Rating: Neutral | Target Price Range: RMB 660-860 | Current Price: RMB 932.20 (close, 2026-10-23) | Time Horizon: 12 months
Meta Information: Total shares outstanding 628.9 million (end of 2026Q3) | Total market cap ~RMB 586.2 billion | Currency: RMB | Analysis base date 2026-10-25, valuation anchor is the closing price on 2026-10-23
Cambricon is a scarce A-share play on third-party domestic AI training chips with proven scale: the structural inflection in domestication rate—from ~41% in 2025 to ~66% in 2026H1—is real. For the first three quarters of 2026, the company posted revenue of RMB 9.526 billion (+106.76%), net profit attributable to shareholders of RMB 3.715 billion (+131.49%), and a net margin of 39%, with Q3 setting another single-quarter record. However, the bulk of the industry's incremental demand is being captured by Huawei (2026H1 shipment share: Huawei 28% vs. Cambricon ~5%); the top five customers account for 88.66% of revenue, four of which were new that year—a fragile customer structure. At the current price of RMB 932.20, the stock trades at ~103x/58x consensus net profit for 2026E/2027E and ~36.3x for 2028E—priced for 2028 street earnings at a multiple ~19% above NVIDIA's current PE-TTM (30.6x), implying a 2025-2028 net profit CAGR of ~99%. Our base-case fair value range is RMB 660-860 (midpoint ~RMB 745); the current price is ~25% above the base midpoint and above the scenario-weighted fair value of RMB 803, with an expected return of -13.8%—no margin of safety. Conclusion: the quality is real and scarce, but the price already treats the "base-case-bullish" path as the default—maintain Neutral (avoid chasing at current levels) and wait for the RMB 660-860 range or public order confirmation before reassessing entry. Key constraints: impairment sensitivity of RMB 11.665 billion in inventory (52% of total assets), severe divergence between operating cash flow and profit, Huawei's supernode squeeze and advanced-node capacity quota constraints in 2027, and sell-side consensus still in a downward revision channel (EPS cut by 24.9% over the past 90 days).
Upcoming changes (facts that could alter pricing over the next 6-18 months): ① The 2026 annual report (expected March 2027) will verify whether full-year revenue crosses the RMB 13.5 billion incentive threshold—RMB 9.526 billion already achieved in the first three quarters (70.6% of progress); Q4 needs only RMB 3.974 billion (+12.5% QoQ, below the +13.5% QoQ already achieved from Q2 to Q3), so hitting the incentive threshold is highly probable; however, the iFinD consensus of RMB 16.222 billion implies Q4 revenue of RMB 6.696 billion (+89.6% QoQ), making "meeting the incentive threshold but missing consensus" the base-case path. ② Public disclosure of major internet company orders (signed wins/framework agreements) is the only direct validation channel for the current-price-implied assumption of "share doubling from 5% to 8-10%." ③ CXMT's HBM3 production ramp and SMIC's advanced-node capacity expansion will determine whether the RMB 27 billion incentive-implied path for 2027 is a commercial question or a physical impossibility.
Primary stock price driver: The speed of conversion from stockpiling → delivery → cash. The stockpiling-procurement chain of RMB 11.665 billion in inventory + RMB 3.044 billion in prepayments + RMB 4.966 billion in notes payable points to concentrated Q4 deliveries; but the same inventory (mostly wafer-related raw materials) could equally point to 2027 deliveries—revenue recognition spans tape-out → packaging/testing → deployment → acceptance across multiple quarters, and acceptance slipping out of Q4 would directly push revenue into 2027Q1.
Verifiable expectation gap: The market anchor (iFinD consensus 2026-2028 revenue of RMB 16.222/28.059/43.482 billion, net profit of RMB 5.709/10.070/16.147 billion; median target price RMB 1,408, 19 analysts) diverges from this report's base case (2027E revenue RMB 23.0-28.0 billion, net profit RMB 7.8-10.0 billion) by ~25%—the disagreement centers on implied 2027 share: consensus-implied revenue of RMB 28.059 billion implies 10-12% share, whereas demand-chain estimates (2027 domestic demand of ~4.08 million chips × 5-10% share × ASP RMB 60,000-80,000 ≈ RMB 12.2-32.6 billion) and capacity quotas (supply-chain sources put Cambricon's SMIC N+2 quota at ~9-11%, annualized ~500,000 chips, unconfirmed) both suggest that assumption is stretched. Verification events and timing: March 2027 annual report (Q4 revenue, top-five customer structure), and the 2026Q4-2027H1 window for major customer order disclosures.
Confirmation catalysts and falsification conditions: Positive—Q4 revenue exceeding RMB 5.0 billion, signed major-customer orders, next-generation chip launch (native FP4/FP8); Negative—Q4 below RMB 3.974 billion (incentive threshold missed), annual inventory write-downs exceeding RMB 1.5 billion, US restrictions extending to foundry/HBM links, Chinese customs approving H200 imports in volume. The opportunity is conditional/trigger-based: price returning to the RMB 660-860 base-case fair range with the delivery chain intact, or positive closure of the expectation gap via public order confirmation—at current prices, there is no deployable positive-expected-value setup.
The demand-side inflection is driven by the multiplication of two exogenous forces: generative AI's evolution toward agentic workloads (IDC raised the 2025-2030 intelligent computing CAGR from 46.2% to 50.3%), combined with US export controls and China's active restrictions on NVIDIA purchases, which are directing demand toward domestic chips (domestication rate jumping from 41% to 66% within a year). The company's own trajectory is real: seven consecutive quarters of doubling-scale revenue growth, first full-year profit in 2025, and a 39% net margin at the top tier among domestic peers. But clarity is needed: the bulk of industry increments is being captured by Huawei—per IDC 2026H1 shipments, Huawei moved 572,000 chips (28%) vs. Cambricon's ~5%; ByteDance's reported ~RMB 40 billion-scale order in 2026 went to Huawei Ascend, while rumored Cambricon mega-orders (Alibaba 150,000 units, ByteDance 40,000 chips, etc.) were repeatedly denied by the parties involved or the company. "A 66% domestication rate is an industry fact, not a Cambricon demand fact"—the company's growth is genuine, but reliance on a handful of major customers (94.09% of receivables and contract assets concentrated in the top five customers) makes its sustainability dependent on the purchasing cadence of single large customers.
