Guotai Haitong: Cleanrooms from storage boom to Fab expansion, order growth translating into revenue and EPS

Guotai Haitong released a research report stating that the cleanroom industry has currently moved beyond the valuation re-rating driven by Fab expansion expectations and is gradually entering the stage where order growth translates into revenue and EPS realization. This round of AI-driven storage upcycle has already transmitted from prices and profitability to capital expenditure and Fab expansion. The long wafer fab construction cycle gives cleanroom demand notable lag and persistence relative to storage profitability. The cleanroom industry has currently moved beyond the valuation re-rating driven by Fab expansion expectations and is gradually entering the stage where order growth translates into revenue and EPS realization. The sustainability of the subsequent upcycle depends on the pace of wafer fab expansion, order continuity, and the ability to realize earnings. Guotai Haitong's main views are as follows: AI demand combined with supply constraints gives this upcycle persistence Reviewing historical storage cycles, improvement in downstream end demand first drives up DRAM and other storage prices, which then transmits to storage original manufacturers' revenue and profitability improvement. This cycle differs from traditional consumer electronics cycles in that AI server ramp-up drives increased demand for HBM and high-performance DRAM; meanwhile, HBM creates structural crowding-out of wafer capacity, and combined with the long construction cycles for new cleanrooms and Fabs, storage original manufacturers further enhance demand visibility through long-term supply agreements. The tight supply-demand balance and product mix upgrading together support the continuation of this storage cycle. Storage profitability recovery transmits to expansion, and the lengthened Fab construction cycle extends the cleanroom upcycle. Historically, storage original manufacturers' capital expenditure typically lags profitability improvement to some extent. After profitability recovers, manufacturers gradually increase capital expenditure, and in this cycle Micron's capex intensity has already reached historically high levels. After capital expenditure is deployed, it still needs to go through investment decisions, civil construction, cleanroom construction, equipment move-in, and secondary hook-up, among other stages. Therefore, capacity cannot be released immediately, forming a transmission path of storage profitability improvement, CAPEX expansion, Fab construction commencement, cleanroom order release, and revenue realization. Domestic wafer fab expansion builds the base, storage expansion contributes core incremental growth, and the order inflection point gradually translates into performance realization Domestic cleanroom demand is not solely contributed by storage manufacturers. Continuous expansion by wafer fabrication enterprises constitutes the industry demand base, while expansion by CXMT and YMTC manufacturers contributes phased demand elasticity. As Fab projects continue to land, cleanroom companies' new signed orders are the first to reflect industry prosperity, and backlog orders form future revenue reserves that are gradually recognized as revenue along with project execution. This round of domestic semiconductor expansion has begun to be reflected in cleanroom companies' order books, and the industry is gradually moving from the order inflection point into the performance realization stage. Domestic wafer fabrication leads the re-rating, the rally spreads to cleanrooms, and sector pricing shifts from PE expansion to EPS realization Historically, overseas storage stocks typically trade on expectations of supply-demand and profitability changes, and stock price inflection points may lead the end of peak profitability. In contrast, this round of domestic market action exhibits a characteristic of spreading from wafer fabrication to Fab capital expenditure beneficiary segments. In 2025Q3, the wafer fabrication sector was the first to strengthen, and after 2025Q4, the cleanroom sector gradually started to move. As cleanroom orders and performance are verified in 2026, sector pricing further shifts from earlier expansion expectations to order realization and profit growth expectations. Currently, consensus EPS continues to be revised upward, and subsequent market action will depend more on the conversion of orders into revenue and profit and whether earnings forecasts can continue to be raised. Risk warnings: Risk of AI server and storage demand growth falling short of expectations; risk of storage prices and industry prosperity declining earlier than expected; risk of wafer fab capital expenditure and Fab construction progress falling short of expectations; risk of cleanroom order acquisition and revenue recognition falling short of expectations; risk of earnings realization falling short of expectations and valuation pullback.