Goldman Sachs Maintains Sell Rating on NSIG with 15 Yuan Target Price

Overview

Goldman Sachs issued a research report on NSIG, maintaining a Sell rating. While 300mm wafer capacity expansion drove revenue growth, pricing pressure on 200mm products and depreciation from new capacity led to gross margin shortfall. The institution lowered profit forecasts and views current valuation as stretched, posing downside risks.

Core views

On performance, 1Q26 revenue grew 35% YoY, mainly driven by 300mm wafer capacity expansion and demand recovery, but gross margin was -11.8%, significantly below the expected 20.8%, primarily due to 200mm wafer pricing pressure and depreciation costs. For capacity planning, the company aims to expand 300mm wafer capacity to 1.05 million wafers/month by end-2026 (vs. 800k+ at end-2025), with 600k in Shanghai and 405k in Taiyuan, upgrading product mix toward Prime Wafers and high-end applications. For profit forecasts, the institution lowered 2026 estimates to a net loss of 482 million yuan (from previous profit of 702 million yuan) and cut 2027 earnings by 10%, mainly due to lower 200mm revenue and margin adjustments. On valuation, the 15.0 yuan target price is based on 54x 2027 PE, implying 2027 P/S of 7x, below the current 11x P/S, suggesting overvaluation.

Analysis framework

The institution used PE valuation, determining target multiples based on global peers' PE and earnings growth correlation. P/S multiples were also used for cross-sectional comparison to assess current valuation rationality. By analyzing capacity expansion plans and product mix upgrades, the report evaluates future gross margin recovery pace while considering short-term earnings pressure from depreciation costs and pricing pressure.

Methodology notes

• Valuation MethodPE/PEG valuation

  Target multiples set based on peer PE and earnings growth correlation

  Referencing global peers' PE and net profit growth relationship, the institution set 2027 target PE at 54x to derive target price.

• Valuation MethodPS valuation

  P/S comparison to assess valuation level

  Comparing target implied P/S with current trading P/S to judge valuation; current 11x P/S is above target implied 7x.

• Industry/Industrial Analysis FrameworkVolume-price decomposition

  Analyzing impact of capacity expansion and product pricing on revenue

  Breaking down revenue growth drivers into 300mm capacity ramp and demand recovery, while monitoring 200mm pricing pressure's drag on margins.

Asset mapping & comparison

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

• NSIG (688126.SS)

  Negative (Sell rating)

  Strengths

  300mm capacity expansion, product mix upgrade to high-end

  Weaknesses

  200mm pricing pressure, high depreciation from new capacity

  Risks

  Demand shortfall, higher-than-expected depreciation, stretched valuation

Key data

• 1Q26 Revenue YoY+35%Driven by 300mm capacity expansion and demand recovery
• 1Q26 Gross Margin-11.8%Below expected 20.8%, impacted by pricing pressure and depreciation
• 2026E Profit ForecastNet loss 482 million yuanPreviously forecasted as profit of 702 million yuan
• 2026 Year-end 300mm Capacity Target1.05 million wafers/month800k+ wafers/month at end-2025
• Target Price Implied 2027E P/S7xBelow current trading P/S of 11x

Impact & implications

Short-term gross margin pressure may affect market sentiment; while capacity expansion is positive long-term, depreciation costs will weigh on near-term performance. Stretched valuation suggests downside risks, requiring investors to monitor gross margin recovery pace and capacity ramp progress.

Risks

• Persistent 200mm wafer pricing pressure
• New capacity depreciation costs weighing on margins
• Current stretched valuation (P/S 11x)

What to watch

• 300mm capacity ramp progress
• Gross margin recovery
• 200mm wafer pricing trends