The arithmetic hurdle for the RMB 13.5 billion incentive threshold is low: Q4 requires only +110.3% YoY and +12.5% QoQ—below the +13.5% QoQ already achieved from Q2 to Q3—and the stockpiling chain of RMB 11.665 billion in inventory (mostly wafer-related raw materials and consigned processing materials in H1) plus RMB 3.044 billion in prepayments provides the physical basis for delivery. But two distinctions matter: first, the stockpiling points to "capacity locking for the next 12-18 months" (the company's own words: "capacity is orders"), and revenue recognition spans tape-out, packaging/testing, deployment, and acceptance across multiple quarters—acceptance slipping out of Q4 pushes revenue into 2027Q1; second, the incentive threshold is not the market threshold—consensus of RMB 16.222 billion implies Q4 revenue of RMB 6.696 billion (+89.6% QoQ), while actual Q3 of RMB 3.531 billion already fell ~44% short of the sell-side quarterly trajectory of ~RMB 6.26 billion. If Q4 delivers near the incentive threshold, "meeting the incentive" and "a falling stock price" can perfectly coexist. Risk counter-evidence for this thesis: Q4 revenue below RMB 3.974 billion means the incentive threshold is missed, and the first domino of the three-year RMB 100 billion target falls.
By the hardest yardstick: the current price equals pricing 2028 consensus earnings at 36.3x—19% more expensive than NVIDIA's current PE-TTM (30.6x)—which requires the company to achieve a 2025-2028 net profit CAGR of ~99% and the market to still grant a growth premium beyond 2028. Reverse-engineering, the current price implies 2027 shipment share doubling from 5% to 10.5%, 2028 revenue of ~RMB 41.9 billion (70% of the incentive target), and no ASP erosion from a potential price war. Three-layer value perspective: book value per share of ~RMB 24, zero-growth EPV of ~RMB 60 (normalized FCFE of RMB 6.36/share ÷ Ke of 12% + net cash of RMB 7.2/share), meaning 93.5% of the current price is a growth option—for a high-growth company that has caught a genuine inflection, this proportion alone is not evidence of "expensive"; expensiveness is adjudicated by the math of embedded expectations: priced beyond the upper half of the demand-chain range, with the bear-case path nearly valued at zero. This report's base case (2027 share of 8-10%, 2028 net profit of RMB 14.0-16.5 billion, 38-42x exit multiple, Ke of 12%, discounted 2.2 years) yields fair value of RMB 660-860; sensitivity: each -5x in the exit multiple reduces fair value by ~RMB 93/share; if the A-share scarcity premium fully converges toward the global anchor (30x), fair value drops to ~RMB 480-650 even with base-case earnings delivered.
The characterization of "poor earnings quality" needs to be more precise: a 112% cash collection ratio indicates healthy downstream collections—profit is not turning into bad debt. The root of weak cash flow is the company's active conversion of cash into inventory and prepayments (inventory + prepayments totaling RMB 14.7 billion, or 97% of net assets) to lock in 12-18 months of capacity amid the entity list and storage price inflation. This is a strategic choice, not a fraud signal, but it carries two genuine tail risks: first, inventory impairment sensitivity—with chip generations turning over annually, if demand shifts to Ascend 950 series or generational transitions disappoint, a 10% write-down equals RMB 1.17 billion (absorbing ~20% of 2026E consensus net profit), while current provision coverage is only ~4.3%; second, notes rollover risk—stockpiling purchases are financed via notes payable (RMB 4.966 billion), cash-like assets sit ~RMB 2.4 billion below total payables, and the company has already begun temporarily using idle raised funds for working capital; if banks tighten acceptance credit, the stockpiling chain faces a point-in-time break risk (tail probability of ~5-8%).
Of the triple constraints, the Huawei squeeze is the most certain: ByteDance is both Cambricon's anchor customer (market estimates put it at over 70% of company revenue, unconfirmed by the company) and awarded a RMB 40 billion-scale order to Huawei—the siphon effect on training-side share is real. The advanced-node quota is a physical ceiling: the rumored 9-11% quota on a single N+2 production line lacks attribution, but even on optimistic assumptions, the constraint on 2027 deliverable volume is clearly visible. The third constraint (NVIDIA reflow) needs rephrasing: the US conditionally approved H200 exports to China in January 2026, but Chinese customs has continuously restricted imports, NVIDIA halted the China-specific H200 in March 2026, and actual deliveries were zero as of May 2026—the dominant variable in this tail risk has shifted from Washington to Beijing; if China approves imports for a trade deal, high-end training demand could be diverted. Overall, the consensus-implied 2027 revenue of RMB 28.059 billion (+73% YoY) requires share and capacity to step up simultaneously, while consensus EPS has already been cut 24.9% over the past 90 days—the combination of resilient target prices (median RMB 1,408) alongside earnings downgrades typically ends with target-price catch-down.
| Metric | FY2023 | FY2024 | FY2025 | 2026Q1-Q3 (Latest) |
|---|---|---|---|---|
| Operating revenue (RMB 100mn) | 7.09 | 11.74 | 64.97 | 95.26 |
| Revenue YoY | — | +65.6% | +453.2% | +106.8% |
| Net profit attributable to shareholders (RMB 100mn) | -8.48 | -4.52 | 20.59 | 37.15 |
| Net profit attributable to shareholders, ex-non-recurring (RMB 100mn) | -10.43 | -8.65 | 17.70 | 35.23 |
| Gross margin | 69.3% | 56.71% | 55.15% | 56.53% |
| Net margin | — | — | 31.69% | 38.99% |
| Operating cash flow (RMB 100mn) | -5.96 | -16.18 | -4.98 | +2.28 |
| Free cash flow (RMB 100mn) | — | -19.84 | -10.67 | -5.60 |
| Cash + cash-like assets (RMB 100mn, period-end) | — | — | 55.79 | 43.66 (as of 2026-09-30) |
| Interest-bearing debt (RMB 100mn) | ≈0 | ≈0 | 0 | ≈0 (leases 0.19) |
| Debt-to-asset ratio | — | — | 11.87% | 32.36% |
| Inventory (RMB 100mn, period-end) | 0.99 | 17.74 | 49.44 | 116.65 |
| R&D investment (RMB 100mn) | — | 10.72 | 11.69 | 12.25 (12.86% of revenue) |
Notes: Ex-non-recurring figures follow the A-share convention of excluding non-recurring gains/losses; FY2025 non-recurring gains/losses totaled RMB 289 million (including government grants of RMB 263 million, or 14.05% of attributable net profit); for 9M26, the company self-reported "net profit excluding share-based payments" of RMB 3.905 billion (share-based payments of ~RMB 190 million). Net debt/EBITDA is not applicable (no interest-bearing debt; EBITDA in a rapid ramp-up phase).
