Pushing down revenue for nearly a year, 13 billion creates a second-generation "big gamble" on the future

Ask AI · How does Bae Storage balance a $10+ billion contract with cash flow pressure?

Radar Finance Original Production | By Peng Cheng, Edited by Meng Shu

On the evening of March 24, Bae Storage released a major announcement externally: the company signed a storage wafer purchase contract with a total committed purchase value of $1.5 billion (equivalent to about RMB 10.3 billion).

Moreover, this massive contract not only locks in part of the company’s baseline volume usage and procurement prices for the next two years, but the contract value also nearly matches the company’s revenue scale for the whole of last year (RMB 11.302 billion).

In fact, the global storage industry is currently undergoing a dramatic reversal in supply and demand. Against the backdrop of improving industry conditions, “long-term contracts” are gradually becoming a new trend in industry development.

And in this industry cycle shift, Bae Storage achieved a remarkable turnaround in performance. In the first half of last year, the company posted a loss of more than RMB 200 million. In the second half, it successfully reversed the situation: not only did it wipe out the first-half losses, it also realized a RMB 853 million attributable net profit for the full year.

Entering 2026, the company’s performance has been surging ahead. In the first two months, it is expected to achieve attributable net profit of between RMB 1.5 billion and RMB 1.8 billion, meaning that the profit scale for just these two months this year is about double that of last year.

While Bae Storage’s performance has been soaring, Sun Chengsi—an 85后 “second-generation entrepreneur” behind the company—has also drawn significant attention. In the “2026 Hurun Global Rich List” released in March, Sun Chengsi ranked on the list with wealth of RMB 13 billion.

However, behind what appears to be a thriving surface, Bae Storage—whose market cap has surpassed RMB 100 billion—still faces many challenges. In 2025, the net cash flow from operating activities took a sharp turn downward: from RMB 532 million in the previous year to -RMB 1.965 billion.

At the same time, the company’s inventories also surged from RMB 3.537 billion at the end of 2024 to RMB 7.868 billion, representing a year-over-year increase of 122.44%. And if this $1.5 billion contract encounters a reversal in the pricing cycle, it may also further increase the company’s cost burden.

Bae Storage splashes out billions to lock in part of its usage for the next 2 years

According to the announcement released by Bae Storage on the evening of March 24, the company signed a routine business procurement contract with a certain storage original equipment manufacturer (disclosed with an exemption due to trade secrets). The contract’s total committed purchase value is $1.5 billion.

The announcement shows that the contract’s total purchase commitment period is 24 months, from Q2 2026 to Q1 2028, with even procurement across 8 quarters, and the purchase prices are locked at unit prices.

It is understood that the contract value exceeds 50% of Bae Storage’s audited operating revenue and total assets for its most recent accounting year.

And the massive procurement contract signed by Bae Storage is not an blind expansion. The annual report shows that the share of direct material costs in operating costs is as high as 94%.

Through this price-locked “long-term contract,” Bae Storage intends to lock in part of its baseline usage for the next 24 months in advance.

According to the relevant contract terms, within every 12 months, Bae Storage’s procurement volume for this product accounts for 11.1% of the company’s total NAND Flash procurement in 2025 and 18.01% of the company’s NAND Flash sales volume in 2025.

Bae Storage believes that if this contract can be fulfilled smoothly, it will help enhance the stability of its mid- to long-term supply of storage wafers and reduce the impact of price fluctuations in storage wafers on costs.

In fact, the signing of this contract occurs at a key turning point as the global storage industry switches from “short-term contracts” to the “long-term contract” model. The sharp rise in prices has led upstream and downstream players across the industrial chain to seek to lock in supply and costs through long-term agreements.

Data from TrendForce, the industry research firm, shows that in Q4 2025, the contract price of NAND Flash increased quarter-over-quarter by 33% to 38%. Entering Q1 2026, the pace of price increases further accelerated, with the quarter-over-quarter increase exceeding 90%.

According to The Economic Observer, on March 18, Micron Technology disclosed in its performance for the second fiscal quarter of fiscal year 2026 its first five-year strategic customer agreement and revealed that it is in negotiations with multiple large customers for similar arrangements.

On the same day, Samsung Electronics’ Co-CEO Jun Young-hyun also said at a shareholders’ meeting that the company is considering extending contract terms from a quarterly or annual basis to three to five years.

