Longsys (HKG: 09976) officially began trading on the main board of the Hong Kong Stock Exchange on September 8, yet the company, which carries the title of "the world's second-largest independent memory module manufacturer," failed to secure a favorable market reception. The stock opened below its offering price of HK$236 per share, dipped below that level multiple times during the session, and ultimately closed at HK$233.6, marking a decline of over 1%. On the same day, Longsys' A-shares (SHE: 301308) edged up 0.18% to close at RMB 358.86. For the same company with identical financial reports, the two markets delivered starkly contrasting valuations.
A notable discrepancy emerged in the pricing of the H-share offering. The HK$236 issue price converts to approximately RMB 204, representing a discount of more than 40% compared to the A-share closing price of RMB 358.22 on September 7. This valuation gap becomes even more striking when considering that just over two weeks prior, the company had completed a private placement on the A-share market at RMB 560 per share—meaning the H-share pricing was set at less than 40% of that figure.
Lukewarm reception on the H-share market
Longsys stands as a leading player in China's NAND flash memory module sector. Founded in 1999 as Shenzhen Longsys Electronics Co., Ltd., the company completed its joint-stock reform in 2018 and listed on the Shenzhen Stock Exchange's ChiNext board in August 2022. Beginning in 2025, Longsys actively pursued a Hong Kong listing, though the journey proved challenging. The company submitted its initial H-share listing application on March 21, 2025, with China Securities and CITI serving as joint sponsors. After receiving the China Securities Regulatory Commission's filing notice for overseas issuance on September 15 of that year, the application ultimately lapsed due to the six-month validity period for prospectuses under Hong Kong Stock Exchange rules.
The breakthrough came in 2026. On May 29, Longsys resubmitted its H-share listing application with the same joint sponsors. The offering price was set at HK$236 per share on September 4, with trading commencing on September 8—marking a journey of approximately eighteen months from start to finish. Investor sentiment revealed a clear divergence across markets: the Hong Kong public offering was oversubscribed by 40.32 times, while the international offering attracted only 3.88 times subscription, indicating more restrained institutional participation.
Longsys had made considerable preparations for the offering. The company proactively priced its shares below the HK$240.6 maximum guidance price stated in the prospectus. The offering comprised approximately 26.08 million shares, expandable to about 29.99 million if the over-allotment option were fully exercised, with proceeds primarily directed toward AI high-end memory R&D, controller chip development, and advanced packaging and testing. The cornerstone investor lineup was equally impressive, featuring 14 domestic and international investors including Transsion International, Lenovo, Lens Technology Hong Kong, Ingenic's Hong Kong arm, Colorful Technology, TCL Technology's affiliate AHGO, and CITIC Asset Management Hong Kong, collectively subscribing approximately USD 151 million (around HK$1.185 billion), representing 18.89% of the offering shares. Despite these measures, the stock price remained unsupported, leaving investors who entered through the heavily oversubscribed public offering underwater from day one.
Why the debut slump occurred
Pricing concerns have taken center stage in explaining the weak debut. Huang Lichong, president of Shenzhen Huisheng International Capital, noted in an interview that the overall pricing remained relatively high without leaving sufficient room for the market: the HK$236 offering price was only approximately 1.91% below the HK$240.60 upper limit of the indicative range. Meanwhile, the issuance size was expanded by roughly 15% through full exercise of the offering adjustment right. "When price decreases slightly while quantity increases, one cannot simply focus on the former and conclude that the issuance has built a substantial safety margin," Huang remarked.
The first-day decline for Longsys is not an isolated case in Hong Kong. According to Huang, statistics from the Hong Kong Stock Exchange indicate that IPO proceeds in the first eight months of 2026 reached approximately HK$342.4 billion, representing a 153% year-on-year increase—the primary market's fundraising capacity is recovering, yet this neither guarantees that all new stocks should rise on their debut nor validates every company's offering valuation.
Surging profits and continued fundraising
In Huang's assessment, Longsys' experience offers a crucial lesson for future Hong Kong listings: pursuing a Hong Kong listing means accepting an independent valuation from a different set of investors, rather than simply converting the A-share price into Hong Kong dollars and applying a discount. This is particularly relevant for cyclical companies, which must clearly communicate three key aspects—earnings potential under normal market conditions, the cash required to sustain growth, and how inventory and supply chain risks are managed. Companies must also balance issuance scale and pricing rather than merely maximizing fundraising amounts.
Applying this framework to Longsys reveals a compelling picture. For the first half of 2026, the company's financial results appeared impressive: revenue reached RMB 24.088 billion, up 136.26% year-on-year; net profit attributable to shareholders surged to RMB 10.577 billion, a remarkable 71,528.66% increase; enterprise-level storage revenue grew 208.80%; and gross margin on storage products reached 59.08%. This profitability stems from the company's position within the industry chain. As a memory module manufacturer operating in the intermediate segment of the semiconductor storage chain, Longsys procures NAND Flash and DRAM components from upstream wafer manufacturers, processes them into products such as solid-state drives and memory modules, and delivers complete solutions to downstream end customers. With NAND prices continuing to rise amid AI computing power expansion and enterprise storage demand, Longsys, positioned as a module manufacturer, has captured a substantial portion of this pricing dividend.
However, extending the timeline reveals that this high growth is built upon an extremely low base: the RMB 10.577 billion profit corresponds to a base of only RMB 14.76 million in the same period last year, and the company recorded a loss of RMB 152 million in the first quarter of 2025. In fact, Longsys' earnings trajectory in recent years has been characterized by dramatic fluctuations—net profit of approximately RMB 1 billion in 2021; a sharp decline to RMB 72.97 million in 2022, the year of its ChiNext listing, representing a 92.81% year-on-year drop; a swing to a substantial loss of RMB 828 million in 2023; a recovery to approximately RMB 500 million in 2024; another loss in the first quarter of 2025; and explosive growth in the first half of 2026.
Despite the surge in profits, Longsys' cash flow has not improved correspondingly. In the first half of this year, net cash flow from operating activities stood at negative RMB 3.151 billion, compared to RMB 693 million in the same period last year—a decline of 554.82%. The primary drain on cash is inventory. As of the end of June, Longsys' book inventory reached RMB 25.777 billion, an increase of approximately 120.73% from RMB 11.678 billion at the end of 2025. This represents 60.12% of total assets of RMB 42.877 billion—a single asset category consuming six-tenths of the company's assets, with inventory turnover days extending to 340.52 days.
This situation may partly explain why Longsys continues to seek capital from the market. Beyond the Hong Kong listing, the company has simultaneously advanced a RMB 3.7 billion private placement on the A-share market, completing the process from announcement to execution in just eight months. In December 2025, Longsys announced plans to issue shares to specific investors to raise no more than RMB 3.7 billion, with RMB 880 million allocated to AI-focused high-end memory R&D, RMB 1.22 billion to semiconductor storage controller chip series R&D, RMB 540 million to high-end semiconductor storage packaging and testing facility construction, and RMB 1.1 billion to supplement working capital. In May 2026, the private placement was approved by the Shenzhen Stock Exchange. The placement was completed in August, attracting participation from several prominent institutions including E Fund Management and Nord Fund, at an issuance price of RMB 560 per share. However, as of the Hong Kong market close on September 8, Longsys' A-shares stood at RMB 358.86, significantly below the placement price.
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