New stocks outlook | Storage industry enters a cycle of rising prices, can JCS Technology with high inventory levels release high performance elasticity?

Since September 2025, the global storage chip market has seen a universal price increase, with many giants announcing price hikes. The price of DRAM products has increased by 15%-30% on average, while NAND flash memory prices have also been raised by 5%-10%. Behind the price increase in all categories of storage products is the explosion of demand for AI, fueling the "storage revolution." AI servers consume far more memory (DRAM) and storage (NAND Flash) than traditional servers, leading international storage giants to adjust their strategies by reducing capacity for traditional process products and focusing more resources on high-end products such as DDR5 and HBM. This strategic shift has led to a shortage of mid- to low-end storage products, resulting in structural shortages, and thus driving up prices for all categories of storage products. The market expects this round of price increases to continue until 2026, boosting investors' confidence in the future profitability of storage chip companies. As a result, storage concept stocks in the market have seen significant increases since September, with companies such as Shannon Semiconductor Technology (300475.SZ), Shenzhen Techwinsemi Technology (001309.SZ), and Shenzhen Longsys Electronics (301308.SZ) doubling their stock prices within a month. Taking advantage of the price increase cycle in the industry, Shenzhen-based Jingcun Technology is making a move towards the capital market. It was revealed that on September 29th, Jingcun Technology submitted an application for a main board listing to the Hong Kong Stock Exchange, with CMSC International and GUOTAI JUNAN I as the joint sponsors. As of October 13th, Jingcun Technology has appointed Orient (Hong Kong) Limited, PU Yin International Financing Limited, and Huafu Jianye Securities Limited as the overall coordinators for its IPO. According to the prospectus, Jingcun Technology is a leading global independent embedded storage product manufacturer, focusing mainly on the research, design, production, and sales of embedded storage products and other storage products. From 2022 to 2024, Jingcun Technology's revenues were 2.096 billion yuan, 2.402 billion yuan, and 3.714 billion yuan, with corresponding net profits of 44.417 million yuan, 37.013 million yuan, and 88.887 million yuan. In the first half of 2025, Jingcun Technology's revenue was 2.06 billion yuan, a year-on-year increase of 19.28%, and net profit was 115 million yuan, a decrease of approximately 5.7% year-on-year. Can Jingcun Technology capitalize on the trend of rising prices in the industry to achieve a higher valuation in its IPO? The answer may be found in the company's prospectus. Continued rapid growth in product sales driving steady performance improvement Established in December 2016, Jingcun Technology has been deeply involved in the storage industry for nearly 9 years, with a continuous focus on the research, design, production, and sales of embedded storage products and other storage products, establishing two major brands, RAYSON and ARTMEM. At the product level, Jingcun Technology's current embedded storage products include products based on DRAM (DDR, LPDDR), products based on NAND Flash (eMMC, UFS), and multi-chip packaging (MCP) embedded storage products (eMCP, uMCP, ePOP). In addition, the company also sells other products, including solid-state drives and memory modules. Jingcun Technology also provides testing and storage technology services to some customers as a complement to storage solutions. According to the prospectus, in 2024, the revenue share of DRAM-based products, NAND Flash-based products, and MCP embedded storage products was 66.6%, 18.1%, and 8.4%, respectively, while the revenue share of solid-state drives, memory modules, and testing services was 6.8%. Obviously, DRAM-based products are the main source of revenue for Jingcun Technology. Jingcun Technology stated that its products can be used in various consumer electronics fields, including smartphones, laptops, tablet computers, education electronics, smart homes, wearable devices, smart Siasun Robot&Automation, and other fields. Faced with the global transformation brought about by artificial intelligence, Jingcun Technology will also provide market-competitive storage solutions for epoch-making products such as AI smartphones, AI PCs, Siasun Robot&Automation, and smart cabin systems. From a sales channel perspective, Jingcun Technology adopts a dual-drive model of direct sales and distribution. In the middle of 2024, Jingcun Technology's revenue from direct sales and distribution accounted for 41.1% and 58.9%, respectively. From 2022 to 2024, the revenue of the two major sales channels showed a continuous upward trend. In terms of geographical location, Jingcun Technology's products are mainly sold to mainland China and Hong Kong. In 2024, Jingcun Technology's revenue in mainland China and Hong Kong accounted for 38.9% and 59.5% respectively, with a 1.2% revenue share in Korea and a 0.4% revenue share in other countries and regions. It is worth noting that the majority of the products sold to Hong Kong are also purchased by customers in mainland China, so Jingcun Technology's main focus is still on the domestic market. From a performance perspective, Jingcun Technology's sustained revenue growth from 2022 to 2024 is mainly due to the rapid increase in sales revenue of DRAM-based products and NAND Flash-based products, combined with the growth of other revenue including solid-state drives, memory modules, and testing services, all contributing to the continuous improvement of the company's overall revenue. The same trend was seen in the first half of 2025, with revenue growing by 19.28% to 2.06 billion yuan, and net profit declining by approximately 5.7% to 115 million yuan. With the continuous rapid increase in sales volume and the emergence of economies of scale, Jingcun Technology's gross profit margin has steadily increased, reaching 7.6%, 8.9%, and 9.2% from 2022 to 2024, but the net profit margin has fluctuated, reaching 2.1%, 1.5%, and 2.4% during the same period. This is mainly due to a decrease in other income in 2023, as well as