramp-up, the competitive landscape, and demand strength.

• Earnings forecastMorgan Stanley ModelWare

  Use Morgan Stanley's internal forecasting framework to generate revenue, EPS, margin, and cash flow forecasts.

  The report notes that, unless otherwise stated, the relevant metrics are based on the Morgan Stanley ModelWare framework and distinguishes Morgan Stanley forecasts from Refinitiv consensus.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Nanya Technology Corp. (2408.TW)

  Core covered name

  Strengths

  Benefits from DDR4 shortages, rising ASPs, high gross margins, long-term agreements, and 2027-2029 expansion plans.

  Weaknesses

  2026e EPS was slightly cut due to share issuance and rising R&D spending; expansion may also bring capex and execution pressure.

  Comparison

  The report believes its 2027e P/E of 5.1x is in line with global DRAM peers and is justified amid severe DDR4 shortages.

  Risks

  DRAM price declines, slower-than-expected 1a/1b nm process ramp-up, weaker specialty DRAM demand, and intensified competition from China and Korea.

• Winbond Electronics Corp.

  Taiwan memory peer and pricing reference

  Strengths

  May also benefit from major memory makers exiting the DDR4 market.

  Weaknesses

  The report does not provide a full company-level earnings forecast.

  Comparison

  The report charts mention the Q/Q price changes of Nanya and Winbond to observe the supply-demand gap and Taiwanese memory pricing performance.

  Risks

  Also exposed to the DRAM cycle, demand volatility, and the competitive landscape.

• Samsung Electronics / SK hynix / CXMT

  Reference for global DRAM competition and supply landscape

  Strengths

  The capacity and product shifts of major global memory makers will affect DDR4 supply.

  Weaknesses

  If competitors do not exit the consumer DRAM or DDR4 market as expected, Nanya Technology's pricing and share improvement may come under pressure.

  Comparison

  The report believes that major memory makers exiting DDR4 will benefit Taiwanese suppliers and says this can offset CXMT's competitive impact in the short term.

  Risks

  Competition from Korean and Chinese manufacturers may be stronger than expected, or they may increase DDR4/consumer DRAM supply again.

Key data

• 2Q26 EPSNT$14.66Up 81% Q/Q and 15% above market consensus.
• 2Q26 revenue growth+68% Q/Q；+684% Y/YRevenue was 4% above Morgan Stanley's forecast and 18% above market consensus.
• 2Q26 ASPmore than +60% Q/QShipments were flat Q/Q, and revenue growth was mainly driven by higher prices.
• 2Q26 gross margin79.5%Up 12 percentage points Q/Q, 1.7 percentage points above Morgan Stanley's forecast, and 3.7 percentage points above market consensus.
• AI-related revenue contribution20-30%AI infrastructure and server-related sales contributed 20-30% of 2Q revenue.
• 3Q26 revenue expectationat least +25% Q/QThe report expects pricing and profitability to continue improving in 3Q26.
• Capex planUS$16bnFor 45kwpm capacity expansion in 2027-2029, of which 80% is for fab equipment spending.
• EPS revisions2026e down 5%; 2027e up 21%; 2028e up 46%The 2026 cut is mainly due to share issuance and higher R&D spending; the 2027-2028 increases reflect capacity planning.
• Target priceNT$580.00Raised from NT$550, implying about 33% upside.
• 2027e P/E5.1xThe report believes this valuation is reasonable relative to global peers at 5.1x.

Impact & implications

If the report's view proves correct, Nanya Technology will benefit from structural DDR4 shortages, demand for high-performance DRAM driven by AI infrastructure, and shipment growth from new capacity, allowing earnings upgrades and valuation re-rating to occur simultaneously. For investors, the focus shifts from a single quarter's results to the durability of the upcycle, the pace of capacity release, and pricing resilience.

Risks

• DRAM prices may fail to remain strong, or weaker supply discipline may worsen the pricing environment.
• 1a/1b nm process ramp-up may be slower than expected, affecting costs, capacity, and earnings leverage.
• Demand for specialty DRAM in applications such as 4K2K TVs and smart set-top boxes may be weaker than expected.
• Chinese and Korean competitors may strengthen competition in consumer DRAM or DDR4 again, compressing Nanya Technology's market share and pricing power.
• The US$16bn expansion plan for 2027-2029 carries execution, equipment installation, EUV scheduling, and capex return risks.
• Share issuance and increased R&D spending may dilute short-term EPS.

What to watch

• Whether 3Q26 revenue achieves at least 25% Q/Q growth.
• DDR4 and DDR5 price trends, especially pricing for DDR4 8Gb and DDR5 16Gb.
• Whether the revenue contribution from AI infrastructure and servers continues to rise.
• Equipment installation in 2027, the pace of 45kwpm expansion, and EUV introduction scheduling in 2028.
• The strength of support from long-term agreements for shipments and pricing.
• The actual progress of major memory makers exiting the DDR4 market, as well as the competitive response from CXMT and Korean manufacturers.
• Monthly sales momentum, specialty DRAM pricing, and industry peer commentary on the cycle.