Drivers of metric changes (items with YoY ≥ ±20%, with company explanations): ① Revenue +453% (FY2025)/+107% (9M26)—company explanation: "benefiting from the continued rise in AI industry compute demand, actively advancing the deployment of AI application scenarios"; ② Turnaround to profit and high growth in attributable net profit—"substantial revenue growth drove sharp YoY increases in total profit, net profit attributable to shareholders, and ex-non-recurring net profit"; the profit inflection is primarily driven by operating leverage: R&D expenses grew only +9% in FY2025, selling/administrative expenses nearly flat, with the R&D expense ratio falling from 157.5% in FY2023 to 12.86% in 9M26; ③ Inventory +136% vs. start of year—"mainly due to the increase in raw materials at period end" plus impairment announcement: "prior strategic stockpiling of raw materials"; ④ Notes payable RMB 351 million → RMB 4.966 billion—interim report explanation: "increase in bank acceptance bills used for procurement payments this period"; ⑤ Asset impairment provisions of RMB 502 million for the first three quarters of 2026—"growth in the age of strategically stockpiled raw materials, with corresponding increases in inventory write-down provisions."
Q3 single-quarter revenue was RMB 3.531 billion (+104.47% YoY, +13.5% QoQ), net profit attributable to parent was RMB 1.404 billion (+147.74% YoY), and single-quarter gross margin was 58.69% (among the highest single quarters since listing, mainly due to a higher share of high-margin cloud products and improved delivery mix); cumulative revenue for the first three quarters of RMB 9.526 billion already exceeded full-year 2025 (RMB 6.497 billion) by 46.6%. Versus expectations: this quarter's report was disclosed after market close on 10-23, and the frozen anchor price of RMB 932.20 is the pre-disclosure price — the market reaction awaits verification on 10-26; sell-side trajectory expectations for Q3 were roughly RMB 6.26 billion, and the actual figure came in about 44% below — this is the fundamental footnote to the stock's ~42% drawdown from its late-June peak during July–October, and the main trigger for the 24.9% cut in consensus EPS over the past 90 days. Quality items: Q3 operating cash flow was -RMB 84 million (9M26 cumulative +RMB 228 million); inventory rose another RMB 6.72 billion from the start of the year to RMB 11.665 billion; accounts receivable rose +322% from end-June (matching Q3's concentrated revenue recognition; the cash collection ratio of 112% remains healthy); inventory write-downs of RMB 502 million in the first three quarters are already reflected in profit. Company posture: on 10-24 the company simultaneously issued an Announcement on Recent Production and Operating Conditions, reiterating that "computing power demand remains robust, gross margins are stable, and performance is expected to keep growing," along with its three-year assessment targets of RMB 13.5/40.5/100 billion — an active effort to stabilize expectations against the backdrop of Q3 results falling short of the sell-side trajectory; the earnings call at 15:00 on 10-26 (attended by the chairman) is the near-term information focal point. Judging whether the market has already priced this in must rest on the sell-side consensus above: the Q3 shortfall versus the trajectory has been partially digested by the July–October drawdown, but the 2026 full-year consensus of RMB 16.222 billion has not yet been revised down fully.
Business model in brief: Fabless AI chip design — proprietary instruction set/microarchitecture plus the Neuware software stack, with wafer foundry and packaging/testing fully outsourced and no in-house capacity; 99.7% of revenue comes from one-time hardware sales of cloud chips and boards/intelligent whole machines, with direct sales at 99.13%; no subscription or recurring revenue (IP licensing in FY2025 was only RMB 2.29 million). Asset-light, high R&D intensity (100% expensed), weak bargaining power upstream (advanced process nodes, HBM), strong bargaining power downstream (in a supply-shortage phase) — the price hikes in domestic AI chips since September 2026 are direct evidence of pricing power, but that power is predicated on supply scarcity.
Cash content of earnings test: OCF/net profit FY2024 3.58 (a loss year), FY2025 -0.24, 9M26 0.06; FCF/net profit FY2025 -0.52, 9M26 -0.15 — persistently below the 0.8/0.5 warning thresholds. It must be pointed out that the bulk of book profits has not converted into free cash, but has instead been absorbed into inventory (RMB 11.665 billion) and prepayments (RMB 3.044 billion). However, unlike companies that "pile up receivables as profit," the cash collection ratio is 112% and receivables turnover is healthy; the bottleneck in cash conversion lies in asset-form transformation (stockpiling) rather than collections — this determines that the cash-flow assessment should track the "inventory → revenue" conversion pace rather than the cash-to-profit ratio itself. Recurring earnings test: of FY2025's RMB 2.059 billion attributable net profit, RMB 289 million was non-recurring (mainly RMB 263 million of government subsidies), with recurring profit of RMB 1.770 billion — a 14% gap, below the 15% warning line but requiring tracking of subsidy sustainability; checking against the company's own disclosed metric: 9M26 "net profit excluding share-based payment" was RMB 3.905 billion; the annual RMB 200 million-level SBC add-back is standard practice, and the new 2026 incentive plan (draft: 5 million shares @ RMB 750, roughly RMB 2.02 billion in expenses amortized over four years) will add roughly RMB 500 million of annual amortization going forward — the company has already switched to assessing Group 3 incentive participants on "net profit excluding share-based payment," itself treating SBC as a cost to be stripped out.
Return on capital: FY2025 weighted ROE 27.7% (the year of returning to profit); ROIC estimated in this report at ~17% (approximated as pre-tax profit / period-end net assets; no interest-bearing debt); with 2026's earnings base rising, ROIC will be revised up significantly — using 9M26 annualized net profit of ~RMB 5 billion against net assets of RMB 15.1 billion, current ROIC is already in the ~30% range. Far above the 15% moat threshold, conditional on earnings sustainability (see C1 customer concentration constraint).
