Galaxy Microelectronics Resumes Trading with 20% Daily Limit: Acquiring Power Semiconductor High-End Track

## Trading Resumes with 20% Daily Limit: Galaxy Microelectronics Discloses Reorganization Plan After a suspension of over two weeks, Galaxy Microelectronics (688689.SH) disclosed a reorganization plan yesterday and resumed trading today. The company proposes to acquire 100% equity of Hengtai Ke Semiconductor from three shareholders through share issuance, and simultaneously raise supporting funds. ## Key Transaction Points: Acquire Hengtai Ke via Share Issuance and Raise Matching Funds The target entities are: Shanghai Zhineng Hengxin Industrial Electronics Co., Ltd., Gongqingcheng Mingnuo Investment Partnership (Limited Partnership), and Tianmu Yulin (Shanghai) Technology Co., Ltd. The acquisition will be completed through share issuance, along with a supporting capital raise. ## Stock Performance on Resumption Day: 20% Daily Limit with Strong Buying On the first day of resumption, the stock hit the 20% daily limit, closing at RMB 55.88 per share, with a market cap of about RMB 7.2 billion. Turnover rate was only 1.21%, with a limit-order queue of 291 million shares (185 times the day's volume), representing over RMB 1.5 billion in pending orders, indicating strong buying enthusiasm. ## Controversies and Uncertainties: Insider Trading Suspicions, Valuation Fog, and Goodwill Pressure Under the high-cycle power semiconductor industry, the market gave positive expectations for Galaxy Microelectronics' move into mid-to-high voltage power semi tracks. However, there are multiple controversies: insider trading suspicions from abnormal price surge before suspension, undetermined target valuation, and potential large goodwill pressure. ## Integration Challenge: Fine Management of Product Lines and Customers Jianghan, senior researcher at Pangu Think Tank, said the biggest integration challenge is fine management of product lines and customers. Hengtai Ke's 700+ products will bring the total to over 1,000, significantly increasing complexity in customer management and capacity allocation. ## Technology and Team Binding Risk: Need for Incentives and Non-Compete Jianghan further noted that core technology is highly tied to the R&D team. Without reasonable equity incentives and non-compete clauses, there is risk of technology loss and goodwill impairment. ## M&A Logic: Industry Integration to Fill Gaps with Synergy Compared to some "cross-border M&A" with weak main business synergy, Galaxy's acquisition of Hengtai Ke is a typical industry M&A to fill gaps and emphasize synergy. After completion, the company can quickly fill its mid-to-high voltage power semi technology gaps, fill high-end product gaps, and improve the overall product matrix. ## Technical Leap Barriers: Narrowing Window to Catch Up in High-End Areas Galaxy has long relied on small-signal and low-voltage power devices as its core performance base, but lags in high-end areas like high-voltage MOSFETs, IGBTs, and SiC. Disclosed technical breakthroughs have not yet translated into actual performance, restricting penetration into high-end markets like automotive electronics. ## Target Capability: Hengtai Ke's Mid-to-High Voltage SGT MOSFET and SuperJunction Technology According to the plan, Hengtai Ke is a national-level specialized new "Little Giant," engaged in R&D and sales of power semiconductor products, covering power supplies, lithium battery protection, brushless motors, new energy, and E-car (OBC, motor control). It has mid-voltage SGT MOSFET and high-voltage SuperJunction technology; its 150V-200V mid-to-high voltage SGT MOSFETs reach domestic top level, pin-to-pin comparable to Infineon's mid-voltage series. ## Industry Chain Synergy: Fabless Design + IDM Manufacturing Integration This deal is a "Fabless design + IDM manufacturing" chain integration: Galaxy has mature chip manufacturing capacity but lacks high-end design capability; Hengtai Ke has top design technology but lacks its own fab, long constrained by foundry capacity and cost fluctuations. The two have complementary business synergies, the realization of which depends on subsequent integration. ## M&A Advantages and Biggest Risk: Integration Execution Ability Investment institutions believe the biggest advantage for mid-sized companies in M&A is shortening the development