The foreign-invested Morgan Stanley report maintains an "outperform" investment rating for flash memory control chip maker Phison. Morgan Stanley said it is optimistic about Phison's revenue and profit expansion driven by extremely strong NAND demand, as well as its continued growth in market share in the control chip field.

The report pointed out that Phison’s financial performance in the third quarter of 2025 was better than expected. Key data include revenue reaching NT$18.137 billion, an increase of 1% from the second quarter and an increase of 30% from 2024. The growth mainly comes from modules and control chips, especially since the demand has been strong since late August.

The gross profit margin reached 32.4%, an increase of 3.3 percentage points from the second quarter. This gross profit margin is 0.7 percentage points higher than Morgan Stanley's estimate and 1.2 percentage points higher than the market consensus. The increase in gross profit margin was mainly due to price increases and inventory reversal. Despite the increase in R&D expenses, the operating profit rate dropped from 13.1% to 7.9% in the second quarter, with EPS of 10.75 yuan.

The report points out that NAND suppliers' NAND supply will be completely sold out in 2026, which makes customers from various end markets turn to Phison for adequate support.群聯目前正謹慎控制模組出貨量。 Although inventory increased by 8% compared with the second quarter and inventory turnover days increased by 20 days to 225 days, given Phison's exposure to multiple end markets and good track record, the company is confident that it will have sufficient inventory in the next few quarters.

In terms of future growth momentum, enterprise-level SSD revenue is expected to reach 20% of total revenue in 2026, significantly higher than 8% in the third quarter of 2025. In addition, Phison has reserved sufficient supply of BT carrier boards for control chips. As Phison currently has strong bargaining power with customers, it is expected to be able to pass on higher costs.

Based on the above factors, Morgan Stanley estimates that Phison's net revenue in 2026 will reach NT$94.799 billion, and EPS is expected to be NT$46.22. Phison's current share price is calculated at a price-to-earnings ratio of 22 times based on 2026 estimated EPS.