CR Micro, First Star Market Red Chip Stock, Up 228% on IPO Day
The major state-owned corporation’s chipmaking arm raised over CNY 3 billion in its public offering on February 27.
China Resources Microelectronics (CR Micro, 688396:SH), a Jiangsu province-based developer of integrated circuits and discrete devices, has gone public on the Star Market, a new experimental board under the aegis of the Shanghai Stock Exchange. Shares of the company rallied by over 228% on the first day. By the end of the afternoon session, after a tally in excess of 1.45 million transactions, they were trading at CNY 42.01 (USD 5.99) apiece. (USD/CNY 7.0144 as of February 26, 08:41 GMT)
CR Micro is a part of an immense conglomerate; Fortune 500 company China Resources was founded in 1938 and is headquartered in Hong Kong. The chipmaker, which was established in the beginning of the 21st century, is involved in Integrated Circuit (IC) design, wafer fabrication, package testing and discrete devices production. It claims to be the only enterprise possessing the complete semiconductor industry chain in China.
The firm had its shares circulating on the Hong Kong Stock Exchange in the first decade of its lifespan. Then, in November 2011, it was made private again. At the same time, the company started developing spinoff projects and new extra research and development capacities, such as its new R&D center in Wuxi (opened in 2011 as well). All those activities eventually bore fruit:
Between 2016 and 2018, CR Micro’s revenues were steadily growing, with the operating income peaking at CNY 6.27 billion (USD 893.88 million) in the last year of this period. However, the recent downturn in the global semiconductor industry caused its 2019 financial results to drift back. The company gained only CNY 2.64 billion (USD 376.37 million) from January to June – more than 16% less than that of the same period in the previous year.
As the number of stocks on China’s eight-month-old tech board is slowly growing, we are seeing companies from a broad range of industries coming out of the IPO pipeline. On February 15, automotive electronics producer Autel IT (688208:SH) started trading in Shanghai. A couple of days later, smart manufacturing company Risong Technology (688090:SH) made its debut. Pre-revenue biosimilar therapeutics firm Bio-Thera (688177:SH) joined them on February 22; on the same day, Roborock (688169:SH), a Xiaomi-backed consumer electronics provider, launched its stock too.
Some may notice that chipmakers, the ‘darlings’ of the Chinese government, which is currently striving to achieve self-sufficiency in the most critical fields, are overshadowed by countless biotech, software and advanced manufacturing firms that have poured into the new board, hungry for sky-high valuations – yet there are many ways to falsify this statement.
For one, the largest stocks on the platform are still those of semiconductor companies. Consider Montage Technology (688008:SH), for instance – its market cap has recently been hovering above CNY 100 billion (USD 14.26 billion). As for CR Micro, it has a good chance to become another bellwether stock on the Star Market.