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The Chinese DRAM memory manufacturer ChangXin Memory, abbreviated as CXMT, debuted on the Shanghai stock exchange and immediately dominated it. The company’s share price rose by more than 400% in a single session and, within one day, it became China’s largest publicly listed company, dethroning the Tencent conglomerate.
Source: Bloomberg Finance
Optimism or mania?
There is no doubt that CXMT is a promising company. At the time of its public market debut, CXMT already holds around 8% of the entire DRAM market and is running at roughly 96% capacity utilization.
The bullish case for the company has two sides:
- First, CXMT can use state support and economies of scale to keep taking market share from the sector’s existing leaders.Second, the Chinese market, which has strong and growing demand, will be fully shielded from outside competition. As a result, CXMT will capture the full potential of domestic growth and the associated profits.These observations are sensible and valuable. However, the valuations formed on the back of the potential in these scenarios are not.
- Second, the Chinese market, which has strong and growing demand, will be fully shielded from outside competition. As a result, CXMT will capture the full potential of domestic growth and the associated profits.
- These observations are sensible and valuable. However, the valuations formed on the back of the potential in these scenarios are not.
- The company’s IPO price was about 8.66 RMB, around 1.3 USD per share. At that price, based on the median forecasts for end of 2026:P/E and P/S were exceptionally low at about 5.4 and 1.7EV/EBITDA and the FCF yield were also conservative at 3.7 and 7.8%
- P/E and P/S were exceptionally low at about 5.4 and 1.7
- EV/EBITDA and the FCF yield were also conservative at 3.7 and 7.8%
But at the current price of about 49 RMB, around 7 USD, based on the median forecasts for end of 2026:
- P/E and P/S are now above 30 and nearly 10, respectively
- EV/EBITDA and the FCF yield are now about 18 and 1.5%
For comparison, the market leader Micron can show a P/E of around 20, EV/EBITDA of around 10, and an FCF yield above 5%. This means that CXMT, which is currently a DRAM maker rather than a producer of the highly sought after HBM, is being valued not as a meaningful player in a secondary market but as an inevitable hegemon in an industry it has not yet entered. An industry that has already made enormous investments to expand supply and that has historically been highly cyclical, with a tendency toward episodes of overproduction.
What does a 49 RMB valuation imply?
A valuation at 49 RMB implies maintaining the growth rate indicated in the company’s forecasts for 2026, meaning revenue growth of 330 to 400% and profit growth of 4,700 to 6,000%. This is not impossible, but it remains extremely unlikely.