Capex quality: CapEx/depreciation FY2024 1.75, FY2025 1.99 — but the company is an asset-light design firm with a small absolute CapEx (FY2025 RMB 569 million), directed at computing-power validation equipment and headquarters, i.e., growth investment rather than maintenance replacement; under the fabless model, the real "capital expenditure" manifests as inventory and prepayments (RMB 14.7 billion); no maintenance/growth split is disclosed, so maintenance investment cannot be determined separately.
Red flags and moat signals: Positives — R&D 100% expensed (no capitalization window dressing), no goodwill, no interest-bearing debt, first-ever dividend in 2025 of RMB 632 million (30.7% payout ratio); Negatives — prolonged divergence between profit and cash flow (see C4), customer concentration of 88.66% with 4 of the top 5 newly added in the current year, and the largest supplier's share of purchases jumping from 22.39% to 55.34% (single-point supply dependency, unexplained by the company).
Consistency of words and deeds: partially delivered, targets set aggressively. Three comparisons: ① The two tranches of restricted stock incentives in 2020/2021 were wholly forfeited in 2025 due to "failure to meet performance assessment targets" — promises not delivered, indicating historically over-ambitious targets; ② The 2023 incentive plan's vesting period with 2025 as the assessment year was met (RMB 239 million of share-based payments recognized) — delivered; ③ The 2026 incentive sets revenue targets of RMB 13.5/40.5/100 billion for 2026/2026-27/2026-28 (implying RMB 27/59.5 billion for 2027/2028, +315%/+716% vs. 2025); first-three-quarters progress is 70.6%, and a Q4 of just +110% YoY would meet the target — progress is normal but the implied path is extremely steep. Overall verdict: management has demonstrated one round of numerical delivery (the 2023 tranche), but target-setting has consistently been aggressive; the 2027–2028 implied path requires order validation and should not be taken at face value.
Shareholder friendliness: neutral-to-friendly. In November 2025, after offsetting the parent company's ~RMB 2.6 billion accumulated loss with capital reserves, the company immediately executed its first-ever dividend since listing (RMB 15 per 10 shares, RMB 632 million in total, 30.71% payout ratio) plus a 10-for-4.9 bonus issue from capital reserves — the capacity to pay dividends was "paved" through capital operations; procedurally compliant but the timing is intriguing. 2025 buyback of RMB 20.06 million. Dilution side: October 2025 private placement of RMB 3.985 billion @ RMB 1,195.02/share (only 0.79% dilution; issue price below the current price but roughly a 10% primary-plus discount to the market price at the time of the placement); new 2026 incentive of 5 million shares (0.8% of share capital). Funding-wise the company is flush with cash-like assets; the placement is more an industrial-positioning move.
Risk signals: ① The labor dispute claim by former deputy GM Liang Jun was revised from RMB 4.287 billion to RMB 27.832 billion (valued at the 2026-07-03 all-time high of RMB 1,620/share, equivalent to 184% of attributable net assets) — but in the 6 incentive-platform-related cases Liang Jun lost all final judgments; valuing this case at the all-time high price is clearly inflated, and the probability of substantive payout is extremely low (assessed in this report at <5%); the risk lies in sentiment disruption to the "core team stability" narrative at hearing/judgment junctures. ② Board reshuffle in November 2025 and abolition of the supervisory board. ③ Highly templated IR responses, with multiple investors publicly questioning the company's unwillingness to disclose information directly (order/capacity rumors uniformly met with "do not credit information from unknown sources") — governance transparency mismatched with market position.
| Segment | Revenue share (FY2025) | Gross margin | YoY | Business logic in one sentence |
|---|---|---|---|---|
| Cloud product line (chips & boards + intelligent whole machines) | 99.68% | 55.22% | +455.3% | Siyuan 290/370 series ramping at major internet firms and intelligent computing centers; the absolute mainstay |
| Edge product line | 0.05% | 44.52% | -48.1% | Siyuan 220 (released 2019), an aging generation with shrinking revenue |
| IP licensing and software | 0.04% | 100% | +455.0% | Pure licensing, high margin but only RMB 2.29 million in size; not a profit engine |
| Other | 0.23% | 22.11% | +1090.3% | Miscellaneous business |
Profit mainstay: the cloud product line contributes ~99.7% of revenue and virtually all gross profit — under the revenue_share × gross_margin framework there is no ambiguity; this is de facto a single-product-line company (cloud share further rose to 99.98% in 2026H1). Gross margin structure differences: cloud at 55.22% vs. other business at 22.11%, a 33pp gap, but the other business is too small to warrant analysis; more informative is the generational trajectory of cloud gross margin — FY2023 69.3% (mainly IP/high-end chips) → FY2024 56.7% (diluted by the ramp of boards/whole machines) → FY2025 55.15% (rising memory costs) → 9M26 56.53% stabilizing and recovering (Q3 single quarter 58.69%) — the revenue ramp did not dilute profitability; the cost pressure from memory price hikes since 2025H2 has been offset by product mix and price increases, direct evidence that downstream bargaining power remains intact. Implications of a single main business: the edge product line has been marginalized, and the next leg of growth rests entirely on the ramp of the cloud Siyuan 690 and the next-generation microarchitecture (native FP4/FP8, in development, unreleased) — product generations and customer validation cadence constitute the entirety of this company's operating rhythm.
Accounting red flags: ① Sharp rise in inventory write-downs (severity high) — "In the first three quarters of 2026, the company recognized inventory write-down losses of RMB 501.6129 million, mainly because the company had made strategic stockpiles of raw materials earlier; as the aging of raw materials increased, the corresponding inventory write-down provisions increased accordingly" (Announcement No. 2026-038); inventory is 52% of total assets, and impairments scale in step with stockpiling — earnings quality is hostage to the stockpiling cadence. ② Non-recurring items boosting results (medium) — FY2025 government subsidies of RMB 263 million booked to current profit, with non-recurring items totaling 14.05% of attributable profit; FY2024 relied even more on RMB 217 million of subsidies plus RMB 159 million of reversals from individually impaired receivables — subsidy sustainability in doubt. ③ Surge in notes payable supporting stockpiling (medium) — from RMB 351 million to RMB 4.966 billion, notes settlement amplifying procurement capacity roughly 13x; the Q3 report does not disclose counterparties or tenor structure of the notes. ④ Loss offset + high dividend/bonus combination (low) — first-ever dividend immediately after the November 2025 capital-reserve loss offset, plus a large bonus issue; procedurally compliant but aimed at restoring distribution capacity.