increased administrative and other operating expenses affecting net profit release during the period. In the first half of 2025, Jingcun Technology's net profit declined by approximately 5.7% to 115 million yuan, despite revenue growing by 19.28% to 2.06 billion yuan. Short-term inventory dividends are expected to drive performance with high elasticity, while challenges remain in the medium to long term From an industry perspective, the current storage industry may have already ushered in new opportunities for development. Frost & Sullivan noted that from 2020 to 2024, the storage industry experienced fluctuations in supply and demand due to the impact of the pandemic, with a brief decline in market size. However, as AI models transition from single mode to multi-modal, driving the demand for data storage, and electronic products under the empowerment of AI evolve, the demand for high-performance, low-power storage will increase. Additionally, the intelligent development of automobiles and industrial sectors will require a large number of storage products. Therefore, they project that the global market size of semiconductor storage products (measured by shipments) will grow to 1.94 billion units by 2029, with a compound annual growth rate of 7.1% from 2024 to 2029, significantly higher than the 1.8% growth rate of the previous five years. Embedded storage products are expected to grow slightly faster than the overall market, with a compound annual growth rate of 7.4%. According to the prospectus, based on the 2024 shipment volume, Jingcun Technology ranks second among the top five independent embedded storage manufacturers worldwide with 140 million units, and ranks first among the top five independent LPDDR manufacturers globally with a shipment volume of 59.1 million units. Obviously, Jingcun Technology has already achieved a certain scale in specific products within the industry and is expected to benefit from the rapid growth in industry demand. Currently, due to the strategic structural adjustments of the storage giants leading to a structural shortage in the industry, driving up prices of all categories of storage products, Jingcun Technology can benefit directly from appreciating inventory in the short term. Industry data shows that storage module companies can realize profit release through the inventory cycle during price hike cycles, especially second-tier manufacturers with flexible scales are expected to increase their performance elasticity, and the release of inventory dividends is expected to drive a Jingcun Technology gross profit margin improvement. According to the prospectus, from 2022 to 2024 and in the first half of 2025, Jingcun Technology's inventories were 682 million yuan, 873 million yuan, 1.162 billion yuan, and 2.001 billion yuan respectively, accounting for approximately 65.6%, 58.1%, 50.0% and 61.6% of total current assets in each period. Such high inventory levels are expected to allow Jingcun Technology to enjoy high elasticity in its business operations in the short term. However, in the medium term, upstream wafer manufacturers (such as Changxin and Yangtze Memory) in the midst of the price hike cycle may prioritize supply to major customers, putting pressure on small and medium-sized module manufacturers in terms of raw material procurement and price fluctuations. During this time, Jingcun Technology will need to purchase wafers at higher prices, but the transmission of product price increases to downstream customers may lag, potentially squeezing profit margins. Moreover, high-cost inventory procurement will require more capital, which may increase cash flow pressure. Looking at the long term, in the current international situation, the trend towards nationalization of the storage industry appears to be inevitable, but industry differentiation may accelerate. This logic is driven by the price hike cycle in storage that pushes resources upstream, with middle-tier module manufacturers facing tiered differentiation. Jingcun Technology will need to establish differentiated competitive barriers through continuous technological upgrades and market focus to avoid being squeezed by leading companies in the long term. In fact, Jingcun Technology's low bargaining power with upstream and downstream partners can also be seen through its trade receivables turnover days. According to the prospectus, from 2022 to 2024, Jingcun Technology's trade payable turnover days were 10 days, 12 days, and 14 days, while the trade receivable turnover days were 26 days, 37 days, and 54 days. The turnover days for accounts receivable are much longer than those for accounts payable, with a clear trend of elongation, which is not conducive to the rapid turnover of Jingcun Technology's funds, leading to the need for the company to push up its liabilities if it wants to expand. As of June 30, 2025, Jingcun Technology's debt-to-asset ratio was 78%, an increase of approximately 6 percentage points from 2022. The significant elongation of trade receivables turnover days at Jingcun Technology is directly related to its high customer concentration. According to the prospectus, the revenue share from the top five customers of Jingcun Technology was 49.7%, 45%, and 49.3% from 2022 to 2024. The high customer concentration weakens Jingcun Technology's bargaining power and presents potential risks of business impact from the loss of top customers. In addition, the high amount of accounts receivable is also worth noting. As of June 30, 2025, Jingcun Technology's total trade receivables and notes receivable amounted to 636 million yuan, nearly one-third of the company's current revenue. If there are bad debt provisions, it may have a certain impact on the company's profitability. Overall, Jingcun Technology has achieved steady growth in recent years, and with the storage industry entering a price hike cycle, Jingcun Technology is expected to release high performance elasticity with the help of high inventory dividends in the short term. However, the company may face challenges in the medium term such as cost and funding pressures, and in the long term, it will need to explore how to build differentiated competitive barriers. Investors should also pay attention to risks such as high customer concentration and elongated accounts receivable turnover days.