[Click eStock] Is It Worth Investing in Chinese Semiconductor Companies?

Mirae Asset Securities has raised its target price for Changxin Memory Technologies (CXMT) from 80 yuan to 90 yuan.

On September 2, Kang Minhee, a researcher at Mirae Asset Securities, stated, "We expect that the price increase of DRAM will continue in the second half of this year due to the ongoing global memory supply shortage, and therefore, we have raised our estimated average selling price (ASP) for this year." Kang added, "CXMT is currently trading at a 56% discount to the average price-to-earnings ratio (PER) of the top five semiconductor companies in China for next year."

CXMT’s earnings leverage is expected to accelerate. Kang explained, "Sales in the second quarter of this year reached 99.51 billion yuan, up 95.9% from the previous quarter, while operating profit soared 130.6% to 81.71 billion yuan, both of which far exceeded estimates." She continued, "For the third quarter of this year, we forecast sales at 120.16 billion yuan and operating profit at 96.13 billion yuan, as higher pricing bases continue to push profit growth through increased selling prices."

Annual sales for this year are estimated at 407.4 billion yuan, with operating profit expected to reach 320 billion yuan. Kang commented, "Price increases are expected to drive top-line growth throughout this year, and long-term supply contracts with major clients will persist due to shortages in generic DRAM supply in China." She added, "Starting next year, revenue contribution is anticipated to expand as investments in artificial intelligence (AI) infrastructure by Chinese big tech companies drive major server demand higher and as production capacity increases. Furthermore, the expansion of HBM (High Bandwidth Memory) supply for domestic AI accelerators is also expected to contribute to sales growth."

This content was produced with the assistance of AI translation services.