Cross-period consistency: ① OCF/attributable net profit: -8.48/-4.52/+20.59/+37.15 billion yuan vs. OCF -5.96/-16.18/-4.98/+2.28 billion yuan — prolonged divergence between profit and cash flow; the company's explanation ("substantially increased sales collections / increased external procurement and tax payments") is internally consistent, but the divergence itself persists; ② Inventory: 0.99 → 17.74 → 49.44 → 11.665 billion yuan, growing more than 100x in three years, with write-downs of 0.33 → 1.34 → 502 million yuan scaling in tandem — the company's year-by-year explanations (increase in consigned processing materials / increase in raw materials / growing aging of strategic stockpiles) are consistent over time; ③ Blended gross margin: 69.3% → 56.7% → 55.15% → 56.5% — stabilized after a two-stage decline; management's explanation (product mix changes / memory costs) matches the data; ④ Largest supplier's purchase share 22.39% → 55.34% — unexplained by the company; single-point supply dependency has risen markedly, the only anomaly in the cross-period review without a management explanation.
Overall judgment: No direct evidence of aggressive revenue recognition or profit manipulation (100% expensed R&D and a 112% cash collection ratio are important "clean" signals), but the dependence of earnings on balance-sheet expansion (stockpiling) and the subsidy contribution mean that an "earnings quality discount" should be reflected in the valuation multiple.
Current price RMB 932.20 (closing 2026-10-23), total market cap RMB 586.2 billion. PE-TTM 140.6x (TTM attributable profit RMB 4.169 billion) — Note: the company only achieved its first annual profit in 2025, so PE historical percentiles are contaminated by the prolonged loss-making period (the 0th percentile since listing is the series minimum); mechanical percentiles are meaningless, for reference only; PB(MRQ) 38.8x (70th percentile since listing, 7th percentile over the past year, historical extreme 99.4x); PS-TTM 51.3x (TTM revenue RMB 11.416 billion). Absolute market cap sits at the 90th percentile since listing (past-year peak RMB 1,002.5 billion, now down -41.5%). Forward: 2026E consensus net profit RMB 5.709 billion → PE ~103x; 2027E RMB 10.070 billion → ~58x; 2028E RMB 16.147 billion (EPS RMB 25.68) → 36.3x — the current price equals pricing 2028 Street earnings at a multiple ~19% above NVIDIA's current PE-TTM (30.6x). PEG cross-check: consensus basis 0.46 (58 ÷ 2027E growth of 110.8%); this report's base-case basis ~0.98 — neither indicates "cheap," and the PEG's linearity assumption ignores the growth downshift after 2028.
Peer benchmarking table:
| Company | Market cap | PE-TTM | PS-TTM | PB | Growth (latest-period revenue) | Net margin | Core difference |
|---|---|---|---|---|---|---|---|
| Cambricon | RMB 586.2 bn | 140.6x | 51.3x | 38.8x | +106.8% (9M26) | 39.0% | Independent third party, pure AI chips, no CPU base business |
| Hygon Information | ~RMB 467.4 bn | 136.2x | 23.6x | 17.7x | +57.6% (9M26) | 23.2% | CUDA-like compatibility + domestic x86 CPU dual engines; 1.6x the size, half the growth |
| Moore Threads | ~RMB 180.6 bn | Loss-making | 71.1x | 14.8x | +147.4% (H1) | Slight profit / narrowing losses | Full-feature GPU dual stack; cloud training competitiveness weaker than Cambricon |
| NVIDIA (global reference) | ~USD 5-6 trillion | 30.6x | — | — | +65% (FY2026) | 55.6% | CUDA ecosystem + generational lead; China share squeezed to 34% |
Cambricon's PS carries a 117% premium to Hygon while PE is roughly on par — the market pays a premium for "growth + purity"; against the global leader, NVIDIA trades at only 17-23x forward PE on +65~106% growth — the global floor anchor for Cambricon's exit multiple.
Three equivalent expressions of the current RMB 586.2 billion market cap: ① 2027 attributable profit of ~RMB 9 billion (65x 2027 PE) → revenue ~RMB 25.8 billion → shipments ~430,000 units → 10.5% share (currently 5%, doubling in one year); ② 2028 revenue ~RMB 41.9 billion (70% of the RMB 59.5 billion incentive target), attributable profit ~RMB 14.7 billion, with the market still assigning ~40x at that point; ③ Directly: 36.3x × 2028E consensus net profit of RMB 16.147 billion. Implies a 2025-2028 attributable profit CAGR of ~98.7%. One sentence of "the current price requires the company to do X, while reality is Y": the current price requires 2027 share to double to 10.5% with ASP not falling to price wars, and 70% of the incentive target completed by 2028 — while demand-chain math (4.08 million units × 5-10% × RMB 60-80k = RMB 12.2-32.6 billion) and capacity allocation (~500,000 units annualized, supply-chain basis) stably support only the lower half of the implied revenue range. Two-way check: the inflection is real (domestic substitution at 66%, hyperscaler capex +121%), and NVIDIA's FY2024/25 revenue growth of +126%/+114% proves that true inflection slopes can be extremely steep; but Hygon's precedent — growth collapsing from +122% to +17.3% between 2022→2023 — is equally real: slope interruption can happen within a single year. The current price is pitched in the upper half of the demand chain, and with consensus EPS already cut 24.9% over the past 90 days, the market is in the process of reverting from "hugging the incentive ceiling" toward reality.
