Brokerage Morning Meeting Highlights | Focus on Domestic Leaders in the Switch and Switch Chip Fields

Yesterday, the market experienced a pullback after a brief surge, with the three major indices momentarily turning negative during trading. The trading volume in the Shanghai and Shenzhen markets reached 2.08 trillion yuan. From a sector perspective, the pharmaceutical and biotechnology sector saw a collective explosion, with vaccines, cell immunity, recombinant proteins, and gene editing all performing notably well, while concepts related to grid equipment, analog chips, and optical fibers were also active. On the downside, the coal sector surged before swiftly retreating. By the market close, the Shanghai Composite Index rose 0.24%, the Shenzhen Component Index increased by 0.59%, and the ChiNext Index climbed by 0.64%. Huaxi believes that the Pan-RAS universal target is welcoming incremental growth, opening layers of market space; China Galaxy emphasizes attention to leading firms in the domestic switch and switching chip sectors; Huatai notes that SK Hynix is increasing its free cash flow (FCF) return ratio and suggests focusing on changes in the shareholder return framework among Korean manufacturers. Huaxi: The Pan-RAS universal target welcomes incremental growth, unlocking layers of market space The RAS target has undergone four generations of technological breakthroughs, completely breaking free from the "undruggable" shackles, forming three mature and differentiated tracks: G12C, highly elastic G12D, and long-term growth Pan-RAS. The demand-side incremental logic is clear. KRAS mutations cover 20%-30% of solid tumors, with 80%-90% of pancreatic cancers carrying mutations, nearly 30% of which are G12D, representing a multibillion-dollar blue ocean market with no targeted therapies. The NSCLC market is expanding to first-line treatments relying on G12C drug combination therapy, establishing a stable cash flow foundation; colorectal cancer continues to provide incremental support as a long-tail market. In the short term, clinical catalysts are expected, while medium to long-term growth will rely on new product releases and technological iterations. The industry's short-term core catalysts will come from concentrated clinical readouts in 2026-2027: global Phase III top-line data for G12D pipeline pancreatic cancer and NSCLC, as well as clinical results for first-line combination therapy of the Pan-RAS pipeline. Data exceeding expectations will lead to rapid valuation increases; medium to long-term value will depend on the commercialization of new products. The G12D inhibitor is expected to fill the gap in pancreatic cancer treatment, potentially corresponding to a market space of around 5 billion yuan in China, while Pan-RAS drugs target the entire population with solid tumor mutations, with global peak sales expected to exceed 10 billion dollars. China Galaxy: Focus on leading firms in the domestic switch and switching chip sectors The back and front-end networking of computing power clusters in the AI era is driving significant demand for switches. 1.6T port switches are expected to start volume production in 2027, with WAIC 2026 becoming an absolute focal point. The internal interconnection bandwidth is rapidly evolving, and with each iteration of port rates, the value of a single switch increases, supporting profitability. At the same time, Scale-Up switches are compressing latency requirements from the microsecond level to the hundreds of nanoseconds, with design complexity and verification cycles far exceeding traditional products, granting existing players sustained bargaining power. This pressures the industry chain's critical links to accelerate the domestic substitution of switching chips, compounded by the performance realization of overseas switch leaders; it is recommended to focus on leading firms in the domestic switch and switching chip sectors. Huatai: SK Hynix is increasing its FCF return ratio, focus on changes in the shareholder return framework among Korean manufacturers On August 19, SK Hynix officially raised its shareholder return target for 2025-2027 from a previous limit of "within 50% of cumulative FCF over three years" to "exceeding 50%." Samsung and SK Hynix have potential space for Korean won returns. Micron will increase returns from December 2026 and gradually transition to returning 100% of excess cash; SanDisk has completed a buyback of approximately 4.5 billion dollars with a long-term framework of 100% excess cash; Kioxia has completed a buyback of around 800 billion yen and uses a multiple-year cumulative excess FCF of about 50% as a reference benchmark for shareholder returns. Recent catalysts primarily involve SK Hynix's additional return plan for Q3 2026 and Micron's increased capital returns starting December 9, with a mid-term focus on the next round of shareholder return policies from Korean firms. This article is reproduced from "Caixin News," edited by GMTEight: Huang Xiaodong.