CXMT (688825) Report Interpretation

Overview

This report updates Goldman Sachs’ view on CXMT following a strong 2Q26 result. The institution maintains Buy and argues that the company is positioned to benefit from China’s AI-driven DRAM and HBM demand, customers’ efforts to diversify supply, capacity expansion and continuing product-mix upgrades.

Core views

CXMT delivered a strong 2Q26 beat. Revenue reached Rmb99.5bn, up 96% quarter-on-quarter and 977% year-on-year, and was 52% above Goldman Sachs’ estimate and 54% above Bloomberg consensus. Goldman Sachs attributes the result to AI-driven DRAM demand, customers diversifying their supplier networks to secure supply, and DRAM prices remaining high. Gross profit was Rmb87.2bn, operating profit Rmb81.8bn and net income Rmb52.8bn. Gross margin reached 87.6%, operating margin 82.2% and net margin 53.1%; the 5.4% operating-expense ratio was also better than both Goldman Sachs’ estimate and Bloomberg consensus. Net income exceeded Goldman Sachs’ estimate by 75% and consensus by 260%. The report’s demand case centers on China’s expanding DRAM market as AI server shipments rise. Goldman Sachs forecasts China DRAM demand to grow at a 50% CAGR from 2026E to 2028E, reaching US$257bn in 2028E. It expects conventional DRAM demand to grow at a 43% CAGR to US$225bn, while HBM demand grows at a much faster 188% CAGR to US$32bn. The institution views CXMT as a key local beneficiary because AI raises demand for both server DRAM and HBM, while customers seeking more resilient supply chains broaden their supplier bases. Goldman Sachs also highlights execution and product mix as important enablers. CXMT is expanding capacity and upgrading its product mix to capture the demand environment. Its self-developed LPDDR6 chip is described as outperforming the previous LPDDR5X generation through architectural and transmission optimization, with peak data-transfer speeds of 12,800Mbps and maximum capacity of 16GB. Samples have been supplied to key customers for validation, and mass production is being accelerated. After incorporating the 2Q26 result, Goldman Sachs raises its 2026E net-income forecast by 14% to Rmb183.8bn and its revenue forecast by 11% to Rmb354.9bn. It keeps 2H26–2030E estimates largely unchanged. The maintained Rmb129 12-month target price is based on a discounted P/E approach: Goldman Sachs applies an unchanged 16.6x 2030E target P/E multiple to 2030E EPS and discounts the result back to 2027E using a 12.7% cost of equity. The target multiple is based on peers’ relationship between forward P/E and forward-year earnings growth; CXMT’s 2030–31E average net-income growth is assumed at 21%.

Analysis framework

Goldman Sachs first compares the reported quarter with its own estimate and Bloomberg consensus, then links the earnings beat to DRAM pricing, AI demand and supply-chain diversification. It combines this with a China DRAM market forecast, CXMT’s capacity and product roadmap, revised earnings estimates, and a peer-informed discounted P/E valuation to maintain its target price.

Methodology notes

• Industry AnalysisSupply-demand framework

  DRAM demand and supply-chain diversification analysis

  The report links AI server demand, high DRAM prices and customers’ supplier diversification to stronger demand for CXMT’s products.

• Valuation methodsP/E and PEG Valuation

  Discounted P/E valuation

  Goldman Sachs selects a 16.6x 2030E P/E from peers’ relationship between valuation and earnings growth, applies it to CXMT’s 2030E EPS, and discounts the value back to 2027E using a 12.7% cost of equity.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• CXMT (688825.SH)

  Primary covered company and identified beneficiary of China’s rising AI-driven DRAM demand and customer supply-chain diversification.

  Strengths

  Strong 2Q26 execution, high profitability, capacity expansion, and LPDDR6 commercialization progress.

  Comparison

  Its target P/E is derived from peers’ correlation between forward P/E and forward-year earnings growth.

  Risks

  Fiercer-than-expected competition, weaker-than-expected market demand and geopolitical instability.

Key data

• 2Q26 revenueRmb99.5bnUp 96% QoQ and 977% YoY; 52% above Goldman Sachs’ estimate and 54% above Bloomberg consensus.
• 2Q26 net incomeRmb52.8bnUp 113% QoQ; 75% above Goldman Sachs’ estimate and 260% above Bloomberg consensus.
• 2Q26 margins87.6% gross margin; 82.2% operating margin; 53.1% net marginThe operating-expense ratio was 5.4%, better than Goldman Sachs’ estimate and Bloomberg consensus.
• China DRAM demandUS$257bn by 2028EGoldman Sachs forecasts a 50% CAGR in 2026–28E; HBM demand is forecast to reach US$32bn, a 188% CAGR.
• 2026E net income forecastRmb183.8bnRaised 14% following the 2Q26 result.
• Target valuationRmb129 target price; 16.6x 2030E P/E; 12.7% cost of equityTarget price and target multiple are unchanged.

Impact & implications

Goldman Sachs believes CXMT can translate a strong AI-led local DRAM demand cycle into continued revenue growth and profitability, supported by capacity expansion, a broader customer supply base and higher-value products including LPDDR6 and HBM-related demand.

Risks

• Fiercer-than-expected market competition could weaken CXMT’s position or profitability.
• Weaker-than-expected market demand could reduce the expected growth in DRAM and HBM demand.
• An unstable geopolitical situation is a stated downside risk.

What to watch

• China AI-server demand and the associated growth in conventional DRAM and HBM demand.
• Customer validation and mass-production progress for CXMT’s LPDDR6 products.
• CXMT’s capacity-expansion execution and product-mix upgrade.
• DRAM pricing and the pace of customer supply-chain diversification.