| Scenario | Probability | Fair Range | Core Assumptions and Key Battleground |
|---|---|---|---|
| Bear | 25% | RMB 165-280 | Triple falsification of the inflection point: Huawei supernode crowding-out + Nvidia re-entry + 2027 capacity release price war; market share stagnates at ~6%, 2027 revenue ~RMB 14.5bn, non-GAAP net margin compressed to 22-26%; 40-50x × 2027 net profit RMB 3.0-4.0bn, discounted 1.2 years. -82% to -70% vs. current price |
| Base | 50% | RMB 660-860 | Inflection point materializes but share ramp is constrained: 2027 share 8-10% × ASP RMB 60-65k → revenue RMB 24.5-27.0bn / net profit RMB 8.5-9.5bn; 2028 revenue RMB 42.0-50.0bn / net profit RMB 14.0-16.5bn; 38-42x exit on 2028 (anchor: Nvidia at 30.6x current + A-share scarcity premium 30-80%, benchmarked against Hygon at 136x TTM and the 25-40x steady state of growth stocks with peaking penetration; independent of the company's current multiple), discounted at Ke 12% for 2.2 years. -8% to -29% vs. current price |
| Bull | 25% | RMB 1,170-1,770 | Both demand and share exceed expectations: total demand revised up to 6-8 million units + share 10-12% + ASP RMB 65-70k → 2027 revenue RMB 30.0-34.0bn / net profit RMB 10.8-12.6bn; 2028 incentive target of RMB 59.5bn fully achieved (revenue RMB 60-70bn) / net profit RMB 21.0-26.0bn; 45-55x exit, discounted 2.2 years. +26% to +90% vs. current price |
Consistency between the ramp estimate and the scenario table: Base-case fair value = 2028 net profit RMB 14.0-16.5bn × 38-42x ÷ 1.12^2.2 ÷ 628.9 million shares = RMB 657-857 ≈ RMB 660-860 (this report's estimate, item-by-item consistent with the scenario table). Multiple sensitivity (this report's reverse scenario): for every -5x in exit multiple, fair value falls by ~RMB 93/share; if the A-share scarcity premium fully converges to the global anchor by 2028 (30x), fair value falls to ~RMB 480-650 on the same base-case earnings — meaning "earnings delivered, valuation impaired" is the primary risk profile at the current price. External benchmarks: within the search scope, no sell-side target price is below the current price (most conservative: Capital Securities at RMB 1,350, 2026-08-08, using a multiple method without testing the falsified-inflection scenario — not comparable to this report's bear case and not adopted as a boundary); most optimistic: Goldman Sachs at RMB 2,406 (2026-05-05, published before the Q3 trajectory miss and the wave of downgrades — not adopted as the bull-case ceiling).
In-house earnings forecast (earnings reconciliation anchor): 2026E revenue RMB 13.8-15.2bn (base RMB 14.5bn), net profit RMB 4.97-5.78bn (base RMB 5.3bn) — Q4 revenue RMB 4.3-5.7bn, incentive target achieved, consensus of RMB 16.2bn looks stretched; 2027E revenue RMB 23.0-28.0bn (base RMB 25.0bn), net profit RMB 7.8-10.0bn (base RMB 8.8bn) — midpoint of the demand chain, ~11% below consensus of RMB 28.059bn. Triangulated against management guidance (incentive thresholds RMB 13.5/27.0bn) and sell-side consensus (RMB 16.222/28.059bn): this report's 2026 estimates are close to both, while 2027 is significantly below consensus and near the lower bound of the incentive threshold — this is the focal point of divergence for the next earnings reconciliation.
Overvalued, but not a bubble. The current price is 8.4% above the upper bound of the base-case fair range, ~25% above the base-case midpoint, and above the probability-weighted fair value across three scenarios of RMB 803 (expected return -13.8%); the margin of safety is negative — under the uniform framework across the coverage database, (base-case fair value lower bound RMB 660 − current price) / current price = -29.2%. Separating quality from price: the quality is real and scarce (ROIC on the order of 30%, net margin 39%, an independent third-party ecosystem niche), but the price already treats the bullish-leaning base path as the default and prices the bear path at zero; having retraced 41.5% from its 1-year market-cap peak, with PB at the 70th percentile since listing rather than an extreme zone, this is "expensive" rather than "bubbly." A notable positioning fact: the current price sits exactly in the gap between the base-case upper bound (RMB 860) and the bull-case lower bound (RMB 1,170) — the market's actual pricing implies a "between base and bull" path (assigning some probability weight to the bull case, 10%+ share), whereas this report's 50%/25% base/bull probabilities anchor fair value below the lower edge of that gap; the arbiter of this divergence is not any multiple parameter, but the public disclosure of major-tech-vendor orders and the share evidence in the 2026 annual report. Applicability of the judgment: if K4 major-vendor orders become public or the 2026 annual report significantly beats consensus, share assumptions would need upward revision and the valuation conclusion would weaken accordingly — this valuation is more sensitive to "share delivery evidence" than to any multiple parameter.
China's AI computing market is projected at USD 51.5bn in 2026 (+37%) and USD 150.1bn in 2030 (IDC / Inspur, "2026 China AI Computing Power Development Assessment Report," published September 2026, as reported by People's Daily/Sina Finance) — implying a 2025-2030 value-based CAGR of ~31.8%; intelligent computing capacity is projected at 2,576.5 EFLOPS in 2026 (+87.9%) and 10,524.3 EFLOPS in 2030, with CAGR revised up from 46.2% in the prior edition to 50.3% — the demand slope is steepening, not decaying. On volume: China AI accelerator shipments were ~2 million units in 2026H1 (IDC; Nvidia 678k/-44%, domestic combined ~1.33 million); global active AI agents from 79.4 million in 2026 → 2.216 billion in 2030 (CAGR 129.8%), with global token consumption CAGR of 4,822.6% — the order-of-magnitude jump in per-unit inference compute consumption is the core engine driving this demand-curve shift to the right. Domestic AI chip market: domestic share (by shipments) ~41% in 2025 → ~66% in 2026H1; Morgan Stanley projects 68% in 2027 and 95% in 2030 (by revenue). IDC also expects the global AI computing demand fulfillment rate to fall from 79% in 2024 to a trough of 71% in 2027 (with the gap widening from USD 38.9bn to USD 380.9bn by 2030) — supply shortage is the industry's baseline state for the next 3-4 years.
