CR Micro (688396) Report Interpretation

Overview

This earnings review assesses CR Micro’s 2Q26 results and outlook. Goldman Sachs sees improving utilization, pricing and operating leverage supporting margin expansion and end-market growth, particularly in AI-server power and diversified applications, but retains a Neutral rating and unchanged Rmb77.02 12-month target price.

Core views

CR Micro’s 2Q26 revenue of Rmb3.271bn was broadly in line with both Goldman Sachs’ Rmb3.253bn estimate and Bloomberg consensus of Rmb3.276bn. The more material positive was profitability: gross profit reached Rmb903m, 3% above Goldman Sachs’ estimate, and gross margin improved to 27.6% from 25.5% in 1Q26 and 25.9% in 2Q25. Goldman Sachs attributes the gross-margin result to product-price increases and better utilization. Operating expenses were also better controlled than expected as revenue scaled, lifting operating income to Rmb426m, 67% quarter-on-quarter and 53% year-on-year higher. Net income was Rmb390m, up 53% year-on-year and 18% quarter-on-quarter. This was 18% above Goldman Sachs’ Rmb330m estimate and 19% above Bloomberg consensus of Rmb329m. Net margin was 11.9%, compared with 11.5% in 1Q26 and 8.9% in 2Q25. The report characterizes these results as evidence of improving profitability, driven jointly by the stronger gross margin and a lower operating-expense ratio. For 3Q26, Goldman Sachs forecasts revenue of about Rmb3.5bn, representing 25% year-on-year growth. Its growth case rests on three linked drivers: rising AI-server shipments are expected to support CR Micro’s power-semiconductor business; the company is diversifying toward optical modules, AI-server power supplies and robotics; and improving foundry and OSAT utilization is expected to continue expanding margins. The forecast table shows 3Q26E revenue of Rmb3.561bn, gross margin of 29.2% and net income of Rmb390m, followed by 4Q26E revenue of Rmb3.647bn and gross margin of 29.4%. Following the quarterly results, Goldman Sachs raises its 2026E net-income estimate by 2% to Rmb1.506bn, from Rmb1.484bn. The change reflects a 0.1 percentage-point increase in the 2026E gross-margin forecast to 28.1% and a 0.3 percentage-point reduction in the operating-margin assumptions through lower opex intensity. Revenue forecasts are essentially unchanged at Rmb13.337bn for 2026E, Rmb16.390bn for 2027E and Rmb19.153bn for 2028E. The firm leaves 2027E and 2028E earnings estimates largely unchanged, with projected net income of Rmb2.012bn and Rmb2.739bn, respectively. Valuation remains unchanged despite the modest 2026E earnings upgrade. Goldman Sachs applies a forward target P/E of 37.4x to 2028E EPS to derive its 12-month target price of Rmb77.02. The multiple is based on the relationship between sector trading P/E and forward net-income growth, using global power-semiconductor suppliers and China AI-semiconductor companies across IC design, foundry and OSAT as peers. The firm notes that the target multiple remains within CR Micro’s historical trading range. Goldman Sachs therefore maintains Neutral relative to its coverage universe.

Analysis framework

Goldman Sachs first compares 2Q26 revenue, margins and earnings with its own estimates and Bloomberg consensus. It then links the earnings beat to pricing, utilization and operating efficiency, updates forward profit assumptions, and assesses growth drivers across AI-server power, optical modules, power supplies and robotics. The target price is derived by applying a peer-informed forward P/E multiple to 2028E EPS.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  Forward P/E valuation

  Goldman Sachs values CR Micro using 37.4x 2028E EPS. The target multiple is informed by the observed relationship between peer trading P/E multiples and forward net-income growth.

• Industry AnalysisVolume-price decomposition

  Margin analysis through pricing, utilization and operating leverage

  The report explains the profitability improvement through higher product prices, better foundry and OSAT utilization, and a lower opex ratio as revenue scales.

Asset mapping & comparison

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

• CR Micro (688396.SH)

  Primary covered company; expected to benefit from AI-server power demand, end-market diversification and improved foundry and OSAT utilization.

  Strengths

  2Q26 gross-margin expansion, better-than-expected operating efficiency, and projected revenue growth.

  Comparison

  The valuation peer set includes global power-semiconductor suppliers and China AI-semiconductor players spanning IC design, foundry and OSAT.

  Risks

  AI-infrastructure demand, yield rates and market competition may differ from Goldman Sachs’ assumptions.

Key data

• 2Q26 revenueRmb3.271bnUp 14% quarter-on-quarter and 14% year-on-year; in line with Goldman Sachs estimates and Bloomberg consensus.
• 2Q26 gross margin27.6%Up from 25.5% in 1Q26 and 25.9% in 2Q25.
• 2Q26 net incomeRmb390mUp 53% year-on-year and 18% quarter-on-quarter; 18% above Goldman Sachs estimates and 19% above Bloomberg consensus.
• 3Q26E revenueRmb3.5bnGoldman Sachs expects 25% year-on-year growth.
• 2026E net incomeRmb1.506bnRaised 2% from Rmb1.484bn following the 2Q26 result.
• 12-month target priceRmb77.02Unchanged; based on 37.4x 2028E P/E.

Impact & implications

The report argues that stronger utilization and pricing can improve CR Micro’s profitability while diversification into AI-server power, optical modules, power supplies and robotics broadens its growth drivers. However, Goldman Sachs retains Neutral because its valuation framework and target price remain unchanged.

Risks

• AI-infrastructure end demand could be stronger or weaker than expected.
• Yield rates could be higher or lower than expected.
• Market competition could be stronger or milder than expected.

What to watch

• AI-server shipment ramp-up and resulting demand for CR Micro’s power-semiconductor products.
• Progress in optical modules, AI-server power supplies and robotics end markets.
• Foundry and OSAT utilization trends and their effect on gross margin.
• Product pricing, yield rates and the operating-expense ratio as revenue scales.