IPO Analysis | Memory industry shifting from beta to alpha: Hongxin Yu (02681) achieves steady-state profitability and cycle resilience under an asset-light model

As the slope of DRAM contract price increases flattens and the market re-examines the long-term ROI of AI capital expenditure, the "forward premium" embedded in memory companies' valuations is being gradually squeezed out, which is the core reason for the current correction in the memory sector. From an investment analysis perspective, industry prosperity cannot substitute for judgment on individual operating capabilities. While observing price elasticity, the memory sector's shift from "beta performance" to "alpha screening" will become inevitable, and market pricing logic will also shift from price-increase expectations to identifying whether memory companies can achieve long-term steady development. Against this backdrop, Hongxin Yu (02681), which officially launched its IPO on October 30, provides a sample worth dissecting: while profits grow rapidly, the company continues to advance R&D in controller chips and memory products, making it a representative enterprise under the current "alpha screening" logic. It is understood that Hongxin Yu's IPO plans to globally offer 14.7172 million H shares. Of these, Hong Kong public offering accounts for approximately 10%, international offering accounts for approximately 90%, with an additional 15% over-allotment option. The offer price ranges from HK$72.29 to HK$82.9 per share, with each board lot of 100 H shares. The H shares are expected to commence trading on the Stock Exchange at 9:00 a.m. on November 12 (Thursday). Moreover, Hongxin Yu has introduced 7 cornerstone investors in this IPO, subscribing to approximately HK$452 million worth of H shares in aggregate, including two industrial capitals Transsion International Limited and Shenzhen Longsys Electronics Investment Limited which represent direct endorsement by downstream customers and industry peers of Hongxin Yu's technical strength in controller chips and memory modules. The cornerstone investors' genuine financial support essentially stems from recognition of Hongxin Yu's business model and profit quality. Under its asset-light operating model, Hongxin Yu possesses strong steady-state profitability, and the resilient durability of this profitability is clearly evidenced at both ends of the industry cycle. 2023 can be described as the cyclical bottom of the global memory industry, yet during this year, Hongxin Yu recorded a loss of only RMB117 million, with a net margin of -1.33%, significantly outperforming peers, while several peers at the time recorded losses several times that of Hongxin Yu. If the notable resilience demonstrated during the industry downturn is one facet of Hongxin Yu's steady-state development durability, then the company's steep profit elasticity during the upcycle provides another angle from which to observe its operating performance. Benefiting from the AI industry's vigorous development driving the memory industry into a high-prosperity cycle, Hongxin Yu turned profitable in 2024, recording net profit of approximately RMB483 million, which further increased to RMB1.364 billion in 2025, and achieved net profit of RMB3.841 billion in the first four months of 2026 already 2.82 times the full-year net profit of 2025. This steady-state profitability characterized by "small drawdowns and large elasticity" stems from the company's asset-light strategy of primarily outsourcing wafer processing, packaging, and testing to third-party manufacturers. This model reduces the capital investment required for building in-house wafer manufacturing and packaging/testing capacity, allowing resources to concentrate on core areas such as product definition, controller R&D, and quality management, maintaining operational flexibility amid cyclical fluctuations, and ultimately achieving asymmetric returns of downside resilience and upside operating leverage. This concentrated resource allocation approach enables the company to maintain counter-cyclical R&D intensity amid cyclical fluctuations. From 2023 to 2025, Hongxin Yu's R&D expenses were approximately RMB283 million, RMB392 million, and RMB493 million, respectively, totaling approximately RMB1.168 billion over the three years. Under sustained high-intensity R&D investment, Hongxin Yu has built four major technology platforms controller chip design, firmware algorithms, test systems, and memory media characterization analysis accelerating the conversion of technological reserves into product dividends. This conversion is mainly reflected at three levels: First, controller chip autonomy. Hongxin Yu has become one of the few independent memory manufacturers in China with the capability to independently design, develop, and commercialize controller chips. The company has mass-produced multiple self-developed controllers, with another 8 in the sampling, tape-out, and design stages, covering UFS, eMMC, USB, and PCIe SSD directions. Second, software-hardware synergy builds technical barriers. The synergy between self-developed controllers and firmware algorithms helps improve products' read/write performance, power consumption control, and cost structure, forming Hongxin Yu's solid technical moat. Third, the reusability of technology platforms supports scenario expansion. Based on the four major technology platforms, Hongxin Yu has achieved accelerated extension from its consumer electronics base to automotive-grade, enterprise-grade, and AI memory scenarios, building a cross-cycle product matrix. In the consumer electronics field, Hongxin Yu covers leading brands such as Xiaomi, Transsion, OPPO, vivo, TCL, and Xiaodu; as some customers extend into the automotive industry, Hongxin Yu entered automotive-grade memory in 2023 and has entered the Tier 1 supply chain, broadening application scenarios beyond consumer electronics. At the same time, the company's enterprise-grade SSDs have been mass-produced and launched, and AI server demand has driven DRAM revenue share to rapidly rise from 1.3% in 2023 to 24.8% in 2025, constituting the third growth curve after consumer electronics and automotive-grade. It can thus be seen that Hongxin Yu's steady-state profitability does not rely solely on memory price increases, but more on the accumulation of product definition rights and technical barriers, which has formed a significant distinction from module manufacturers that rely purely on processing and assembly. With profit resilience under the asset-light model and the continuous release of R&D-driven technology dividends, Hongxin Yu attracting strong subscription demand during the IPO period is likely to be a high-probability event.