The chain: EDA/IP (Synopsys, Cadence, and domestic alternatives) → advanced-node foundry (SMIC's N+2-equivalent 7nm is the only production line in mainland China capable of volume AI chip production, targeting 70k wafers/month by end-2026, equivalent to ~2.6 million chips/year; per supply-chain sources Huawei takes ~43%, Cambricon ~11%, to be verified) → HBM (monopolized by Samsung/SK Hynix/Micron and subject to US export controls on China; domestic substitution relies on CXMT's HBM3, which entered risk production in September 2026 with small-batch output around end-2026) → advanced packaging (JCET, Tongfu) → Fabless chip design (Cambricon's segment) → AI servers → cloud vendors/internet majors/telecom operators and state-owned intelligent computing centers. The reality of value distribution: design is the profit high ground (Cambricon 9M26 gross margin 56.5%, net margin 39%), but the scarcest resources are upstream — advanced-node capacity and HBM constitute a dual bottleneck, and design firms have weak bargaining power over upstream suppliers (must lock supply with large prepayments + strategic inventory: Cambricon's inventory of RMB 11.665bn + prepayments of RMB 3.044bn, equal to 97% of net assets); downstream, bargaining power is strong during the supply shortage (domestic AI chip prices rising since September 2026) — this is the source of the current "volume-and-price upcycle" window for the design segment — a window that may narrow as capacity is released in 2027-2028.
Demand drivers: LLM training + inference + AI agent ramp-up; domestic big-tech capex — Alibaba FY2026 capex RMB 126.063bn, Tencent 2026Q1 RMB 31.94bn (Q2 +176% YoY; Tencent + Alibaba combined over RMB 120bn in Q2 alone), ByteDance planning ~RMB 160bn for 2026 (of which AI chip procurement ~RMB 85bn, with some reports of a 25% upward revision); Securities Times cited a September research note projecting 2026 domestic cloud-vendor capex of ~RMB 995bn (+121%), with domestic chips accounting for over 70%. On the policy side, the "AI+" initiative and Xinchuang drive procurement by state-owned enterprises and telecom operators. Competitive landscape (IDC 2026H1 shipment basis, ~2 million units total): Nvidia 34%, Huawei Ascend 28% (572k units), Alibaba T-Head 7%, Cambricon 5% (~100k units), Baidu Kunlunxin 4%, Hygon 3% — CR6 ~81%; evolving from Nvidia's 2023 near-monopoly (80-90%) to "one superpower, one strong player + multiple poles," with the domestic camp at ~66% combined. Note the difference in metrics: Morgan Stanley (2026-05, revenue basis) projects Huawei at 62% and Cambricon at 14% in 2026 — the divergence between shipment and revenue bases stems from ASP and product mix (Huawei includes many supernode systems; Cambricon's high-end training cards carry a higher ASP), and the two are not interchangeable. Barriers to entry: ① software ecosystem (Nvidia's decades-long CUDA accumulation; domestic players compensate with proprietary software stacks + mainstream LLM adaptation — after DeepSeek V4 was fully adapted to Ascend/Hygon/Cambricon/Enflame, compute utilization rose from ~60% to 85%); ② advanced-node capacity (new entrants can hardly obtain N+2 quotas); ③ capital (top players spend billions of RMB on R&D); ④ customer qualification cycles. Substitution threat: cloud vendors' in-house ASICs (T-Head already exceeds Cambricon at 7% shipment share, Kunlunxin at 4%) are the most direct substitute — majors' structural tendency to "reduce reliance on any single third party via in-house chips" (TrendForce) caps third-party chip companies' share ceiling over the long run; if the H200 receives Chinese import clearance, it would also partially substitute high-end training demand.
The industry is in an upcycle within the early-to-mid growth phase (demand growth far exceeding supply, price hikes, full order books); 2026 has been defined by multiple brokerages as the "Year One of domestic AI computing delivery." Watch for the mismatch between concentrated release of domestic capacity in 2027-2028 and the downshift in demand growth. Leading indicators: big-tech quarterly capex, IDC quarterly shipments and domestic share, SMIC advanced-node ramp, DRAM/HBM contract prices (2026Q1 DRAM contract prices up >90% QoQ — memory inflation is both a coincident indicator of the cycle and a cost headwind for Cambricon), and the number of 10,000-GPU intelligent computing clusters (MIIT: 42 built, intelligent computing capacity exceeding 1,590 EFLOPS). Regulation is this cycle's "first-order variable": on the US side, successive rounds of controls from 2022-2025 banned or licensed high-end GPU sales to China; January 2026 brought conditional approval of the H200, but Chinese customs simultaneously restricted imports (zero deliveries as of May 2026; Nvidia halted China-specific H200 production in March) — this two-way game of "the US decides whether it can be sold, China decides whether it can be bought" makes controls both a protective umbrella for domestic substitution (positive) and a source of supply-chain uncertainty (BIS's "May 31 guidance" already pierces through to headquarters/ultimate parent companies; if extended to foundry/HBM, it would lock down domestic chips' physical capacity); on the Chinese side, the "Opinions on Deeply Implementing the 'AI+' Initiative" (2025-08) and the 15th Five-Year Plan's "focus on developing high-end computing chips" provide a demand-side policy umbrella.
Cambricon is the leader of China's "independent third-party" cloud AI computing camp: its niche sits between Huawei (full stack + captive capacity allocation) and cloud vendors' in-house chips (T-Head/Kunlunxin) — it does not compete with its customers' cloud businesses, its core differentiation versus Huawei; it captures domestic-substitution orders via its proprietary instruction set + Neuware software stack + major customer lock-ins. Share trend is up but the slope is in question: shipment share of 5% (2026H1), with the highest revenue growth (+107%) among top domestic vendors; on product strength, Siyuan 690 (mass-produced in early 2026, dual-die, FP16 over 700 TFLOPS, ~80% of H100 per test-unit reports) is roughly on par with Ascend 910C/950, still 1-2 generations behind Nvidia's H200/B series; weaknesses lie in cluster interconnect and ecosystem depth. Moat: first-mover volume-production positioning + inventory-based capacity lock-in (securing ~11% of the N+2 quota), migration costs from software-stack adaptation, and binding customer relationships as they shift from trials to volume procurement. Core constraints: advanced-node and HBM supply ceilings determine the revenue cap; Nvidia's high-end re-entry and post-2027 price competition from released domestic capacity are the main downside risks to share and margin.