From losing more than RMB 200 million to earning more than RMB 30 million per day

Before Bae Storage signed this massive procurement contract, its performance last year staged a major reversal.

According to the company’s previously disclosed financial data, in the first half of last year, the company was still stuck in a loss quagmire, with a half-year attributable net profit loss of more than RMB 200 million.

However, starting from the third quarter of last year, the company’s performance quickly reversed, achieving a profit of RMB 256 million in a single quarter.

By the fourth quarter, the company’s attributable net profit in a single quarter further surged to RMB 823 million, accounting for more than 96% of the full-year attributable net profit.

For the entire 2025, Bae Storage achieved revenue of RMB 11.302 billion, a year-over-year increase of 68.82%; attributable net profit was RMB 853 million, a substantial year-over-year increase of 429.07%.

Entering 2026, Bae Storage’s performance continues the strong growth momentum from the second half of last year.

According to the company’s disclosed performance forecast, in the first two months of this year, the company expects revenue of between RMB 4.0 billion and RMB 4.5 billion, a year-over-year increase of 340% to 395%.

In the same period, Bae Storage expects attributable net profit of between RMB 1.5 billion and RMB 1.8 billion, a year-over-year increase of 921.77% to 1,086.13%.

If calculated using the upper end, that is equivalent to earning more than RMB 30 million net per day on average; and even just the profit for these two months is more than double last year’s full-year figure.

The core logic behind Bae Storage’s blowout performance lies in price benefits driven by a mismatch between supply and demand. Affected by the global macroeconomic environment, storage prices have been falling quarter by quarter since Q3 2024, reaching a phase low in Q1 2025.

However, starting from Q2 2025, as storage prices stabilized and rebounded, Bae Storage’s key projects were gradually delivered. Its sales revenue and gross margin gradually returned, and its operating performance improved step by step.

In 2026, the storage industry will enter a highly favorable cycle. Fueled by AI computing power and domestic substitution, DRAM/NAND prices will continue rising. With industry-wide supply falling short of demand, Bae Storage is benefiting significantly.

And Bae Storage’s surge in performance also directly lifted its stock price. As of the close on March 26, Bae Storage’s share price was RMB 238.98 per share, more than double compared with the start of the year, and its latest market cap reached RMB 111.6 billion.

Tianyancha shows that Sun Chengsi is Bae Storage’s actual controller and chairman. In addition, according to the company’s annual report, as of the end of 2025, Sun Chengsi directly holds about 17.69% of the company’s shares.

In the “2026 Hurun Global Rich List” unveiled in early March, Sun Chengsi ranked 2,420th on the list with wealth of RMB 13 billion.

And Bae Storage’s fortunes were laid by Sun Chengsi’s father, Sun Yixin. In 2012, after studying in the UK, Sun Chengsi joined Bae Storage and served as deputy general manager. In 2015, he successively took on the responsibilities of general manager and chairman.

Under the leadership of this post-85 second-generation entrepreneur, Bae Storage began to accelerate its development. In 2022, Bae Storage successfully listed on A-shares, and subsequently became a leading independent semiconductor storage solutions provider with a market cap of over RMB 100 billion.

It is worth noting that in its 2025 annual report, Bae Storage mentioned that the “acting-in-concert agreement” signed in June 2022—under which the company’s actual controller and shareholders Xu Jianfeng, Sun Jing, Sun Liang, and employee shareholding platforms Shenzhen Batai, Shenzhen Fangtai Lai, Shenzhen Tedeseng, and Shenzhen Baisen—expired on December 30, 2025.

Based on this, the acting-in-concert relationship naturally terminates. After the acting-in-concert relationship ends, the company shares held by the parties will no longer be aggregated and calculated.

In addition, Bae Storage shareholder Sun Yixin is Sun Chengsi’s father, who is Sun Chengsi’s legally designated acting-in-concert person. Accordingly, through direct shareholding and the acting-in-concert relationship combined, Sun Chengsi controls about 17.7% of the voting rights of the company.

Bae Storage stated that because the actual controller’s equity control ratio is relatively low, there is a risk that the company’s control rights may be unstable, which could have an unfavorable impact on the stability of the company’s business management.

