Summary of Key Points
On July 16th, the A-share storage sector experienced a stark contrast: De Ming Li, a leading storage company, saw its profits soar by 50 times but still hit the daily limit down due to concerns about a slowdown in growth during the second quarter; meanwhile, Chang Xin Technology, another domestic storage leader, launched what could be its third-largest IPO in history, raising 57.9 billion yuan and setting a new record for the STAR Market. Behind Chang Xin is Hefei State-owned Assets, which has a profit margin of over 100 billion yuan, with Alibaba and its employees also set to benefit. However, there is significant disagreement in the market regarding its valuation (with overseas estimates of a market value of 3.5 trillion yuan versus an A-share issuance valuation of 58 billion yuan). Institutions are aggressively bidding for shares (Huan Fang deployed 153 products for the offering), and companies in the supply chain, such as NIO and ZTE, are strategically entering the sector. Ordinary investors need to be cautious about the cyclical risks involved.
The Divided Storage Sector: De Ming Li's Limit Down is Not an Accident; Chang Xin's IPO is Inevitable
Why did De Ming Li's performance soar yet still see a limit down?
The storage industry is highly cyclical, similar to a roller coaster—profits can be huge in good times but losses can be severe in bad times. The market focuses not on current earnings but on whether future profits will be even greater. De Ming Li reported net profits of 5.7-6.5 billion yuan in the first half of the year (after a loss last year), with earnings of 3.3 billion yuan in the first quarter, and a 6%-30% decline in the second quarter, indicating that the cycle may be reaching its peak, leading to immediate market skepticism.
Why is Chang Xin's IPO such a big deal?
The issuance price is 8.66 yuan per share, with an initial raise of 57.9 billion yuan (with the potential for an additional 66.6 billion yuan through over-allotment), surpassing SMIC's 53.2 billion yuan, making it the largest IPO in the STAR Market's history. Institutions are eager to participate: 93 public funds and 5,419 allotment recipients plan to subscribe for 67.97 billion shares (with leading funds like E Fund submitting bids for over 40 billion shares each), demonstrating their belief in the logic of domestic substitution.
Who Are the Biggest Winners?
Hefei State-owned Assets: A Profit Margin of Over 100 Billion Yuan
After equity penetration, Hefei State-owned Assets holds 36.79% of the shares. With a market value of 2 trillion yuan, the potential profit margin would be (2 trillion × 36.79%) - 30 billion yuan ≈ 705.8 billion yuan; even at a lower market value of 580 billion yuan, the profit margin would still be 580 billion × 36.79% - 30 billion yuan ≈ 183.4 billion yuan. This is a classic example of Hefei's investment in technology (they have previously made profits from investments in BOE and NIO).
Alibaba: A Minimum Profit Margin of 20 Billion Yuan
Alibaba holds a total of 4.97% of the shares, and with a market value of 58 billion yuan, the potential profit margin would be 58 billion × 4.97% - investment ≈ 20 billion yuan (with the potential for nearly 10 billion yuan).
Employees: Could They Become Millionaires?
35% of the 19,000 employees hold shares, but the lock-up period is more than three years, with distributions occurring in phases. Whether they can realize this profit depends on how long the current cyclical boom continues (given that the current profits are due to both the cycle and domestic substitution).
Valuation Disagreement: Overseas at 3.5 Billion Yuan vs A-share at 58 Billion Yuan—What's the Controversy?
Why Such a High Overseas Valuation?
On the decentralized platform Hyperliquid, Chang Xin's perpetual contracts are priced at 54 yuan (versus an A-share issuance price of 8.66 yuan), implying a market value of 3.5 trillion yuan. The reason is that overseas investors place more emphasis on the long-term logic of domestic substitution—China was previously dependent on Samsung, SK Hynix, and Micron for DRAM chips, with Chang Xin being the only domestic company capable of mass-producing these chips, which is significant for breaking the monopoly.
Why Is the A-share Valuation More Conservative?
The main concern is that the cycle may not be sustainable: Chang Xin incurred losses of 36.6 billion yuan from 2016 to 2024 and only made a profit of 1.875 billion yuan in 2025, with half of its 2026 earnings coming in just the second half of the year (an average daily profit of 300 million yuan). The current profits are partly due to global storage price increases and domestic substitution. If the cycle turns down, profits could shrink significantly.
Technological Gap:
Chang Xin's manufacturing process is still one generation behind leaders like Samsung, but it benefits from the domestic market and policy support. Whether it can catch up in the long term depends on its R&D investment (the funds raised from the IPO will mainly go towards research and expansion).
Institutional Bidding Frenzy: Why Are Companies Like NIO Entering the Sector?
Huan Fang Quantitative Investment: What Are They Betting On?
Huan Fang, one of China's largest quantitative private equity firms with 70 billion yuan in management assets, deployed all 153 of its products for the offering, indicating that they believe the issuance price is undervalued. The offline bidding process involves submitting prices and quantities; all Huan Fang products bid at 8.78 yuan (slightly above the issuance price), showing their expectation of a rise in stock price after listing.
Companies in the Supply Chain: NIO, ZTE, etc.: Bonding with Leaders to Ensure Security
NIO's Power Technology received 158 million shares with a lock-up period of 18 months, and companies like ZTE and Chery also participated. The logic is simple: DRAM is essential for all electronic devices—smartphones, servers, and autonomous vehicles require storage. With the growing demand for smart vehicles (which need to process large amounts of data), it's better to partner with Chang Xin to ensure supply chain security. Alibaba's lock-up period of 36 months is twice that of NIO, reflecting its commitment to long-term cooperation (Alibaba Cloud needs a large number of storage chips).
For Ordinary Investors: Opportunity or Risk?
1. Expected Returns from New Share Offerings: You could make about 20,000 yuan, but don't be too greedy
Each new share order costs 4,330 yuan, and the expected success rate is 0.3%-0.7% (higher than for typical new shares). If the market value reaches 3 trillion yuan after listing, a successful bid would earn (54-8.66) × 500 ≈ 22,700 yuan; if it reaches 5 trillion yuan, earnings would be (90-8.66) × 500 ≈ 40,700 yuan. However, the profit this year is due to the "liquidity premium" between the primary and secondary markets, not the company's actual value.
2. Risk Points: The High Issuance Price and Potential Losses in a Downward Cycle
The P/E ratio of 308 times is much higher than the industry average. If the storage cycle peaks and performance declines, the stock price could plummet, potentially wiping out any gains from new share purchases.
3. Industry Logic: Chang Xin Can't Save the Storage Sector Alone, but It Can Survive
The fate of the storage sector depends on global supply and demand (such as expansion plans by Samsung, demand from smartphones/servers, and AI's impact on HBM). However, as the only domestic DRAM leader, Chang Xin has policy and market support, allowing it to withstand downturns (domestic companies will prioritize purchasing its products).
In Conclusion:
New share offerings can be a viable option (with low entry barriers and high success rates), but don't invest heavily. In the long term, Chang Xin's value lies in its role in domestic substitution, though cyclical fluctuations need to be monitored.
This news story highlights both the potential for wealth creation and the associated risks in China's "domestic technology breakthrough" narrative. By understanding the cyclical dynamics, ordinary investors can approach this "storage sector boom" rationally.