13x bullish on ChangXin Memory Technologies?

Original Author: Su Yang

Original Editor: Xu Qingyang

Source: Tencent Technology

ChangXin Memory Technologies (CXMT) has become the hottest topic in China's tech industry.

On July 27, CXMT, China's leading DRAM manufacturer, was listed on the STAR Market (科创板) with an opening price of RMB 49.50 per share, surging over 470% from its IPO price of RMB 8.66 per share. Meanwhile, with a market capitalization exceeding RMB 3.6 trillion, it surpassed ICBC to top China's stock market valuation rankings, doubling the market cap of Kweichow Moutai and becoming the new heavyweight champion of A-shares.

As the only IDM enterprise in China capable of mass-producing DRAM, CXMT's net profit in the first half of the year has already exceeded RMB 50 billion, with its global market share climbing from 3% to nearly 8%, carving out a niche in a market dominated by Samsung, SK Hynix, and Micron for decades.

Alongside CXMT's surge, a report from Nomura also grabbed attention.

Before the market opened on July 27, international investment bank Nomura released a report initiating coverage on CXMT with a "Buy" rating and a target price of RMB 116. The implied upside potential of over 12 times from the opening price immediately thrust CXMT into the market spotlight. In its report title, Nomura even compared the industrial value of CXMT's DRAM chips to "the pearl on China's crown."

Nomura's research report on CXMT

"A target price of over 100 (RMB) implies a market cap of over RMB 7 trillion, which is quite aggressive," said an investor who has long tracked China's semiconductor industry. "Such a possibility exists, but it requires exuberant market sentiment and would likely consume growth expectations for at least the next 3 years."

So, what is the underlying logic behind Nomura's 13x bullish stance on CXMT, and how does it assess the risks?

Projected 2027 Revenue of RMB 560 Billion

According to data disclosed by CXMT in its IPO press release, the company expects to achieve revenue of RMB 110 billion to RMB 120 billion for the first half of 2026, a year-on-year increase of 612.53% to 677.31%. It anticipates net profit attributable to parent company of RMB 50 billion to RMB 57 billion, a year-on-year increase of 2244.03% to 2544.19%.

Regarding the performance growth, CXMT stated, "In recent years, driven by factors such as the recovery of the memory industry, optimization of product mix, and the release of scale effects, the company's operating performance has achieved rapid growth."

Compared to CXMT's own forecasts, Nomura's report is more optimistic. According to its model projections, CXMT's revenue will surge rapidly from RMB 61.8 billion in 2025 to RMB 290.7 billion in 2026, RMB 560.8 billion in 2027, and eventually RMB 773.3 billion in 2028.

Nomura also forecasts CXMT's net profit attributable to parent company will climb from less than RMB 1.9 billion to RMB 130.3 billion, RMB 277.2 billion, and RMB 393.1 billion in 2026, 2027, and 2028 respectively. The compound annual growth rates (CAGR) for these two metrics are 63% for revenue and 74% for net profit.

The underlying logic for CXMT's performance projections centers on three dimensions: capacity expansion, technological upgrades, and price increases. The first two dimensions are strongly correlated with the use of funds raised in CXMT's IPO prospectus.

Previously, CXMT disclosed in its prospectus that the proceeds from this offering will primarily be used for projects such as technological upgrades to mass production lines for memory wafer manufacturing, DRAM memory technology upgrades, and research and development of advanced dynamic random access memory technologies, aiming to further enhance advanced manufacturing capabilities and innovation levels.

It is noteworthy that the price increases stem from two main aspects: firstly, the increase in average selling price per wafer due to technological upgrades; secondly, the general rise in memory chip prices driven by the super-cycle.

"Since the second half of 2025, the continuous rise in product prices has led to a rapid increase in gross profit margins and profit levels for product sales, driving the company to turn losses into profits in 2025," CXMT wrote earlier in the overview section of its prospectus.

CXMT's product shipment structure is also upgrading.

In a previous response to an inquiry letter, CXMT disclosed that mobile terminal products are currently the cornerstone of its revenue. Smartphone manufacturers like Xiaomi, Transsion, Honor, vivo, and OPPO correspond to its LPDDR series products, while cloud providers like Alibaba and ByteDance mainly correspond to its DDR series products.

The revenue contribution from these two customer groups was roughly 90% to 10%.

By May 17, 2026, the revenue contribution from AI server-related products (DDR series) surged to over 30%, but the main contributor remained the LPDDR series product line, accounting for over 66%.

During this phase of performance ramp-up, the potential moves of a heavyweight customer, Apple, deserve close attention.

According to the Financial Times, Apple has begun testing CXMT's DRAM chips, aiming to use them in entry-level iPhones and other devices sold in the Chinese market. Meanwhile, Apple has been lobbying the U.S. government since around May or June this year, seeking relevant approvals.

If a cooperation deal is reached eventually, CXMT could potentially capture a portion of Apple's global DRAM procurement volume. The significance of this order extends far beyond the sales revenue itself, signaling a shift for a supplier previously labeled as "domestic substitution" towards one recognized by mainstream global customers.

However, some institutions believe Apple is only purchasing CXMT products in small batches and may be using the introduction of a new supply variable as leverage in negotiations with Samsung and SK Hynix.

Capacity in High Demand, Valuation Rivals Twice Micron's

Based on Nomura's target price of RMB 116, corresponding to an estimated 2028 earnings per share (EPS) of RMB 5.8, CXMT's forward price-to-earnings (PE) ratio is approximately 20 times.

