Where to begin

Shenzhen Longsys Electronics Co.,Ltd. (301308.SZ) released its first-half 2026 financial report, showing growth in both revenue and net profit. However, behind the positive numbers, concerns are mounting. To secure upstream wafer supply, the company has taken on debt to build inventory, causing a sharp rise in stockpiles and long-term borrowings while turning operating cash flow negative. Under pressure from short-term debt, a 3.7 billion yuan private placement has been completed. Institutional investors that aggressively bought into the offering at a high stock price are now facing combined paper losses of nearly 1.1 billion yuan after the share price dropped significantly. Meanwhile, company executives had already cashed out at elevated levels.

Debt-fueled stockpiling drives inventory and borrowing surge

Public information shows that Shenzhen Longsys Electronics Co.,Ltd. focuses on the research, design, packaging, testing, and sales of memory and controller chips, as well as storage solutions for consumer, enterprise, automotive, and industrial markets. In 2026, accelerated AI data center construction boosted enterprise storage demand, with the semiconductor memory market growing rapidly and memory prices entering a clear upward trend, lifting the company's performance. The half-year report shows revenue of 24.088 billion yuan, up 136.26% year-on-year, and net profit attributable to shareholders of 10.577 billion yuan, a staggering 71,528.66% increase.

However, cash flow performance diverged from net profit. In the first half of 2026, net cash from operating activities was -3.151 billion yuan, reversing from positive to negative, attributed to increased payments for goods and services. Looking back from 2023 to 2025, this metric was -2.798 billion, -1.19 billion, and -1.201 billion yuan respectively, remaining persistently negative. Further analysis shows that this cash flow strain is linked to inventory growth. Memory wafers are a key raw material, and with rising demand and limited global capacity expansion, Shenzhen Longsys renewed supply agreements with major wafer manufacturers to secure supply, driving inventory from 7.833 billion yuan at end-2024 to 11.678 billion yuan at end-2025. By June 30, 2026, inventory reached 25.777 billion yuan, up 219.18% year-on-year, far exceeding revenue growth and accounting for 60.12% of total assets.

Large-scale stockpiling requires funding, pushing long-term borrowings to 10.493 billion yuan by June 30, 2026, a 311.67% year-on-year surge. Meanwhile, cash and trading financial assets totaled 3.256 billion yuan, while short-term borrowings stood at 4.92 billion yuan, leaving insufficient funds to cover short-term debt. Zhang Xiaorong, president of the Deep Technology Research Institute, commented that Shenzhen Longsys is betting on continued demand growth and price increases for memory, borrowing heavily to stockpile. If prices fall or demand disappoints, large inventories could depreciate, high borrowing costs would weigh on cash flow and performance, making this a risky, low-margin strategy.

According to CFM flash memory market data, foreign companies like Samsung Electronics, SK Hynix, Kioxia, Micron Technology, and SanDisk hold nearly 90% of global NAND Flash and DRAM market share. Given the high concentration and reliance on overseas supply, Shenzhen Longsys faces concentrated suppliers and high foreign procurement. Industry insiders note that lacking in-house wafer R&D and production, the company's core raw materials depend on external supply, hindering sustainable competitive advantage. If the memory market downturn occurs, price competition in a commoditized market could significantly compress profit margins.

Institutional investors lose nearly 1.1 billion yuan as executives cash out at highs

Under short-term debt pressure, Shenzhen Longsys successfully raised 3.7 billion yuan through a private placement in August 2026, with net proceeds of about 3.668 billion yuan after expenses. Of this, 2.6 billion yuan is earmarked for three projects, including semiconductor memory controller chip R&D, and 1.1 billion yuan for working capital. The issuance report shows an offering price of 560 yuan per share for 6.6071 million shares, with 21 investors subscribing, including listed company StarChip Technology, a subsidiary of Sungrow Power Supply, and fund firms like E Fund, Caitong, and Nord.

In the first half of 2026, as the memory industry recovered, Shenzhen Longsys's stock price rose steadily, hitting a record high of 749.88 yuan per share on July 1. On that same day, 35 subscribers submitted bids ranging from 452.9 yuan to 710 yuan per share, with the final offering price set at 560 yuan per share, an 20% discount to the closing price of 667.84 yuan. However, after the subscription, the memory sector cooled, and the stock price began to fall. By the release of the placement report on August 7, the closing price was 386.6 yuan, implying a 45% premium to the offering price. As of August 13, the stock closed at 397 yuan, down over 40% from its peak and below the offering price, meaning investors in the placement face paper losses of about 1.077 billion yuan.

Beyond the placement, Shenzhen Longsys is advancing an IPO in Hong Kong, pursuing an "A+H" dual listing. On May 29, 2026, it resubmitted its listing application to the Hong Kong Stock Exchange. Notably, while the company is raising funds intensively, executives have been cashing out at high levels. Between May 12 and June 25, 2026, the second-largest shareholder and director Li Zhixiong reduced holdings by 2.399 million shares at prices ranging from 500.08 yuan to 688.1 yuan per share, a 0.57% stake reduction, cashing out 1.382 billion yuan. After the sale, his stake fell from 4.51% to 3.9%. Additionally, from May 11 to May 13, 2026, shareholder and deputy general manager Gao Xichun sold 23,000 shares at prices between 528.09 yuan and 610.06 yuan, cashing out 12.43 million yuan. These sales occurred during the stock's price rally.

In addition to executives, Shenzhen Longsys's employee stock ownership platforms—Longxi No.1, Longxi No.2, Longxi No.3, Longjian Management, and Longxi No.5—also cashed out early this year through a negotiated transfer. They sold a total of 12.5744 million shares at 212.09 yuan per share, a 3% stake reduction, cashing out roughly 2.667 billion yuan. Founder Cai Huabo served as executive partner in these platforms. In total, executives and employee platforms have cashed out about 4.06 billion yuan this year.