Starting from October 8, Longsys (09976) H-shares were officially included in the Stock Connect eligible list, allowing qualified mainland investors to directly participate in its Hong Kong stock trading, significantly broadening the investor base and potentially further enhancing trading liquidity.

For Longsys, which has been listed in Hong Kong for just over a month, inclusion in Stock Connect means dual increments in trading activity and shareholder structure. However, the opening of the channel only represents improved capital "accessibility," not a signal for valuation re-rating—southbound capital places greater emphasis on earnings quality and realization paths. Does Longsys meet the criteria?

In the first half of 2026, Longsys delivered impressive results with revenue of 24.088 billion yuan and net profit attributable to shareholders of 10.577 billion yuan. But no matter how impressive the surface data appears, it must withstand scrutiny. How solid is the fundamental quality of this world's second-largest independent semiconductor memory manufacturer?

Fundamental Quality: Earnings Explosion and Three High-Growth Tracks

Let's first look at the financial report. In the first half of 2026, Longsys achieved revenue of 24.088 billion yuan, a year-on-year increase of 136.26%; net profit attributable to shareholders reached 10.577 billion yuan, a year-on-year increase of over 715 times.

Earnings quality also withstands scrutiny: comprehensive gross margin was 58.90%, up 45.95 percentage points year-on-year, marking five consecutive quarters of increase; ROE reached 56.92%, maintaining high capital efficiency; trade receivables and notes turnover days decreased from 40.7 days in 2023 to 23.2 days in the first four months of 2026, compressing the collection cycle by over 40%. While revenue doubled, collection actually accelerated.

Behind the high growth is a fundamental shift in industry logic—storage has evolved from consumer electronics to a core component of AI infrastructure. According to CFM flash memory market definitions, the global DRAM and NAND market size reached 137.14 billion USD in the first quarter of 2026, up 81.6% quarter-on-quarter, with the industry officially entering an "AI-driven structural prosperity upcycle." Morgan Stanley also estimates that by 2030, Agentic AI will contribute 26% to 77% of global DRAM incremental demand. The company's growth momentum has essentially detached from traditional consumer electronics constraints, with earnings explosion supported at the industry level rather than mere price speculation.

Enterprise-level storage is currently the most solid realization path. In the first half, Longsys enterprise storage revenue reached 2.140 billion yuan, up 208.80% year-on-year, significantly outpacing overall revenue growth. High-end products such as eSSD and RDIMM are accelerating in volume, having been introduced into the core supply chains of leading internet companies and mainstream server manufacturers, and certified for mass production and shipment by leading customers including Lenovo, JD Cloud, and Bilibili. The company has completed compatibility adaptation with domestic CPU platforms such as Kunpeng, Hygon, and Phytium, deeply integrating into domestic computing infrastructure supply chains. On the industry side, server-related DRAM demand has accounted for 53% of global total demand, historically surpassing consumer electronics demand from phones and PCs for the first time. A single AI server carries 8 to 10 times the DRAM capacity of traditional servers, with NAND usage exceeding traditional servers by more than 3 times. Bandwidth, latency, and stability requirements have comprehensively upgraded, directly driving both volume and price increases for high-end enterprise storage products. In the second quarter of 2026, enterprise SSDs accounted for 48% of global NAND shipments, nearly double that of a year earlier. It is worth noting that Lenovo Group is both a core customer and a strategic investor that subscribed to H-shares for 10 million USD. This deep binding of industrial capital provides additional endorsement for the earnings realization path.

In high-end layout, Longsys has formed two new curves: edge AI and automotive-grade storage. In edge AI, the self-developed SPU storage processing unit combined with iSA intelligent storage architecture, deeply co-optimized with AMD, achieves 3.2 times increase in edge AI model carrying capacity, 200% improvement in memory utilization efficiency, and 40% reduction in terminal DRAM usage. Under 4GB low-configuration DDR, device response speed can approach traditional 6GB/8GB DDR levels, helping terminal manufacturers achieve higher AI performance at lower hardware costs. Currently, the company's cumulative production of various storage controller chips has exceeded 280 million units, among which the UFS4.1 controller, the first to adopt 5nm advanced process, has achieved stable mass production. According to Morgan Stanley estimates, the edge AI storage market size will grow from 10 million USD in 2025 to 6 billion USD in 2030, with a five-year compound growth rate of 257%, providing sufficient space to support long-term growth. In automotive-grade storage, the self-developed 5nm process automotive-grade UFS4.1 product achieves sequential read speeds of 4200MB/s and has entered the verification and introduction phase with high-level intelligent driving models and global leading automakers. The company cooperates with over 20 OEMs and over 50 Tier1 suppliers. The track space itself is vast enough: global average in-vehicle storage capacity per vehicle has risen from 34GB in 2021 to 483GB in 2026, with L3 and above high-level intelligent driving models requiring 4TB to 20TB of storage per vehicle, hundreds of times traditional phone capacity.

Overseas expansion is another insurance for Longsys' high-quality development. The company has built three differentiated brand matrices: FORESEE, Lexar, and Zilia. FORESEE focuses on B2B storage, Lexar positions in the global high-end B2C market with first-half revenue of 3.966 billion yuan, up 84.90% year-on-year; Zilia focuses on the Latin American regional market with revenue of 3.950 billion yuan, up 184.58% year-on-year. In the first half, overseas revenue reached 17.017 billion yuan, up 142.27% year-on-year, accounting for 70.64% of total revenue. The three-layer diversification of brands, regions, and customers significantly reduces dependence on a single market. Meanwhile, the September H-share IPO proceeds will mainly be invested in chip design, high-end AI storage product research and development, and global capacity and channel layout, reserving sufficient ammunition for the globalization strategy.

Two-Way Convergence of Incremental Capital and Earnings Realization

Inclusion in Stock Connect essentially introduces incremental mainland capital to H-shares: trading activity is expected to increase, shareholder structure tends toward diversification, and the company's investor base further expands. But for southbound capital, the opening of the channel is only the starting point—capital accessibility does not equal automatic buying. Whether capital can settle depends on whether the fundamentals withstand scrutiny.

From a fundamental perspective, Longsys' growth does not rely on a single product line: the volume and price increase of enterprise storage, the sequential volume ramp of edge AI and automotive-grade storage, and the revenue contribution of the global brand matrix constitute a multi-point realization path. Continuously rising earnings quality and real capital backing from industrial capital build growth on verifiable operating facts.

The southbound capital style of "emphasizing fundamentals, looking at realization" is precisely the touchstone for this logic—if earnings quality holds up, incremental capital will be willing to settle. When incremental capital continues to flow in and earnings are realized quarter by quarter, the two are expected to form positive resonance. On the industry side, the massive demand for storage from AI continues, high-end storage prosperity has long-term support, and track demand space continues to expand. On the capital side, long-term funds are increasingly inclined to examine hard-tech assets through industrial logic. It can be expected that Stock Connect brings not only improved liquidity but also a re-pricing of Longsys' industrial value by a batch of long-term perspective capital.