CITIC Securities: Continue to be optimistic about storage demand exceeding expectations, expecting industry supply and demand imbalance to persist until the first half of 2027.

CITIC Securities Research Report points out that since February, the storage industry has maintained high prosperity, supported by better-than-expected performance and guidance from Kioxia, an increase in NAND contract prices for Q1, and the release of better-than-expected performance announcements from domestic module manufacturer Buwei Storage for January-February. We continue to be optimistic about storage demand exceeding expectations, expecting supply and demand imbalance to persist until the first half of 2027. Our core recommendations are storage module companies with strong short-term performance explosive potential, storage manufacturers, and design companies close to the original manufacturers.

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Storage | Q1 NAND Contract Prices Rise Again, Module Manufacturers’ Performance Guidance Strong (February 2026)

Since February, the industry has been supported by Kioxia’s better-than-expected performance and guidance, an increase in NAND contract prices for Q1, and the release of better-than-expected performance announcements from domestic module manufacturer Buwei Storage, further confirming that the storage industry remains highly prosperous. We remain optimistic about storage demand exceeding expectations, expecting supply and demand imbalance to continue until the first half of 2027. Our main recommendations are storage module companies with explosive short-term performance, storage manufacturers, and design companies close to the original manufacturers.

▍1. Price Review in February 2026 (Bloomberg, CFM Flash Market, TrendForce)

1. DRAM: After a significant month-on-month increase in January, DRAM spot and contract prices slowed in February. According to Bloomberg, mainstream spot prices ranged from -3% to +12% month-on-month; DDR5-8Gb / DDR4-8Gb contract prices increased by +4% / +8%.

2. NAND Flash: Prices continued to rise rapidly in February, with the rate of increase converging. Bloomberg reports that mainstream spot prices increased by +10% to +26%, and contract prices rose by +37% to +67% month-on-month.

3. Modules: In February, DDR4/5 memory module spot prices were roughly flat; SSD prices increased by 0% to +13%; portable storage increased by +10% to +25%; DDR5 memory module contract prices increased by +4% to +18%, while DDR4 prices remained flat; SSD prices increased by +6% to +18%. (Note: Due to large fluctuations in spot market prices and shorter contract negotiation cycles, storage prices from different sources may vary.)

▍2. Price Outlook (TrendForce March 2026)

1. DRAM: It is expected that traditional DRAM contract prices will increase by 90% to 95% in Q1 (unchanged). According to Korean media sedaily at the end of February, Samsung Electronics and SK Hynix have notified customers that DRAM prices will continue to rise significantly in Q2 2025. Taiwanese media “PCDIY!” reports that SK Hynix issued a price increase notice after the Spring Festival, with DDR5 chips expected to rise by 40% in Q2 2026.

2. NAND Flash: Due to strong demand from AI servers and severe supply-demand imbalance, manufacturers are eager to raise prices, with an overall contract price increase of 85% to 90% in Q1 (previously expected 55% to 60%).

3. Niche Storage: For NOR Flash, Taiwanese manufacturers are gradually reducing capacity for small- and medium-capacity NOR Flash, leading to capacity convergence and improved supply-demand. We expect NOR Flash prices to continue rising in H1 2026, with overall Q1 increases exceeding 20%, and larger increases for small- and medium-capacity NOR. For SLC NAND Flash, overseas manufacturers like Micron, Kioxia, and Samsung are gradually reducing supply. Under supply contraction, price increases in H1 2026 could approach those of mainstream TLC/QLC products.

▍3. Overseas Manufacturers’ Demand Outlook

SK Hynix: The company expects DRAM bit demand to grow over 20% YoY in 2026, NAND bit demand to grow 15% to 20% (high teens); DRAM and NAND inventories are only about four weeks’ worth, and demand from all customers in 2026 will not be fully met.

SanDisk: The company expects data center bit demand to grow over 60% in 2026.

Kioxia: The company expects long-term NAND market bit demand to grow at about 20% CAGR; HyperScaler LTA negotiations extend to 2027-2028; the company guides FY Q4 2025 (CY Q1 2026) revenue growth of 55% to 72% quarter-on-quarter, exceeding market expectations.

▍4. Domestic Storage Manufacturers’ Performance Expectations

Buwei Storage: The company expects revenue of 4-4.5 billion yuan in January-February, up 340% to 395% YoY; net profit attributable to parent of 1.5-1.8 billion yuan, up 922% to 1086% YoY; net profit excluding non-recurring gains and losses of 1.35-1.6 billion yuan; after deducting share-based payments, attributable net profit of 1.53-1.83 billion yuan, exceeding market expectations.

Risk Factors:

Overseas CSPs’ AI CAPEX below expectations; weakening downstream demand in consumer electronics; storage price increases below expectations; intensified industry competition; technological innovation risks; international trade friction risks, etc.

Investment Strategy:

We remain optimistic about storage demand exceeding expectations, expecting supply and demand imbalance to persist until the first half of 2027. Our core recommendations are: 1) storage module companies with strong short-term performance explosive potential; 2) storage design companies, especially those closely aligned with original manufacturers.