"Over RMB 100 billion in profit supporting a market cap of RMB 2 trillion is reasonable," Chen Qi, an investor long focused on the semiconductor industry, previously told Tencent Technology. A RMB 2 trillion market cap corresponds precisely to a 20x PE.

For comparison, Wall Street's PE expectation for Micron for the 2026 calendar year is roughly 10 times, while SK Hynix's is only around 5 times. "When the semiconductor cycle arrives, anything can happen," Chen Qi said.

In Chen Qi's view, a 10x PE is reasonable, but a 20x PE is also within the realm of possibility. "CXMT's real opportunity lies in the fact that it stands opposite Samsung, Hynix, and Micron, representing China's true entry onto the memory industry table."

Nomura's 20x PE for CXMT is based on another logic: Micron can be seen as the valuation anchor globally in the DRAM field, with its historical forward PE center around 10 times. However, the A-share semiconductor sector has long traded at a valuation premium of 1 to 3 times relative to comparable US-listed stocks. Taking the midpoint of roughly 2 times, CXMT's PE would be 20 times.

The core support for CXMT's valuation is the fact that global memory demand is being dragged into exponential growth by AI, while the supply side, constrained by physical bottlenecks, simply cannot keep pace. Nomura estimates that even factoring in a 60% reduction due to efficiency-improving technologies, global memory demand will still grow over seven times between 2026 and 2030, representing a CAGR exceeding 60%.

Nomura even proposes a more extreme scenario: if AI robots operate autonomously without human operational rhythm constraints, the upper limit of demand would only be bounded by authorization boundaries, infrastructure carrying capacity, and capital expenditure budgets.

But the pace of supply-side expansion lags far behind.

Nomura expects the industry's capacity expansion CAGR to be only 30% to 40%. CXMT's bit expansion CAGR between 2026 and 2030 is estimated at 40% to 45%, which, while higher than the industry average, remains significantly below the demand growth rate.

Furthermore, around the same time Nomura's report was released, Korean and US chip giants initiated a new wave of consolidation.

On July 24 (US local time), Samsung Electronics signed a Memorandum of Understanding (MOU) with Broadcom for over USD 200 billion, covering the supply of high-end memory like HBM4, 2nm process foundry services, and advanced packaging. During the same period, SK Group and SK Hynix reached a long-term cooperation intent with NVIDIA, valued at over USD 500 billion, focusing on joint development and stable supply of next-generation HBM.

For CXMT, the more focused the leading manufacturers become on HBM, the more pronounced the supply gap left in the traditional DRAM market becomes. Nomura predicts CXMT's share of the global DRAM market will increase from its current level of approximately 10% to 18% by the end of 2028.

Additionally, from the perspective of the domestic Chinese market, there is ample room for improvement in the self-sufficiency rate, providing a window for CXMT's performance growth.

According to WSTS data, China accounted for approximately 25% of the global DRAM consumption market in 2025. However, based on production revenue, the global share of domestic Chinese manufacturers was only about 10%, implying a self-sufficiency rate of around 30%. Looking solely at the Chinese domestic market, the substitution potential is substantial.

A Dual Examination Under the Spotlight

While the prospects are tempting, Nomura also devotes considerable space in its report to discussing risks.

The primary risk is the embargo on critical equipment and materials, such as lithography and etching tools, and high-end photoresists, driven by the US's MATCH Act and other policies. Under the worst-case scenario, besides capacity expansion being constrained, CXMT's revenue and net profit for 2027 and 2028 would shrink by approximately 13%-14% and 30%-33%, respectively.

These external risks closely overlap with several shortcomings mentioned in the prospectus.

CXMT's prospectus mentions "geopolitical risks," such as being placed on the 1260H list, and competitive risks from a highly monopolistic global market. Most critically, there is the inherent cyclical risk of the industry: the strong cyclicality of the DRAM industry and the risk of significant performance fluctuations.

Currently, the industry is still under an upswing super-cycle, but cracks have appeared in the market's consensus on memory.

Take Micron as an example. After hitting a historical high of USD 1,255 on June 25, its stock price fell to a low of USD 804 within just three weeks, marking a maximum drawdown of 36%. SK Hynix experienced an even more dramatic swing: its stock price in Korea fell from a high of KRW 298.7 million on June 25 to KRW 167.8 million, a drawdown of 43.8%. Its ADR surged 27% on July 14, only to fall back 9% the next day.

The aforementioned investor focused on China's semiconductor industry told Tencent Technology that cyclicality ultimately comes back to basic supply and demand theory. "As long as the market is frantic, capacity expansion becomes unlimited. Demand, however, can halt abruptly at a certain inflection point. No market is an exception; memory is just a more extreme case."

The investor cited the case of Hua Hong (likely referring to HHGrace or a related entity) making storage investments that soared and then crashed at the peak of the internet bubble in the 1990s, eventually forcing a transition to logic chip foundry, to emphasize the impact of memory cyclicality. "Few other markets exhibit such extremes – prices can rise 5-10 times in 1-2 years during a boom, and then fall 90% in 1-2 years when they break down. Since 1990, this cycle of roughly 6 years has occurred at least 5 times, making it quite a regular pattern."

Therefore, how CXMT maintains strict financial discipline and avoids aggressive capacity expansion during the current favorable upswing cycle will test its long-term strategic wisdom.