window. Through precise M&A, mid-sized firms can initially form a full-chain synergy prototype, enhancing overall competitiveness in a complex environment. At the same time, integration risk is the biggest challenge. Differences in organizational structure, corporate culture, team integration, and R&D paths require fine management to reduce internal friction and drive strategic implementation. ## Valuation Fog and Funding Pressure: Transaction Price Not Yet Finalized Against the backdrop of intensifying market competition, M&A uncertainty still comes from valuation and consideration. The plan's risk note says Hengtai Ke will face competition from both international giants and domestic newcomers; if the global macro weakens, downstream demand slows, or the semi industry sees a deep, prolonged downturn, operating results may be affected. More core uncertainty: the final valuation and consideration have not been disclosed. As of the plan signing date, auditing and valuation work is still ongoing; the transaction price has not been disclosed. The share issuance price is set at RMB 28.48 per share, and the consideration shares are locked for 36 months. ## Use of Supporting Funds and Target Financials Supporting funds will be used for transaction taxes, intermediary fees, target project construction, and supplementing working capital and repaying debt. Unaudited data shows Hengtai Ke's 2024 and 2025 revenue were RMB 206 million and RMB 193 million respectively; net profit attributable to parent was RMB 32.23 million and RMB 35.72 million, with steady profit growth. As of end-2025, Hengtai Ke's parent company equity was only RMB 416 million, showing a significant light-asset nature. ## Valuation Method for Light-Asset Semis: DCF as Base with Cross-Validation Jianghan said the core of valuing light-asset semiconductor design companies lies in intangible assets like IP cores and R&D teams. Traditional PE/PB models may fail due to earnings volatility and high upfront spending. A more reasonable valuation should be based on a multi-stage DCF model, supplemented by relative valuation cross-validation, while incorporating qualitative factors like technology iteration risk and downstream application cyclicality. For judging premium bubbles, one should not simply refer to book net assets or short-term profits, but comprehensively assess the scarcity of technology in the specific segment, commercialization progress, and transaction payment structure to form a more prudent judgment. ## Listed Company Fundamentals: Slowing Profit Growth and Cash Flow Pressure Galaxy's net profit attributable to parent declined year-on-year from 2022 to 2023. In 2024, revenue was RMB 909 million, up 30.75% YoY; net profit was RMB 71.87 million, up only 12.21%. In 2025, full-year revenue was RMB 1.05 billion, up 15.46% YoY; net profit was RMB 79.90 million, with growth slowing to 11.17%. On cash, cash at end-2025 was only RMB 137 million, down 44.65% YoY, with operating cash flow weakening year by year. In 2025, net operating cash inflow was RMB 43.75 million, down 34.73% YoY, related to longer customer payment cycles and higher inventories. ## Goodwill Impairment Risk: Performance Realization Test After High-Premium M&A A private equity source noted that after Hengtai Ke's consolidation, it can directly boost the listed company's earnings, but both entities are relatively small, and whether "1+1>2" synergy can be achieved remains uncertain. The biggest risk is the formation of large goodwill from high-premium acquisition; if performance misses expectations, goodwill impairment will erode listed company's profit. Further emphasis: The key to M&A for transitioning to high-end tracks is not short-term boom but long-term performance realization and integration execution. ## Pre-Suspension Price Anomaly: Insider Information Leak Concerns Furthermore, the abnormal price movement before suspension raised market concerns about insider information leaks. Before the suspension announcement on June 10-11, Galaxy's stock suddenly surged, rising nearly 19% over two days with heavy volume; over the same period, the semiconductor sector index rose only 2.70%, showing a significant deviation. The company stated that no insider information leaks or insider trading existed. On June 29, Blue Whale News called Galaxy's board office but received no reply as of press time.