Estimated First-Day Price of New Stocks — Taking Hongming Electronics as an Example

1. Determine the Industry [Taoguba]
   The first step in valuation is to determine the specific industry in which the company operates. Some companies have more than one line of business, so it is important to identify the concept with the highest speculative value.
   Hongming is a leading domestic military special MLCC manufacturer, with its corresponding industry being MLCC (Multilayer Ceramic Capacitors).

2. Determine Industry Position
   After confirming the industry, identify peer companies and leading enterprises within the field.
   The peer situation in the MLCC manufacturing industry where Hongming operates is as follows:

3. SanHuan Group: The company’s MLCC products have achieved full-scale production from hk01005 to 2220 (imperial), with a rich product line.

4. Fenghua Hi-Tech: Main business includes MLCCs, resistors, and other passive components, currently advancing the construction of new MLCC production capacity and accelerating the product structure’s transition to high-end.

5. Torch Electronics: Business includes MLCCs and other electronic components.

6. Hongda Electronics: Main products include various capacitors, including MLCCs. In 2025, it completed R&D projects for high-reliability multilayer ceramic capacitors.

7. Dali Cap: Main business is the R&D, manufacturing, and sales of RF microwave MLCCs.

8. Hongyuan Electronics: A core manufacturer of electronic components centered on MLCCs, with products widely used in military, communication, and other fields.
   Leading enterprises in the industry:

9. SanHuan Group: With over 50 years of experience in electronic ceramics production, its MLCC products cover consumer electronics, automotive electronics, and more. It has a deep layout in the automotive-grade MLCC sector, with products validated by mainstream manufacturers. By 2024, the annual production capacity of MLCCs has exceeded 300 billion units.

10. Fenghua Hi-Tech: A leader in the domestic MLCC industry: Since introducing the first domestic MLCC production line in 1985, it has focused on this field for 40 years. It has achieved coverage of full-size MLCC products from 01005 to 2225 and has passed automotive-grade certification. Its leading product, MLCC, has been recognized as a “National Manufacturing Single Champion Product,” with a domestic market share consistently ranking at the forefront of the industry.

11. Hongming Electronics: A leader in special/high-reliability MLCCs: A national-level specialized and innovative “little giant,” its special MLCC products have been rated as “Manufacturing Single Champion.” It is a core player in the defense sector (with revenue accounting for over 89%). It has deep ties to national key projects in aerospace, weapons, shipbuilding, nuclear industry, etc. With over 60 years of technological accumulation, it possesses full industry chain capabilities from ceramic materials to components.

12. IPO Information
    According to public information:

13. Issue price: 69.66 yuan/share

14. Issue price-earnings ratio: 33.61 times

15. Total share capital after issuance: approximately 121.55 million shares

16. Total market value after issuance: approximately 8.466 billion yuan (69.66 yuan/share × 121.55 million shares)

The issue price is 69.66 yuan, but the opening price on the first day of trading for new shares will soar, and prices may either rise or plummet after trading starts, so what we want to estimate is a psychological price level.
It’s like an auction where the starting price is usually low; you estimate how low the price will be before you bid.

4. Comparative Method
   You do not have any internal information about the company, and even if you obtain all financial data, you cannot accurately value it. Because valuation assesses the company’s intrinsic value, not the asset value on the financial statements. Therefore, it is more appropriate to compare with some comparable companies in the same industry.

Known: The IPO prospectus has an issue price of 33.61 times earnings ratio, corresponding to a stock price of 69.66 yuan.

1. Industry average price-earnings ratio benchmark from the prospectus: 65.16 times earnings ratio, corresponding to a stock price of 135.10 yuan.
2. Weighted average price-earnings ratio benchmark of the comparable companies: 74.90 times earnings ratio, corresponding to a stock price of 155.30 yuan.
3. Benchmarking leading companies in the industry: According to Fenghua Hi-Tech (23.3 billion total market value) on March 24, the price-earnings ratio is 76.30 times, corresponding to a stock price of 159.00 yuan. According to SanHuan Group (106.5 billion total market value) on March 24, the price-earnings ratio is 39.80 times, corresponding to a stock price of 83.00 yuan. However, it is close to Fenghua Hi-Tech in total market value, so it benchmarks Fenghua Hi-Tech.
4. Benchmarking the historical situation of the two rounds of MLCC price increases in 2017-2018 and 2020-2021: The prices of Japanese ceramic capacitors have cumulatively increased by 70%/20%. The simultaneous increase in volume and price has driven manufacturers’ operating profit margins to achieve 3-4 times growth, with the price-earnings ratio nearly doubling. Therefore, according to the issue price of 33.61 times doubling, it corresponds to a price-earnings ratio of 67.22 times, corresponding to a stock price of 139.32 yuan.

