1H26 Preliminary Results Significantly Beat Expectations; Maintain Buy and Raise Target Price to HK$80.5

Overview

Biren Technology announced preliminary 1H26 earnings guidance, with both revenue and losses outperforming Goldman Sachs' and market expectations. Goldman Sachs maintains its positive view on China's AI capital expenditure and the company's customer expansion, and expects greater shipment scale to improve operating efficiency.

Core views

The expansion of AI applications is driving AI chip shipments; product mix upgrades toward higher-compute products and a broader customer base will support medium- to long-term revenue growth. Gradual capacity expansion and yield improvements at domestic fabs should help the company capture Chinese market demand, although higher raw-material costs may pressure short-term gross margin.

Analysis framework

Goldman Sachs revised its earnings forecasts based on preliminary 1H26 results, product mix and shipment forecasts, expense-ratio assumptions, and comparable-company valuation relationships, and estimates its 12-month target price by discounting 2030E EV/EBITDA to 2027.

Methodology notes

• Valuation methodsDiscounted EV/EBITDA

  Valuation based on 2030E EV/EBITDA and discounting

  Using 36.0x 2030E EV/EBITDA and discounting it to 2027 at a 12.7% cost of equity, the analysis derives a 12-month target price of HK$80.5.

• Relative ValuationComparable Company Valuation

  Peer relationship between EV/EBITDA and EBITDA growth

  The target multiple is determined with reference to the relationship between updated peer companies' forward EV/EBITDA multiples and average year-over-year EBITDA growth.

• Earnings ForecastRevenue and Expense-Ratio Driver Model

  Forecasts for product mix, ASP, gross margin, and expense ratios

  The revenue upgrade primarily reflects a shift toward higher-performance AI chip products and higher ASPs; lower expense ratios reflect improved operating efficiency from increased shipment volumes.

Asset mapping & comparison

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

• 6082.HK

  Core Covered Stock

  Strengths

  Growing AI chip demand, customer-base expansion, product mix upgrades, operating leverage from higher shipment volumes, and improved domestic supply-chain yields.

  Weaknesses

  The company remains in transition from losses to profitability, while short-term gross margin is affected by rising raw-material costs.

  Comparison

  The target EV/EBITDA multiple is determined based on peer companies' forward valuations and the relationship with EBITDA growth.

  Risks

  Below-expected AI chip demand in China, intensifying market competition, and wafer-supply constraints could affect GPU board shipments.

Key data

• Midpoint of 1H26 Revenue GuidanceRMB1.225 billionUp 1,980% year over year and 26% quarter over quarter; 41% above Goldman Sachs' forecast and 54% above market consensus.
• Midpoint of 1H26 Net Loss GuidanceRMB360 millionBetter than Goldman Sachs' and market consensus expectations.
• 12-Month Target PriceHK$80.5Previously HK$70.7.
• Current Price and Potential UpsideHK$38.98; 106.5%The price and target-price-implied upside disclosed in the report.
• Target Valuation Multiple36.0x 2030 EV/EBITDAPreviously 43.0x, reflecting an industry valuation markdown amid rising component costs.
• Long-Term Gross Margin AssumptionApproximately 50%Supported by product mix upgrades and improved yields at domestic fabs.

Impact & implications

If AI demand and customer expansion materialize as expected, Biren Technology's revenue scale, expense ratios, and profitability should continue to improve. Although the target valuation multiple was reduced, upgraded earnings forecasts and long-term growth prospects drove the target-price increase.

Risks

• AI chip demand in the Chinese market is below expectations.
• Market competition is stronger than expected.
• Wafer-supply constraints could affect GPU board shipments.
• Rising raw-material costs could depress short-term gross margin.
• Capacity expansion and yield-improvement progress at domestic fabs falls short of expectations.

What to watch

• Whether formal 1H26 results, revenue, and losses fall within or outperform the guidance range.
• AI chip shipment volumes, cloud-chip product mix, and ASP changes.
• Progress in onboarding new customers and expanding the customer base.
• Domestic fab capacity ramp-up, yields, and wafer-supply conditions.
• Progress in gross margin, expense ratios, and achieving profitability.