Morningstar

CXMT Stock Pricey After a Roaring First Day

Shares in ChangXin Memory Technologies closed 466% higher than the offering price.

Securities in This Article
CXMT Corp Class A
(688825)

Key Morningstar Metrics for CXMT

  • Fair Value Estimate: CNY 16.10
  • Morningstar Rating: ★
  • Morningstar Economic Moat Rating: None
  • Morningstar Uncertainty Rating: Medium

We initiate coverage of CXMT, or ChangXin Memory Technologies 688825 the fourth-largest DRAM player globally. CXMT’s IPO offering of 6.7 billion shares represented 10% of its free float postissuance at an initial valuation of CNY 8.66 per share. Shares closed at CNY 49, 466% higher than offering price.

The bottom line: Our fair value estimate for CXMT is CNY 16.10. While initially cheap to the IPO price, shares now look overvalued after its close. We do not think CXMT has a moat, as we view DRAM chips as broadly commoditized products with little differentiation and low switching costs.

  • Our fair value implies a 2027 price/book ratio of 1.8 times, above IPO prices implied by 2027 book value, as we expect a valuation uplift from the ongoing upcycle. Shares rose sharply amid strong domestic interest as onshore investors hopped on the memory supercycle, but we see the rally as overdone.

Long view: We see the current memory undersupply driving strong DRAM prices as temporary. We foresee sharp capacity growth from memory makers in late 2027 and into 2028, improving the currently tight demand-supply dynamics and driving price erosion.

  • With our view of tail-end cyclicality in mind, our midcycle operating margin is 27%, well below our 2026 and 2027 margin estimates of 75% and 80%, respectively. We believe the market is overly optimistic about CXMT’s ability to maintain high memory prices and profitability.

Between the lines: We expect CXMT’s heavy investments to continue, given China’s focus on technological self-sufficiency. We think the gap between CXMT and memory leaders will not shrink materially, given export restrictions on chip equipment, and foresee its pricing power falling short of peers’.

  • CXMT is well-positioned to capitalize on rising domestic AI demand. It is expected to commercialize HBM3 by 2026, and tightening chip export restrictions to China amid a rapid emergence of domestic artificial intelligence chips that use HBM allows CXMT to fill the supply gap.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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