Morgan Stanley: Initiates a target price of HKD 95 for INNOSCIENCE, benefiting from multiple long-term growth drivers
Morgan Stanley initiates coverage on INNOSCIENCE with an Equal Weight (EW) rating and a target price of HKD 95. The bank believes the company will benefit from long-term growth drivers such as AI data centers, humanoid robots, and electric vehicles. INNOSCIENCE's stock price has nearly doubled since its partnership with NVIDIA, and it is expected to expand its market share in the gallium nitride market, with growth rates surpassing the overall market growth. Despite intense industry competition and valuations reflecting high expectations, the company's strategic partnerships with leading clients demonstrate strong growth potential
According to the Zhitong Finance APP, Morgan Stanley has released a research report stating that it has initiated coverage on INNOSCIENCE (02577) with an Equal Weight (EW) rating and a target price of HKD 95. Since announcing its partnership with NVIDIA at the end of July 2025, INNOSCIENCE's stock price has nearly doubled (while the Hang Seng Index rose 8% during the same period). The firm believes that the growth opportunities in NVIDIA's AI data centers are largely reflected in the current stock price, but there remains uncertainty regarding verification and order allocation. The firm expects INNOSCIENCE to benefit from several long-term growth drivers, including AI data centers, humanoid robots, and electric vehicles. Industry competition remains fierce, and current valuations largely reflect high market expectations.
Gallium Nitride: Niche but with Huge Growth Potential
The gallium nitride market is a niche segment within the semiconductor industry. According to the World Semiconductor Trade Statistics, the total potential market size for gallium nitride in 2024 is USD 346 million, while the entire semiconductor industry is valued at USD 631 billion. Driven by multiple factors, the firm predicts that the gallium nitride market will achieve a 49% compound annual growth rate from 2024 to 2029. These drivers include 800V high-voltage DC power conversion for data centers, the increasing number of servo motors used in humanoid robots, growing gallium nitride applications in electric vehicles (on-board chargers, lidar, DC-DC converters), and the fast-charging demand for consumer electronics.
INNOSCIENCE Expected to Expand Market Share in the Rapidly Growing Gallium Nitride Market
Leveraging its Integrated Device Manufacturer (IDM) business model, INNOSCIENCE possesses superior technology route synchronization, stable production capacity, and cost advantages in large-scale production. The firm expects INNOSCIENCE's growth rate to surpass the overall market growth rate. Additionally, INNOSCIENCE's strategic partnerships with leading downstream customers reflect its technological leadership and indicate strong growth potential, such as its collaboration with NVIDIA on AI data centers, partnerships with Hesai Technology and Suton Juchuang on electric vehicles, and cooperation with Zhiyuan Robotics on humanoid robots. Furthermore, the strategic partnership with STMicroelectronics will also help expand its overseas business.
Long-Term Growth Potential, but Competition and Overcapacity May Persist
In addition to INNOSCIENCE, other manufacturers such as Infineon are also expanding production. Based on the supply-demand model constructed by the firm, it predicts that global capacity will grow from 100,000 wafers per month in 2024 to 345,000 wafers per month in 2029 (based on 6-inch wafers). While the overall capacity utilization for gallium nitride may improve, it is expected to remain below 60% over the next five years, indicating that pricing and profitability in the gallium nitride market will face pressure. The firm anticipates that INNOSCIENCE's gross margin will improve moderately in 2026/27