Thus, the valuation ranges from low to high:
135.10 yuan (benchmarking industry average)
139.32 yuan (benchmarking historical data)
155.30 yuan (benchmarking peer companies)
159.00 yuan (benchmarking industry leaders)
This gives a reference value range of 135.10 yuan—159.00 yuan.

5. Subjective Weighted Pricing Method
   After obtaining the above range, we will use another method for cross-validation.
   Known: The IPO prospectus has an issue price of 33.61 times earnings ratio, corresponding to a stock price of 69.66 yuan.
   Analysis:
6. Hongming Electronics is the absolute leader in the special MLCC field, the largest special MLCC company in the country, and this rarity enjoys a valuation premium in the A-share market. It differs from comprehensive MLCC leaders Fenghua Hi-Tech and SanHuan Group in terms of products and markets. This rarity gives a +30% premium.
7. Nearly 90% of Hongming Electronics’ revenue from electronic components comes from the defense sector, with characteristics of high reliability and high barriers, making its valuation higher than ordinary civilian enterprises. Its fundamentals are very solid, possessing a deep moat in high-end markets such as military industry, which is difficult for Fenghua Hi-Tech and SanHuan Group to shake in the short term. This irreplaceable military and aerospace concept gives a +20% premium.
8. The MLCC industry is currently in a structural price increase window, with global leader Murata starting comprehensive price increases, and high-end demand driven by AI servers leading to an upturn in industry prosperity, allowing the market to price in advance. This gives a +20% premium.
9. Hongming Electronics has a circulating market value of 1.33 billion yuan, which is very small, meaning that the actual tradable shares at the beginning of listing are limited. In the A-share market, new stocks with low circulation are easily noticed and speculated on by funds, often driving the stock price to positions far exceeding rational valuations. This gives a +10% premium.
10. Global absolute leader Murata is taking systematic measures to isolate geopolitical risks and has officially launched a decoupling plan from the U.S.-China rare earth supply chain, gradually reducing its dependence on Chinese rare earth raw materials for MLCC production and advancing the replacement layout of rare earth supply chains in the U.S., Australia, and other overseas markets. High-end automotive-grade, industrial control-grade, and military-grade MLCCs must add rare earth elements such as lanthanum, cerium, and neodymium to meet high capacity, high stability, and long-life performance requirements; currently, no country other than China can achieve large-scale, low-cost, stable supply of high-purity rare earth deep-processing products. The decoupling will inevitably lead Murata to face rising raw material costs and unstable supply, while domestic MLCC manufacturers, backed by China’s complete rare earth supply chain, have a natural cost and supply advantage. In this context, the domestic replacement of MLCCs will accelerate comprehensively, leading to a systemic re-evaluation of the entire A-share related industry chain. This gives a +20% premium.

With a 100% subjective premium added, the corresponding stock price is 139.32 yuan. As a subjective scoring reference value, it varies from person to person and may not be comprehensive. Although it is scored, qualitative aspects are actually more important than quantitative ones, serving only to cross-validate the reasonableness of my comparative method.

In summary, we first used objective data for comparison to arrive at the valuation range from four dimensions: industry average, historical cycle data, peer companies, and leading enterprises. Then we used the subjective scoring method for cross-validation. This gives a reference value range of 135.10 yuan—159.00 yuan.

In reality, Hongming Electronics opened at 140.14 yuan and closed at 128.65 yuan.

Valuation is only the first step in buying new shares; what plays a larger role in the opening price is short-term sentiment, such as the impact of the military sector on Hongming Electronics. If the calculation of the power price line gains momentum in the following days, and Fenghua and SanHuan hit the limit, it will also have a significant impact on the price.