Montage Technology Co Ltd (688008.SS): Demand set to further improve in 4Q

Montage reported strong 3Q preliminary results, driven by continued strong server CPU demand due to the rapid development of AI inference and AI agentic applications. Mid-point preliminary 3Q revenue was Rmb2,079mn, up 11% Q/Q and 46% Y/Y, 5% above MSe; mid-point preliminary net profit was Rmb1,250mn, up 9% Q/Q and 164% Y/Y, 24% above MSe. The relatively mild Q/Q growth reflects 2Q net profit being inflated by non-recurring items such as investment gains and fair value changes. 3Q mid-point adjusted net profit excluding non-recurring items was Rmb1,000mn, up 39% Q/Q and 166% Y/Y. 3Q interconnect chips mid-point gross margin was 68.25%, driven by a continued increase in the product mix of gen 3/4/5 DDR5 RCD chips. Management expects interconnect demand to further strengthen in 4Q. Maintain OW: Morgan Stanley believes Montage is well positioned to benefit from expanding AI demand through memory interface chips, and sees it as a unique proxy for China's AI server market through its PCIe b