Artificial Intelligence Needs Real Memory

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1、23May2017Americas/UnitedStatesEquityResearchSemiconductorEquipmentLamResearchCorp.(LRCX)RatingOUTPERFORMINCREASETARGETPRICEPrice(22-May-17,US$)152.91Targetprice(US$)(from160.00)201.0052-weekpricerange(US$)152.91-79.27ArtificialIntelligenceNeedsRealMemoryMarketcap(

2、US$m)24,666.20Targetpriceisfor12months.■BottomLine:WebelievethatinvestorsarecontinuingtoviewLRCX'sResearchAnalystsseculargrowthascyclical.Structurally,itisbecomingmoredifficulttogrowFarhanAhmad4152497929supply,anddemandgrowthisstartingtoaccelerate.WeexpectMemoryfa

3、rhan.ahmad@credit-suisse.comstrengthtocontinueinto2018,andsupporthigherCapEx.WeareincreasingJohnW.PitzerWFEforCY17/CY18to$40.8bn(+18%y/y)/$44.2bn(+9%y//y),primarily2125384610duetoSamsungCapEx.WeareincreasingourCY18EPSfrom$12.35tojohn.pitzer@credit-suisse.com$13,an

4、dTPto$201basedon14xofCY18EPSplusnetcash.■CyclicalWorriesIgnoreSecularTrends:CapexperincrementalbitgrowthhasmorethandoubledforbothNAND/DRAMoverlastthreeyears.Notethatin2016evenasMemoryCapExwasatstronglevels,bothNANDandDRAMwentfromsignificantoversupplyatbeginningofy

5、eartosignificantundersupply.WeseethistrendcontinuinganddriveseculargrowthformemoryCapEx,whichshouldbenefitLRCXthemost.■Demandgrowthisaccelerating:WearestartingtoseeanaccelerationinNAND/DRAMdemandgrowth-basedonSIAdata,industrybitgrowthoverlastyearhavebeen49%/42%y/y

6、-wellaboveexpectationof35%/25%y/y.ThedemandgrowthwhichisakeyriskhasbeenextremelystrongfromCloud/hyperscalecustomerssomeofwhomareinvestingforAIinfrastructure.NotethatleadingedgelogicchipinDeepLearningsystemsdrives4xhigherDRAMcontentperunitareaoflogic,thaninSmartpho

7、nes-asAIgrowsitshouldbenefitLRCXmorethanothersemicaps.■Services:SustainablyGrowingAnnuityStream:DuetofastergrowthofSystemshipment,installedbaseisgrowingatafasterrateforLRCXthanpeers,andallowingservicesbusiness(25%oftotal)togrowat>10%y/y.Assuming20xmultipleonServic

8、esEPS($3),marketisvaluingLRCXSystemsEPSatonly7.5xonexcashbasis.SharepriceperformanceFinancialandvaluationmetrics170Year6/16A6/17E6/18E150EPS(Excl.ESO)(U