Biren Receives Level 1 Security Certification; Goldman Sachs Raises Target Price to HKD 70.7

Overview

Goldman Sachs released a research report on Biren (6082.HK), maintaining a Buy rating and raising the 12-month target price from HKD 61.7 to HKD 70.7. The report posits that the company's product mix shift towards high-compute AI chips will drive ASP growth and margin improvement, with a profitability inflection point expected in 2027.

Core views

Products and Certification: Biren's Bili166 has received a Level 1 security and reliability rating from national institutions such as the China Information Technology Security Evaluation Center. Its AI compute boards are compatible with local large models like Shenqiu, SenseTime, and Zhipu, benefiting from the growth of local AI applications. Growth Drivers: Growth is primarily driven by the migration to AI chip products with higher compute power, energy efficiency, and ASP. This is further supported by rising cloud capital expenditure in China, increased local market share, and customer base expansion towards local CSPs, driving the product mix towards higher-margin products (such as compute boards). Financial Forecasts: Revenue forecasts for 2026-2030 are raised by 4%/18%/28%/18%/9%, mainly based on higher AI chip ASP. The company is expected to transition from a net loss in 2026 to net profit in 2027, with AI chip shipments projected to exceed 300k/700k units in 2028/2030E. Valuation Logic: Based on discounting the 2030E EV/EBITDA multiple of 43.0x to 2027, with a Cost of Equity (COE) of 12.7%. The upward revision in the target multiple reflects the re-rating of China's AI supply chain.

Analysis framework

The institution employs the EV/EBITDA valuation method to capture long-term growth, determining multiples by comparing peers' forward EV/EBITDA with EBITDA growth rates. The analysis focuses on how product mix upgrades (increasing proportion of high-margin compute boards) drive ASP and margins, combines cloud capex cycles to assess revenue scale, and ultimately derives the profitability inflection point and valuation repair potential.

Methodology notes

• Valuation MethodEV/EBITDA valuation

  EV/EBITDA Valuation

  Suitable for high-growth companies not yet fully profitable; reflects long-term value through forward multiple discounting, avoiding interference from short-term depreciation and amortization.

• Company Fundamentals and Financial FrameworkEarnings Quality Analysis

  Earnings Quality Analysis

  Focuses on the inflection point from loss to profit, combining shipment volumes and ASP to judge the pace of profit release and assess earnings sustainability.

• Industry/Sector Analysis Framework

  Product Mix Upgrade Drives ASP Higher

  Improving the overall earnings structure by increasing the proportion of high-margin products is a common growth and profit improvement logic for technology hardware companies.

Asset mapping & comparison

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

• Biren (6082.HK)

  Core beneficiary, benefiting from product upgrades and AI demand

  Strengths

  Level 1 security and reliability rating, compatible with local large models

  Weaknesses

  Still expected to incur losses in 2026

  Risks

  Supply chain constraints, competition

Key data

• Target PriceHKD 70.7Raised from previous HKD 61.7
• 2026-30E Revenue Upgrade4%/18%/28%/18%/9%Mainly based on higher AI chip ASP
• 2028E AI Chip Shipments>300k unitsExpected to surpass 300k
• 2030E AI Chip Shipments>700k unitsExpected to surpass 700k
• EV/EBITDA Multiple43.0x2030E, previously 41.0x
• Cost of Equity (COE)12.7%Unchanged

Impact & implications

The report suggests Biren will benefit from the re-rating of China's AI supply chain and growing local compute demand. Passing product certification helps increase market share. As products migrate to higher compute capabilities, ASP and gross margins are expected to improve simultaneously, driving valuation repair.

Risks

• Chinese market demand lower than expected
• Market competition stronger than expected
• Wafer supply constraints affecting GPU board shipments

What to watch

• Progress in AI chip shipments
• Trends in Chinese cloud capital expenditure
• Expansion of local CSP customers