China's CXMT Ranks First in Market Cap…Robot Company Halves in Value

CXMT (ChangXin Memory), one of the most notable companies in the recent Chinese IPO market, has climbed to the top of China's market capitalization, garnering significant market attention. Driven by the boom in the memory market this year, CXMT has achieved rapid performance growth, leading to a rise in its stock price and securing a high market position, as Team Leader Kim Gyeong-hwan noted, "CXMT is now number one in China's market cap, isn't it?"

In contrast to CXMT, the robot company Unitree Robotics showed a divergent trend in the Chinese IPO market, with its stock price halving just two weeks after listing. Team Leader Kim Gyeong-hwan pointed out, "Isn't Unitree the best at making robots in the world? ... Its stock price halved just two weeks after listing," indicating that despite Unitree's excellent technology, it was embroiled in an overvaluation controversy. This difference is analyzed to have arisen from the differing valuation methods of the two companies' management and their actual profitability.

Looking at the practical profit model of Unitree's robot business, it was found that approximately 70% of its revenue is concentrated on supplying raw and subsidiary materials for educational purposes. Team Leader Kim Gyeong-hwan explained, "Compared to Unitree's fame, about 70% goes to educational companies and schools as raw and subsidiary materials, and for industrial use... we still don't know how much it will contribute to the profit margin." This means that a high proportion of sales are to government agencies or schools, suggesting that it has not yet entered the stage of verifying profitability in the full-scale industrial robot market.

CXMT failed the STAR Market 50 Index inclusion review in September. Team Leader Kim Gyeong-hwan stated, "There was a review in September, but it was rejected this time. ... The Chinese media's assessment is this: ... There were many rumors that a portion would be quickly included in the index, but the reason for the rejection this time is... the Korean market in June, July, and August had an excessively large proportion of certain stocks... a bit of a lesson learned." Although it is not a stock directly purchased by foreigners, its failure to be included in an index that significantly affects institutional and pension fund supply and demand shows that Chinese authorities are adopting a cautious market management strategy, taking the concentration phenomenon in specific stocks seen in the Korean stock market as a lesson.

Despite meeting the technical inclusion requirements, Chinese authorities showed restraint in CXMT's early index inclusion. Team Leader Kim Gyeong-hwan explained, "Technically, the exchange and authorities seemed to push for it. But they said, 'Let's just put this in slowly,'" implying that while there was ample possibility for inclusion as a specially listed stock, the authorities chose a 'go slow' strategy to refrain from premature inclusion and prevent market overheating.

This year, China's exports recorded an unprecedented boom not only in surging AI-related items but also in general items excluding AI. Team Leader Kim Gyeong-hwan emphasized, "This year, China's exports, like Taiwan and Korea, are indeed at an all-time high, surpassing past cycles." While the growth rate of AI-related items reached 60-70%, items excluding AI also showed a high growth rate of 20%, confirming that export unit price increases are diversifying into areas such as shipbuilding, electric vehicles, and solar power.

Chinese exports are diversifying not only in terms of items but also geographically. Team Leader Kim Gyeong-hwan mentioned, "It's spread to all regions," emphasizing that export channels are expanding to every region worldwide. In particular, what started as rerouted exports after the US-China trade war has now become mainstream exports, with even accumulated exports to the US turning to an increase this year.

China's domestic market is experiencing a structural slump as it reduces credit and debt. Team Leader Kim Gyeong-hwan explained, "Looking at domestic demand, yes, domestic demand has further contracted, so it's somewhat difficult to say it has been absorbed, and basically, it's still in a more depressed state." Despite this domestic sluggishness, rural areas and third- and fourth-tier cities show a peculiar phenomenon of higher income growth rates than GDP, while export industries, supported by national capital, continue to grow.

Behind China's economic growth model is a strategy of maintaining only the minimum standard for people's livelihoods and consumption. Team Leader Kim Gyeong-hwan stated, "Basically, whether intentional or not, China's recent approach seems to be to maintain only the minimum standard for livelihoods and consumption, and the income growth rate in most rural and third- and fourth-tier cities, which we can refer to as supporting the approval rating, is higher than GDP." This shows China's current policy of strengthening a portfolio focused on productivity, engineers, and exports to drive national economic growth.

US-China relations have already entered a long-term truce, and the possibility of easing tariffs and export restrictions is low. Team Leader Kim Gyeong-hwan explained, "Even if the US and China meet, it's no longer just a temporary breakup after dating; it's like a couple in an arranged marriage where passion can't increase, and the situation is about whether it's a dispute or a court case, or just comfortably raising children. So, they will only have small deals this time, and the truce will just be extended." This means that the US and China have become coexisting partners through repeated small deals and truces, and Chinese companies' external activities are expected to continue even under these circumstances.