The full chain of driver trajectories × per-unit consumption × penetration × share: ① total demand — China intelligent computing 2026E 2,576.5 EFLOPS (+87.9%), cloud-vendor capex 2026E ~RMB 995bn (+121%); ② domestic penetration — shipments 41% in 2025 → 66% in 2026H1 → 68% in 2027E (Morgan Stanley); ③ order-of-magnitude jump — training clusters from thousand-GPU to 10,000-GPU/supernode scale (DRAM usage per AI server 8-10x a conventional server), token consumption CAGR 4,822.6% (jump in per-agent inference compute consumption); ④ company share — 5% → 8-10% (base case). Chain product: 2027 China demand ~6 million units (third-hand survey transcripts cite 6-8 million, for order-of-magnitude reference only) × 68% domestic rate ≈ 4.08 million domestic units × Cambricon share 5-10% × ASP RMB 60-80k ≈ revenue RMB 12.2-32.6bn — this report's base case takes RMB 24.5-27.0bn (share 8-10%), the bull case RMB 30.0-34.0bn (share 10-12%), and consensus of RMB 28.059bn falls between base and bull (implying 10-12% share). The chain's key fragilities: ASP (RMB 60k is a rough back-calculation from IDC shipments × revenue; if training-card ASP rises to RMB 80k, the same share implies substantially higher revenue) and total demand (the 6 million figure has no first-hand attributed source) — these two are the main uncertain inputs in this valuation.
A generic earnings framework would miss four defining dimensions of this industry, listed separately:
① Product generational cadence: Chips iterate annually (Siyuan 100→270→290→370→690, roughly one generation every two years; Huawei Ascend has accelerated to an annual cadence, with the 960DT pulled forward three quarters to 2027Q1). Cambricon's main products on sale remain the Siyuan 290/370, with the 690 in volume ramp since early 2026; the next-generation microarchitecture (LLM-oriented, native FP4/FP8) is in development but unreleased, and the 2025 refinancing project "LLM-oriented chip platform project" has explicitly adopted a new instruction set + native FP4. Generational lag = a double loss in share and margin — this is the single most important watch item for 2027-2028.
② Customer lock-in and order visibility: A fabless chip company's revenue is inherently "major-customer validation × procurement cycle." Cambricon's top five customers account for 88.66%, 4 of the 5 are new that year, and 94.09% of receivables and contract assets are concentrated in the top five — order visibility metrics (contract liabilities of only RMB 141m) lag far behind inventory-build metrics (inventory of RMB 11.665bn), meaning the company is operating "production-first, sales-later" rather than "order-driven production": a rational choice in a supply-shortage environment, but it also means that if demand reverses, the company will be the last to know.
③ Supply-chain stockpiling = capacity is orders: Under entity-list and memory-price-inflation conditions, "locking in 12-18 months of capacity" is itself a competitive advantage (company's own words). Inventory + prepayments of RMB 14.7bn equal 65.8% of total assets — financially manifesting as cash flow diverging from profit (see C4), and strategically as capacity positioning. Peer comparison: Hygon is stockpiling just as aggressively (its inventory also surged) — this is an industry-wide phenomenon, not a company-specific one, and should be assessed via cross-industry comparison rather than isolated criticism.
④ Software ecosystem and LLM adaptation: Domestic chips' catch-up with Nvidia is fundamentally an ecosystem race. Cambricon's Neuware stack achieved Day 0 adaptation of DeepSeek-V4 (2026-04-24), with ongoing adaptation of Qwen/GLM/Kimi; DeepSeek V4's full adaptation across all four domestic vendors lifted compute utilization from ~60% to 85% — the density of ecosystem adaptation directly determines customers' real TCO and is a leading indicator of share.
Overall rating: Neutral, confidence 0.50, time horizon 12 months. Cambricon is one of the A-share market's scarcest genuine inflection-point names — domestic penetration jumped 25 percentage points in a year, revenue has doubled consecutively, net margin is 39%, there is no interest-bearing debt, and the balance sheet is clean with full R&D expensing; but the price of RMB 932.20 already embeds 36.3x 2028E consensus earnings (19% above Nvidia's current multiple), implying a path of share doubling in one year with a three-year CAGR of ~99%, while demand-chain estimates, capacity quotas, and Huawei's crowding-out all suggest that path is stretched. Market structure (60 research reports with zero neutral/sell ratings, margin balance at a high of RMB 15.154bn, shareholder count +23.57% in a single quarter) coexists with consensus being downgraded (-24.9%/90 days), so short-term volatility will stay elevated. Strategy: do not chase at the current price; a base-case fair value of RMB 660-860 is the price condition for entry, and public disclosure of major-vendor orders or an earnings beat is the fundamental condition — until either materializes, the odds are asymmetric (downside to base -8%~-29%, to bear case -70%+; upside to bull case +26%~+90% but requiring share evidence). For existing holders, above RMB 860 (base-case fair-value upper bound) the margin of safety is fully exhausted — one should mechanically trim rather than "let profits run" — this stock's cost of ownership is 3-5% daily volatility.
Key risk disclosures: ① impairment elasticity on inventory of RMB 11.665bn (a 10% impairment ≈ RMB 1.17bn, ~20% of 2026E consensus net profit); ② Huawei supernodes siphoning training-side share (ByteDance's RMB 40bn-class mega order has already gone to Huawei); ③ advanced-node/HBM supply quotas capping 2027 delivery; ④ tail risk of share diversion if Chinese customs clears the H200; ⑤ sentiment disturbance from Liang Jun's RMB 27.8bn lawsuit (probability of actual payout <5%); ⑥ high valuation leaves zero tolerance for growth deceleration (a -5x exit multiple ≈ -RMB 93/share).
Monitoring points (per the watch list): whether Q4 revenue ≥ RMB 3.974bn (incentive threshold); whether inventory peaks and the pace of write-downs; bill payable rollover and cash-like funding gap; major-vendor named orders / changes in top-five customer structure in the annual report; next-gen chip launch and 690 ramp; CXMT HBM3 mass production and SMIC N+2 ramp; whether BIS extends controls to foundry/HBM; Chinese customs' stance on H200 approval.
Data in this report as of 2026-10-25; valuation anchor is the closing price of RMB 932.20 on 2026-10-23; financial data sourced from the company's periodic reports and announcements (SSE / cninfo), IDC/Inspur industry reports, Wind/TUSHARE/THS consensus, and public news coverage, with key citations in the evidence columns. This report does not constitute investment advice.