CXMT: The issue price is 8.66 yuan per share, subscription will take place on July 16.

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The IPO issue price of Changxin Technology, the largest domestic DRAM manufacturer, has been officially set. The company has set the issue price at 8.66 yuan/share, corresponding to a total market value after issuance of approximately 579.2 billion yuan, which is lower than the earlier market expectation of a trillion-yuan valuation, sparking discussions about the reasonableness of its pricing.

In terms of pricing logic, Changxin Technology did not adopt an aggressive valuation this time. Instead, after considering the results of comprehensive inquiries, industry cycles, and the valuation levels of comparable companies, the issue price was set slightly below the median of offline inquiry prices. However, as the actual fundraising scale is significantly higher than originally planned, the company has warned in a special investment risk announcement that the share price may fall below the issue price after listing, reminding investors to fully assess the related risks.

According to the issuance schedule, Changxin Technology will launch online and offline subscriptions on July 16 (T day), with an issue price of 8.66 yuan/share for both channels. No payment is required at the time of subscription; investors must complete payment by 16:00 on July 20 (T+2).

Regarding lock-up arrangements, shares issued online will be tradable immediately after listing; among the offline issued shares, 30% have no lock-up period, while 70% are locked up for 6 months. For strategic placement shares, the lock-up period is set at 12 to 36 months depending on investor type. The sponsor's follow-up investment is locked up for 24 months, and the special asset management plans for executives and core employees, as well as the shares allocated to Hangzhou Alibaba Cloud Feitian Information Technology Co., Ltd. under Alibaba Cloud, are locked up for 36 months.

High PE, low PB—How to interpret the valuation?

Calculated based on the issue price, Changxin Technology's post-issuance valuation exhibits a typical "high PE, low PB" characteristic.

Based on net profit before non-recurring gains and losses in 2025, the post-issuance diluted price-earnings ratio is about 308.92 times; based on net profit after non-recurring items, it is about 108.95 times. Both indicators are higher than the industry average static P/E ratio of 76.32 times released by the China Securities Index, yet the PE after non-recurring items is lower than the average of comparable companies at 134.62 times.

By contrast, the company’s post-issuance diluted price-to-book ratio is about 5.06 times, significantly lower than the peer average of 9.30 times. Comparable companies include Samsung Electronics, SK Hynix, Micron Technology, TSMC, and China Resources Microelectronics, etc.

From the inquiry situation, institutional investors’ enthusiasm remains high. A total of 10,907 placement targets managed by 285 investors participated in valid quotations for the offline offering, with the intended subscription amount reaching 462.85 times the initial offline issue size.

Why do cyclical industries focus more on PB?

The focus of current market discussions regarding Changxin Technology's IPO is not actually the level of the issue price, but rather whether PE or PB should be used for valuation. According to investment bankers cited by Shanghai Securities News, the DRAM industry is a typical highly cyclical sector, and the industry convention is to prefer price-to-book ratio (PB) as the core valuation anchor rather than price-earnings ratio (PE).

The reason is that the profits of memory chip companies fluctuate sharply with industry cycles. During an upswing, profits soar and PE can be pressed down to 5 to 6 times; during a downturn, profits plummet and PE may soar to over a hundred times, even becoming completely distorted. In contrast, PB is based on asset value, is less affected by profit swings, and better reflects a company's long-term competitiveness.

As of the close on July 13, the forecast PBs for Samsung Electronics, SK Hynix, and Micron Technology were approximately 2.22, 3.73, and 5.73 times, respectively, with corresponding forecast PEs of about 5.02, 5.64, and 8.20 times. According to market estimates, if annual earnings are extrapolated based on Changxin Technology's first-half performance forecast, the issue price corresponds to a dynamic PE and PB of about 5 times and 3 times, respectively, similar to those of the leading international memory companies.

Explosive performance growth, fundraising focuses on HBM and capacity expansion

In terms of fundamentals, Changxin Technology is currently in a phase of rapid performance release.

The company is the largest domestic integrated DRAM R&D and design company, currently ranking fourth in global market share. In the first quarter of this year, the company achieved operating revenue of 50.8 billion yuan, up 719% year-on-year; net profit after non-recurring items exceeded 26.3 billion yuan, up 1993% year-on-year. The company expects first-half operating revenue to reach 110 to 120 billion yuan, with net profit attributable to shareholders about 50 to 57 billion yuan.

Market participants believe that for a company still in its growth stage and in a highly cyclical industry, maintaining a relatively restrained valuation at the initial listing stage is more conducive to leaving room for future growth. The funds raised will mainly be used for new generation DRAM production capacity expansion and HBM high bandwidth memory R&D projects.

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