Management prioritizes "price and profit margin," limited NAND expansion, Goldman Sachs raises Kioxia target price again.

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Goldman Sachs has significantly raised its target price for Kioxia Holdings from 93,000 yen to 116,000 yen, reiterating its Buy rating. The reason is the continued supply-demand tightness in the NAND flash memory market, coupled with the company management’s clear priority on price and profit margins. Based on the current share price of 88,450 yen, the new target price implies about 31% upside potential.

According to Chasing Wind Trading Desk, Goldman Sachs stated in a research report released on June 30 that at a recent investor open day and analyst conference call, Kioxia’s management clearly expressed that the company will not sacrifice price to sign long-term contracts and will continue to prioritize maintaining selling prices and profit margins.

At the same time, Goldman Sachs found through channel research with production equipment manufacturers that major storage chip makers continue to focus capital expenditure on DRAM, and supply increments from new NAND wafer plants are expected to be very limited before 2028.

Driven by these assessments, Goldman Sachs analysts Shuhei Nakamura and Kaho Otake raised their operating profit forecasts for Kioxia for FY3/27 to FY3/29 by 9%, 19%, and 29% respectively, and concurrently increased their EPS forecasts by 10%, 19%, and 29%. Over the past 12 months, Kioxia’s share price has surged by 3406%, significantly outperforming the TOPIX index.

Price expectations continue to be revised up, ASP growth exceeds previous forecasts

In this report, Goldman Sachs further raised its forecast for Kioxia’s average selling price (ASP). On a calendar year basis, Goldman now expects Kioxia’s CY2026 ASP to rise 4.5 times year-on-year (previously forecast as 4.3 times), and for CY2027 to rise 38% year-on-year (previously 27%).

The upward ASP trend is expected to last at least until mid-CY2027, mainly supported by ongoing tight supply-demand conditions. In addition, as a priority loan was repaid early, interest expense drag is reduced, further boosting EPS forecasts.

For the first quarter of FY3/27 to be announced on July 31, Kioxia’s operating profit is expected to be 1.417 trillion yen, higher than the company’s earlier guidance of 1.298 trillion yen and also above Bloomberg’s market consensus of 1.36 trillion yen. Goldman points out that since about 30% of first-quarter shipment price negotiations were not complete at the time of the guidance, actual ASP may exceed expectations.

Management remains committed to prioritizing profit margins, cost advantages build a moat

Kioxia’s management has recently made it clear that "price takes precedence over shipment volume" — not targeting signing long-term contracts, but instead remaining flexible to grasp market pricing opportunities. Goldman Sachs believes this strategy helps Kioxia maintain relatively high profit margins in the industry.

Financial data shows Kioxia’s EBIT margin for FY3/27 is expected to reach 80.1%, and rise further to 81.3% and 81.5% in FY3/28 and FY3/29. The core drivers for high margins are twofold: first, Kioxia’s relatively low capital intensity compared with peers; second, the scale effect and continued cost reduction from expanding sales of its eighth-generation BiCS technology chips. The report argues that Kioxia’s operating margin in the NAND business is industry-leading, clearly outperforming Samsung and SanDisk.

Supply expansion is limited; supply-demand tightness may persist until 2028

Channel research reveals that major storage chipmakers, amid expanding AI demand, continue to prioritize capital expenditure on DRAM, and new NAND capacity is not expected to come onstream until after CY2028.

The drivers behind the tight NAND supply-demand include: rapidly rising enterprise SSD (eSSD) demand as server deployments accelerate; constrained HDD supply driving substitution demand; and concerns about U.S. export restrictions on Korean memory makers constraining the supply side. Overall, Goldman Sachs believes Kioxia’s peak profitability will surpass previous expectations, and this high profit level is likely to be sustainable over the next two to three years.

Goldman Sachs has raised its 12-month target price for Kioxia from 93,000 yen to 116,000 yen, using a valuation method based on the average ROE for FY3/27 to FY3/28 and the target price-to-book (PB) ratio, and referring to the implied cost of equity of peer companies (using 13% for FY3/27 and 20% for FY3/28). The new target price corresponds to about 8.2x FY3/28E P/E ratio, which Goldman Sachs considers reasonable for an upcycle.

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The above content is from Chasing Wind Trading Desk.

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