Behind the high growth in performance, multiple challenges also loom

Along with the blowout performance and “high-stakes bet” on the future, Bae Storage also faces a series of financial concerns and potential risks. Against the backdrop of signing the $1.5 billion contract, these risks appear especially prominent.

First is the tremendous pressure on cash flow. Even though profits surged, the company’s operating cash flow deteriorated sharply. In 2025, the net cash flow from operating activities was -RMB 1.965 billion, while it was RMB 532 million in the same period of the previous year.

In its annual report, Bae Storage attributes this to an increase in operating procurement spending. “The company is in a phase of rapid development, implementing a strategic procurement strategy for key raw materials such as storage wafers. During the reporting period, the cash outflow for procuring raw materials was relatively high.”

As of the end of 2025, Bae Storage’s inventory scale reached RMB 7.868 billion, up 122% from the end of the previous year.

Some analysts believe that from an industry perspective, stocking up in advance during a price uptrend cycle can lock in lower-cost inventory, improve future gross margin, and capture market share.

But from a risk-control perspective, high inventory also means a large amount of funds is tied up, which may weigh on the company’s cash flow and increase potential risks of inventory write-downs.

Second, the $1.5 billion price-locked “long-term contract” also hides risks. The announcement notes that the market price and market demand for the contract products may fluctuate during the contract period. In situations where procurement quantities, prices, and times are locked per contract terms, the company may suffer significant losses if the market price of the contract products declines and/or market demand falls during this period.

Fitch Ratings Asia-Pacific Corporate Ratings Director Zhang Huiyuan said, “The prices of storage chips in 2026-2027 will remain firm. While a gradual increase in capacity can help the industry avoid severe shortages, it cannot fully resolve the problem of insufficient supply.”

According to calculations by Isaiah Intellect Consulting, global DRAM capacity supply in 2026 (excluding HBM supply) will decline by about 3% year over year.

Wang Xudong, a semiconductor analyst at Isaiah Intellect Consulting, said, “Against this backdrop, we believe that the tight capacity situation in the global storage industry in 2026 will be difficult to ease, prices will continue to rise, but the magnitude of later increases will narrow.”

At the same time, Bae Storage also faces certain debt-servicing capacity risks. From 2022 to 2025, the company’s current ratio was 2.2x, 1.25x, 1.24x, and 1.64x, respectively. The quick ratio was 0.98x, 0.34x, 0.4x, and 0.5x, respectively. On a consolidated basis, the asset-liability ratio was 45.1%, 69.66%, 69.47%, and 64.47%, respectively.

Bae Storage emphasized that the storage industry it operates in is capital-intensive; the company’s business operations require a large amount of funding. Meanwhile, during the reporting period the company’s business development was rapid, further increasing funding needs. However, the company’s equity financing is relatively limited, with debt financing as the main source. Therefore, its asset-liability ratio is relatively high.

If, in the future, major adverse impacts occur in external macro policies and the operating environment, or if the company’s financial position and operating performance fluctuate such that it cannot repay the relevant debts in a timely manner, the company could face major repayment risks, which would have an unfavorable impact on its sustainable operating ability.

It is also worth mentioning that on March 24, alongside announcing the signing of the above procurement contract, Bae Storage also released an announcement regarding increasing its comprehensive credit line for 2026.

The announcement shows that Bae Storage will have the company and its subsidiaries within the consolidated reporting scope apply to banks or other financial institutions for total comprehensive credit lines for 2026. The amount was adjusted from no more than RMB 15 billion to no more than RMB 20 billion (or an equivalent amount in foreign currency), revealing the company’s strong need for funds.

In addition, last year Bae Storage completed a private placement of up to RMB 1.9 billion, mainly to support the expansion and construction projects for the Huizhou Bae Advanced Packaging and Storage Memory Manufacturing Base, as well as the wafer-level advanced packaging manufacturing project.

Meanwhile, in October last year, Bae Storage submitted its listing prospectus to the Hong Kong Stock Exchange, aiming to push for a dual listing of “A+H.”

The prospectus shows that Bae Storage plans to use the raised funds to enhance its R&D capabilities and drive product innovation, as well as for a global expansion strategy, potential strategic investment, cooperation, and merger and acquisition opportunities, among other uses.

After signing such a “big-ticket” RMB 10+ billion procurement order, can Bae Storage set new performance highs again in the future? Radar Finance will continue to monitor.