Goldman Sachs initiates coverage of InnoScience with a Buy rating and HK$114 target price

Overview

This is a Goldman Sachs initiation-of-coverage report on InnoScience. The report positions the company as a leading GaN supplier serving applications including consumer electronics, automotive, data centers, industrial, and humanoid robotics, and believes that the migration of AI data centers toward 800VDC rack-level power architectures will increase demand for high-efficiency, high-power-density GaN devices.

Core views

The core view is that InnoScience's growth is driven by three main trends: first, rising GaN penetration in data center power; second, expansion from fast charging and consumer electronics into automotive, industrial, data center, and humanoid robotics applications, with product mix upgrades driving higher value per system; and third, continued expansion of GaN wafer capacity at the Suzhou facility, with total capacity expected to increase from approximately 20k wpm at end-2025 to over 68k wpm at end-2029.

Analysis framework

The report forms its investment view by combining industry demand estimates, company revenue and profit forecasts, capacity ramp-up, product mix upgrades, peer valuation, and discounted EV/EBITDA analysis, with 2027E P/S used as a cross-check.

Methodology notes

• Valuation methods2030E Discounted EV/EBITDA

  Target price calculation

  The 12-month target price of HK$114 is based on a discounted 2030E EV/EBITDA methodology, using a 29.5x target multiple discounted to 2027E and a 9.5% cost of equity.

• Valuation cross-check2027E P/S

  Target price reasonableness check

  The target price implies a 2027E P/S of 22x, consistent with the company's average P/S of approximately 22x since April 2025.

• M&A assessmentGoldman Sachs M&A framework

  M&A rank 3

  The report assigns InnoScience an M&A rank of 3, indicating a low probability of acquisition; given its listing in December 2024 and concentrated ownership by the founder and management, the target price does not include an M&A premium.

• Factor analysisGS Factor Profile

  Growth, Financial Returns, Multiple and Integrated

  The Goldman Sachs Factor Profile compares stocks with the market and peers across growth, financial returns, valuation multiples, and integrated percentiles, although the main investment conclusions in this report remain driven by fundamentals and valuation.

Asset mapping & comparison

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

• InnoScience (02577.HK)

  Covered company and core beneficiary asset

  Strengths

  Leading GaN supplier operating under an IDM model, with products spanning 15V to 1,200V and serving multiple scenarios including consumer electronics, automotive, data centers, industrial, and humanoid robotics.

  Weaknesses

  Still in the scale-up phase, with 2025E and 2026E earnings under pressure and financial performance highly dependent on revenue ramp-up and gross margin improvement.

  Comparison

  Goldman Sachs' 2027E/2028E earnings forecasts are 8%/11% above Bloomberg consensus, primarily due to higher revenue and better expense ratios resulting from scale advantages.

  Risks

  Slower-than-expected GaN adoption, intensified price competition, and delays in ramping up new capacity.

• AI data center 800VDC power architecture

  Demand driver

  Strengths

  Higher power density and efficiency requirements are increasing demand for GaN devices, while InnoScience's products can cover conversion stages including 800V to 54V, 54V to 12V, and 12V to 0.8V.

  Weaknesses

  The market remains in the early stages of penetration growth, with assumed GaN adoption rates of 2%/7%/17% in 2026E/2027E/2028E, creating execution uncertainty.

  Comparison

  Compared with traditional power devices, GaN offers advantages in high frequency, high efficiency, and loss reduction.

  Risks

  AI server rack shipments, ASIC adoption rates, customer qualification timelines, and changes in power architecture paths could all affect demand.

Key data

• 12-month target priceHK$114.00Goldman Sachs' target price at initiation of coverage.
• Current priceHK$54.95Price disclosed on the report cover.
• RatingBuyRating effective July 7, 2026.
• 2025-2028E GaN revenue CAGR73%Driven by GaN wafers, discrete devices, application expansion, and 800VDC data center demand.
• GaN capacity planApproximately 20k wpm to over 68k wpmExpected to increase from approximately 20k wpm at end-2025 to over 68k wpm at end-2029.
• AI server rack shipment forecast55k/105k/163k in 2026E/2027E/2028EUsed to estimate GaN demand under the VDC power architecture.
• VDC architecture GaN market size forecastUS$118mn/US$634mn/US$1.9bn in 2026E/2027E/2028EBased on assumed GaN adoption rates of 2%/7%/17%.
• Revenue forecastRmb1,213mn/Rmb2,224mn/Rmb4,026mn/Rmb6,233mn in 2025E/2026E/2027E/2028EReport financial forecasts.
• Gross margin forecastApproximately 20% in 2026E and approximately 40% in the long termDriven by scale expansion and product mix upgrades toward high-end applications.
• Free cash flow turning positiveRmb62mn in 2028E and Rmb1,561mn in 2030EPrimarily from improved operating cash flow driven by higher profits.

Impact & implications

If the report's assumptions materialize, InnoScience could become a beneficiary of efficiency upgrades in AI data center power and rising GaN penetration, with potential inflection-point improvements in revenue, gross margin, ROE, and free cash flow; however, its valuation depends on sustained high growth and a successful capacity ramp-up, making it sensitive to changes in penetration rates and the competitive landscape.

Risks

• Slower-than-expected GaN adoption could weigh on revenue and earnings forecasts.
• Stronger-than-expected price competition for GaN products could erode ASPs and gross margin improvement.
• A longer-than-expected or delayed ramp-up of new GaN capacity could constrain deliveries and scale benefits.
• Long-term valuation is sensitive to assumptions including 2030E EBITDA, the 29.5x target multiple, and the 9.5% cost of equity.

What to watch

• Customer adoption and volume production timelines for the 800VDC data center power architecture.
• Changes in GaN penetration in data centers, automotive, industrial, and humanoid robotics.
• Progress in ramping up new capacity at the Suzhou facility and achievement of wpm capacity targets.
• Whether gross margin improves along the path of approximately 20% in 2026E and approximately 40% in the long term.
• Whether revenue can grow from Rmb1,213mn in 2025E to Rmb6,233mn in 2028E.
• Whether the gap with Bloomberg consensus is substantiated through orders, revenue, and expense ratios.