UBS initiated coverage of Cxmt Corporation in an August 7 report, assigning a "Buy" rating with a target price of 70 yuan. Based on the closing price of 52.48 yuan on August 7, this target implies a potential upside of approximately 33%. The bank sees the company at the intersection of a tight global DRAM supply-demand dynamic, AI-driven demand growth, and accelerated domestic substitution, which could rapidly enhance profitability in the coming years.
UBS projects net profits for Cxmt Corporation of 139.7 billion yuan, 332.8 billion yuan, and 428.2 billion yuan for 2026 through 2028, respectively, representing a compound annual growth rate of 75%. This is roughly 19% higher than the Wind consensus average. During the same period, the company's EBIT margin is expected to remain at a high level of 75% to 85%, significantly above historical DRAM industry averages.
UBS believes the core logic supporting a valuation re-rating for Cxmt Corporation rests on three pillars: the continuation of a global DRAM supply shortage cycle, market share gains through capacity expansion, and profit leverage from a product mix shift toward server DRAM and HBM.
DRAM Supply Tightness Expected to Persist Through 2028
The global DRAM supply-demand landscape is becoming a key support for Cxmt Corporation's profit growth. UBS estimates that a DRAM industry supply shortage will last at least until the second quarter of 2028, driven by sustained investment in AI infrastructure and limited capacity expansion by memory manufacturers.
On the demand side, servers have become a primary growth driver for DRAM. According to Gartner data, server DRAM bit demand is expected to grow at a compound annual rate of 66% from 2025 to 2027, significantly higher than the overall DRAM market's roughly 30% growth. Demand from AI servers is particularly strong. UBS estimates that DRAM configuration in AI servers at hyperscale cloud providers will be 27 times that of traditional servers.
In terms of pricing, UBS forecasts DDR contract prices will rise from $0.40 per Gb in 2025 to $1.61 per Gb in 2026, and further to $2.24 per Gb in 2027, representing a two-year compound annual growth rate of 137%. During the same period, the average HBM price is expected to increase from $1.52 per Gb in 2025 to $3.13 per Gb in 2027.
Notably, because top manufacturers like Samsung, SK Hynix, and Micron are increasingly shifting capacity toward HBM, supply for traditional DDR products is becoming even tighter. Since Cxmt Corporation's current revenue structure is still primarily based on DDR and LPDDR, it is well-positioned to benefit directly from the rise in commodity DRAM prices.
Accelerated Capacity Expansion Could Lift Global DRAM Supply Share to 10% by 2028
Capacity expansion will be a crucial engine for Cxmt Corporation's growth in the coming years. The company plans to raise funds via an IPO to expand capacity and advance process technology. UBS estimates the company's monthly DRAM wafer capacity will increase from 240,000 wafers at the end of 2025 to 466,000 wafers by the end of 2028, with new capacity coming mainly from expansion of existing fabs in Hefei and Beijing, as well as the gradual ramp-up of new fabs in Shanghai and Hefei.
From a market share perspective, UBS expects Cxmt Corporation's DRAM bit shipments to achieve a compound annual growth rate of 40% from 2025 to 2028, reaching approximately 58 billion GB by 2028. This would correspond to a global DRAM bit supply share of about 10%, up from roughly 7% in 2025.
Process technology upgrades will also drive higher output per wafer. Cxmt Corporation has already progressed from G1 and G3 nodes to the G4 node and is moving toward the G5 node. UBS believes that migrating to advanced processes will increase storage capacity per wafer, allowing the company's bit shipment growth to outpace its capacity growth rate.
Localization Demand Unlocks Growth, Server DRAM and HBM Become Key Focus
The demand for semiconductor localization is providing long-term growth space for Cxmt Corporation. The company has made progress in customer acquisition. Reports indicate that ByteDance has signed a DRAM procurement agreement with Cxmt Corporation worth over $7 billion, and Tencent has also signed a long-term server DRAM supply agreement valued at over 20 billion yuan. Companies such as Alibaba and Lenovo have also become customers.
In the consumer electronics sector, Transsion Holdings previously stated that Cxmt Corporation accounts for over 50% of its DRAM procurement.
UBS projects that Cxmt Corporation's share of the Chinese server DRAM market will rise from 12% in 2025 to about 20% in 2028, with server-related DRAM bit shipments growing from 4.9 billion GB to 29.5 billion GB, a compound annual growth rate of 82%.
Is High Profitability Sustainable? UBS Optimistic on Profit Release
The rapid improvement in Cxmt Corporation's profitability is another key focus for the market. The company's operating profit margin reached 70% in the first quarter of 2026, but the market has previously harbored doubts about whether such high margins can be sustained, primarily concerning depreciation pressure and personnel cost growth.
UBS believes that as revenue scales expand, fixed cost pressure will gradually decrease, leaving room for further improvement in profitability. The bank forecasts gross margins for Cxmt Corporation of 82%, 89%, and 89% for 2026 through 2028, respectively. At the same time, depreciation costs as a percentage of revenue are expected to fall from the 40% to 119% range seen between 2022 and 2025, down to 6% to 10% between 2026 and 2028.
An improving product mix will also further boost profit margins. UBS estimates that the share of server DRAM revenue will increase from 26% in 2025 to about 51% in 2028, while the share from mobile DRAM will decline from 59% to 38%. Since server DRAM prices are typically higher than mobile products, this structural upgrade will drive further profitability improvement.
Leveraging operating leverage, UBS expects Cxmt Corporation's EBIT margin to remain between 75% and 85% from 2026 to 2028, before potentially falling back to between 68% and 74% from 2029 to 2030 as DRAM prices normalize.
Synergy of Profit Growth and Valuation Lifts, Cxmt Corporation Poised for a Double Boost
For valuation, UBS employs a price-to-book ratio and return on equity (P/B-ROE) model to price Cxmt Corporation, a methodology similar to its coverage of Samsung Electronics and SK Hynix. The bank sets a target price of 70 yuan for Cxmt Corporation, corresponding to 8.6 times the expected 2027 book value, based on an average ROE of 37% from 2028 to 2030 and an 8.5% cost of capital. This valuation level is roughly 40% higher than the average 6.1 times 2027 P/B ratio for major A-share wafer foundry companies.
UBS believes the premium primarily stems from Cxmt Corporation's higher expected profit growth and the earnings elasticity provided by the DRAM super cycle. As the DRAM supply-demand cycle strengthens, localization demand continues to be released, and the product mix upgrades, Cxmt Corporation is poised to experience a "Davis Double Play" driven by both earnings growth and valuation expansion.
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