AI demand drives MRCD/MDB growth, and Montage Technology's new products are likely to sustain high gross margins

Overview

This report is the meeting note from Goldman Sachs' Shanghai meeting with Montage Technology management during its China technology roadshow. Discussion focused on demand trends for memory interconnect ICs, the new product expansion plan, and market competition dynamics amid CPU platform diversification. The overall conclusion is positive: management is constructive on AI-driven growth in MRCD/MDB demand and expects the 2027 new CPU platform to support continued progress on the company's new products.

Core views

The core views consist of three points: first, the AI trend is lifting demand for high-bandwidth memory interconnects, and the MRCD/MDB market outlook is positive; Montage Technology aims to gain a higher market share in MRCD/MDB than in RCD. Second, new products such as MRDIMM Gen2, PCIe Gen6, and CXL 3.0 will benefit from new CPU platforms and customers' upgraded requirements for performance and efficiency, and will help maintain relatively high gross margins. Third, CPU supplier diversification will not necessarily change the competitive landscape for memory interface ICs because these products are highly standardized; new CPU suppliers are more likely to adapt to existing standards rather than require deep customization.

Analysis framework

The report mainly analyzes management meeting notes, product roadmap discussions, industry demand judgments, comparable valuation, and Goldman Sachs forecast data. The valuation section uses a 2030E discounted P/E methodology and determines the target multiple by combining comparable company P/E ratios with the correlation to net profit growth.

Methodology notes

• Valuation methods2030E discounted P/E

  The target price is derived by discounting forward earnings to a target P/E multiple.

  The A-share 12-month target price of Rmb363.0 is based on a 45.2x 2030E discounted P/E; the H-share 12-month target price of HK$510.0 is based on a 58.3x 2030E P/E, and uses a 29% valuation premium to A-shares and an exchange rate of 1.09 CNY/HKD.

• Factor AnalysisGS Factor Profile

  Goldman Sachs' factor framework compares a stock's position versus the market and industry peers across growth, financial return, valuation multiples, and composite indicators.

  The growth factor uses forward revenue, EBITDA, and EPS growth; the financial return factor uses ROE, ROCE, and CROCI; the valuation multiple factor uses P/E, P/B, P/D, EV/EBITDA, EV/FCF and other metrics; the composite percentile combines relative positioning across growth, financial return, and valuation.

• M&A ProbabilityM&A Rank

  Goldman Sachs uses a 1-to-3 score to measure the probability that a company becomes a potential acquisition target.

  An M&A Rank of 1 indicates high probability, 2 indicates medium probability, and 3 indicates low probability and is usually excluded from the target price. The chart in this report shows Montage Technology with an M&A Rank of 3.

Asset mapping & comparison

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

• Montage Technology A-share 688008.SS

  Core coverage name

  Strengths

  Benefits from AI-driven demand for high-bandwidth memory interconnects; has the ability to supply DDR5 Gen 1 and Gen 2 MRCD/MDB chipsets; the new product roadmap includes MRDIMM Gen2, PCIe Gen6, and CXL 3.0.

  Weaknesses

  The valuation multiple is relatively high and sensitive to growth execution and the new product rollout pace; the business depends on expansion in the memory interface IC market.

  Comparison

  Management believes the company's target share in the MRCD/MDB market is higher than in RCD and emphasizes advantages in performance, latency, and power consumption versus peers.

  Risks

  Slower-than-expected growth in the memory interface IC market, slower-than-expected new product adoption, and stronger-than-expected competition.

• Montage H-share 6809.HK

  Same company H-share mapping

  Strengths

  Shares the same fundamentals and product growth logic as the A-share, with a target price of HK$510.00.

  Weaknesses

  Upside is lower than the A-share data in the table, and valuation uses a premium assumption versus A-shares.

  Comparison

  The H-share target price is based on a 58.3x 2030E P/E, with a 29% valuation premium versus A-shares.

  Risks

  In addition to company fundamentals risks, it is also affected by Hong Kong market liquidity, exchange rates, and changes in the valuation premium assumption.

Key data

• A-share 12-month target priceRmb363.00For 688008.SS; current price Rmb257.30, implying 41.1% upside.
• H-share 12-month target priceHK$510.00For 6809.HK; current price HK$446.80, implying 14.1% upside.
• Market capitalizationRmb314.5bn / $46.2bnCompany market data disclosed in the chart.
• Enterprise valueRmb298.9bn / $43.9bnCompany market data disclosed in the chart.
• 2026E revenueRmb8,121.6mnGoldman Sachs forecast; 2025 was Rmb5,456.3mn.
• 2027E revenueRmb11,153.7mnGoldman Sachs forecast, reflecting expectations for new product and demand growth.
• 2028E revenueRmb15,621.6mnGoldman Sachs forecast.
• 2026E EPSRmb3.12Goldman Sachs forecast; 2027E is Rmb4.37 and 2028E is Rmb5.92.
• 2026E P/E82.5xValuation multiple forecast disclosed in the Goldman Sachs chart.
• M&A Rank3Under Goldman Sachs' framework, this indicates a low probability of M&A and is usually excluded from the target price.

Impact & implications

If AI server and high-bandwidth memory demand continue to grow, Montage Technology's share and profitability in MRCD/MDB and related next-generation memory interconnect products may be supported. The 2027 new CPU platform's support for MRDIMM Gen2, PCIe Gen6, and CXL 3.0 is a key catalyst to watch for new product ramp-up and margin resilience. For investors, the main implication of the report is that the company's growth logic comes not only from a single product cycle, but also from bandwidth upgrades driven by AI, customer migration to more efficient products due to rising memory costs, and continued demand for standardized interface chips amid CPU platform diversification.

Risks

• Slower-than-expected growth in the memory interface IC market.
• Slower-than-expected new product launches and customer adoption.
• Competition may be more intense than expected.
• If AI-related demand falls short of expectations, growth momentum in MRCD/MDB and high-bandwidth memory interconnect products could weaken.
• The high valuation is sensitive to earnings growth, gross margin, and the pace of new product execution.

What to watch

• Whether MRCD/MDB demand continues to rise along with AI servers and high-bandwidth memory demand.
• The actual support and ramp pace for MRDIMM Gen2, PCIe Gen6, and CXL 3.0 on the new CPU platform in 2027.
• Whether the company's market share gain in MRCD/MDB relative to RCD is realized.
• Whether rising memory costs push customers toward higher-performance, more efficient new products.
• Whether CPU supplier diversification still preserves the existing competitive landscape for memory interface ICs.
• Whether gross margins can remain at a high level amid new product expansion.