First-to-third-quarter revenue projected to surge over eightfold year-on-year; stock drops 10.4% over two sessions following earnings guidance.
Third-quarter net profit expected to rise 1–4% quarter-on-quarter; Goldman Sachs and UBS split on price targets.
ChangXin Memory Technologies (CXMT), the Chinese DRAM maker emerging as a formidable competitor to Samsung Electronics and SK hynix, has projected explosive earnings growth, yet its share price has continued to slide. As the company accelerates next-generation memory development and production expansion, international investment banks (IBs) remain divided on its recent quarterly performance. While Goldman Sachs slightly raised its target price, citing earnings that beat its proprietary estimates, UBS lowered its target, pointing to net profit falling short of expectations.
On the Shanghai Stock Exchange on the 20th, CXMT closed down 2.89% at 40.32 yuan. Following a 7.77% plunge on the 19th—the first trading day after its earnings preview—the cumulative two-day decline reached 10.4%. This stands approximately 34.8% lower than its record closing high of 61.80 yuan on August 17th.
Driving heightened interest in CXMT is the growing anticipation that it can narrow the technological gap with South Korea’s memory giants. According to a report published on the 12th by SEMI China, CXMT plans to introduce server-grade DDR5 memory products applying '4F²', a next-generation DRAM design architecture, by the end of the year. Nevertheless, cautious assessments regarding the speed of commercialization have emerged. In a Dow Jones report on the 15th, UBS analyst Nicolas Gaudois raised the possibility that this year's products may remain at the sample stage, noting that additional development is required to enhance performance and efficiency.
The company's business scale is expanding rapidly. According to an earnings preview released by CXMT on the evening of the 16th, projected revenue for the first nine months of the year stands at 265 billion to 270 billion yuan. This represents roughly an 8.3- to 8.4-fold increase compared to 32.084 billion yuan over the same period last year. Net profit attributable to controlling shareholders is forecast to reach 131 billion to 132.5 billion yuan, turning around from a net loss of 5.28 billion yuan a year earlier. These figures are preliminary unaudited estimates released by the company.
CXMT attributed its earnings turnaround to severe DRAM supply shortages and surging prices fueled by expanding artificial intelligence (AI) computing demand. The company explained that enhanced production capacity, process optimization, high utilization rates, and an improved product mix collectively contributed to the performance, pointing to a combination of favorable industry conditions and internal production scaling.
A closer look at the latest single quarter reveals a disparity between revenue and profit growth momentum. Subtracting first-half figures from the cumulative guidance, third-quarter revenue is estimated at 114.69 billion to 119.69 billion yuan, with net profit attributable to controlling shareholders at approximately 53.395 billion to 54.895 billion yuan. According to calculations by memory market research firm CFM, the quarter-on-quarter revenue growth rate stands at 15.3% to 20.3%, whereas net profit growth is limited to 1.0% to 3.9%. While top-line growth is expected to post double digits, bottom-line growth represents a marginal increase from the previous quarter.
Goldman Sachs evaluated the results as outperforming its internal forecasts. According to a report by financial information outlet Gelonghui on the 20th, the midpoints of CXMT’s third-quarter revenue and net profit guidance surpassed Goldman Sachs’ estimates by approximately 30% and 17%, respectively. Citing AI-driven DRAM demand, customer diversification, and capacity expansion as key growth pillars, Goldman Sachs raised its target price for CXMT from 129 yuan to 130 yuan while maintaining a 'Buy' rating.
UBS held a different view. Citing financial news outlet Aastocks, UBS noted that the third-quarter net profit guidance fell short of both its own and consensus expectations, prompting the firm to lower its target price from 80 yuan to 76 yuan. UBS also maintained its 'Buy' stance. While both institutions kept their investment ratings intact, they arrived at opposing target price adjustments due to differing interpretations of whether the earnings met expectations.
The latest earnings preview omitted detailed cost breakdowns or metrics on the earnings contribution of next-generation products, leaving the exact reasons for the muted profit growth relative to revenue unexplained. Consequently, it remains difficult to isolate the individual impacts of surging memory prices versus internal competitiveness gains from the headline surge in cumulative performance. The competitive pressure CXMT ultimately exerts on Samsung Electronics and SK hynix will hinge on the actual volume of new product shipments it delivers, alongside the cost structures and profitability it secures in the process.
