Nazhen Technology, backed by the "Hisense Group," is rushing to a Hong Kong IPO but is caught in a dependency on related parties, with net profit plunging and financial risks becoming prominent.

(Image source: Visual China)

Blue Whale News, March 11 — Recently, the Hong Kong Stock Exchange official website showed that Nazhen Technology (hereinafter referred to as “Nazhen Technology”) has submitted its prospectus, planning to list on the Main Board. Citigroup and CITIC Securities are joint sponsors. This marks the company’s second attempt at a listing after its initial application in August 2025 was invalidated.

According to the IPO documents, as of the last practical date, Hisense Group Holdings directly or indirectly owns a total of 394 million shares through its wholly owned subsidiary, Century Jinlong, accounting for approximately 48.61% of the company’s issued shares.

Currently, Hisense Group owns five listed companies: Hisense Visual, Hisense Home Appliances, San Electric Holdings, Qianzhao Optoelectronics, and Colin Electric. If Nazhen Technology successfully lists on the Hong Kong Stock Exchange, it will become the sixth listed company under Hisense Group, further enriching Hisense’s capital platform in the technology sector.

Revenue continues to grow, but net profit fluctuates sharply

As a global supplier of optical communication and optical connection products, Nazhen Technology’s main business includes the research and development, manufacturing, and sales of optical modules, optical chips, and optical network terminals.

According to data from Frost & Sullivan, in 2024, by global optical module revenue, the company holds a 2.9% market share, ranking fifth among professional optical module manufacturers worldwide; by China optical module revenue, its market share reaches 7.2%, ranking third. In the FTTx optical module field, it holds a 5.0% share globally and a 4.1% share in China’s optical network terminal box market, both ranking in the top three among global professional manufacturers, demonstrating strong industry competitiveness.

During the reporting period, Nazhen Technology’s performance showed continuous revenue growth and significant fluctuations in net profit. The IPO prospectus indicates that from 2023 to 2025, the company achieved operating revenues of 4.239 billion yuan, 5.087 billion yuan, and 8.355 billion yuan, mainly benefiting from the rapid growth in global data center upgrades and AI computing power demands, which drove demand for optical modules.

In terms of net profit, the company recorded an annual profit of about 216 million yuan in 2023; profit declined by 58.5% to approximately 89.49 million yuan in 2024, mainly due to a decrease in gross margin; in 2025, net profit surged to about 873 million yuan, primarily due to a one-time gain of 353 million yuan from the sale of a joint venture. Excluding this non-recurring gain, operating net profit was approximately 519 million yuan.

Gross margin-wise, the company’s overall gross margin showed a “first decline, then rise” trend, at 20.6%, 17.4%, and 20% from 2023 to 2025. The core product, data communication optical modules, saw gross margins decrease from 28.9% in 2023 to 24.4% in 2025. The optical chip business has been unprofitable for two consecutive years, with gross margins of -157.4% in 2024 and -121% in 2025, mainly because revenue from this segment is insufficient to cover fixed costs such as depreciation of manufacturing facilities and labor.

Backed by the “Hisense system,” frequent related-party transactions

It is noteworthy that the company exhibits a high overlap of customers and suppliers.

During the reporting period, among all suppliers or their affiliates, 7, 4, and 5 are also customers of the company, respectively. In 2023 and 2025, nearly 50% of total revenue came from these overlapping customers, with Hisense Group, the controlling shareholder, being both a major shareholder and a significant overlapping customer and supplier.

Additionally, customer concentration has increased year by year. From 2023 to 2025, the top five customers accounted for 55.8%, 66.9%, and 70.2% of sales, respectively. A reduction in major customers’ procurement could directly impact performance.

Meanwhile, during the reporting period, the company did not fully pay social security and housing provident fund contributions for some employees, with a total arrears of about 33.1 million yuan over three years, posing risks of back payments and fines. Against this background, the company has distributed over 434 million yuan in cash dividends over the past three years. This situation of dividend distribution coupled with compliance risks requires reasonable explanation to the market. Whether Nazhen Technology can successfully list on the Hong Kong Stock Exchange remains subject to regulatory inquiries and further market verification.

The funds raised from this IPO will mainly be used for five areas: continuous investment in new product and technology R&D, focusing on breakthroughs in high-end optical modules and optical chips; expanding production capacity for optical modules and chips, while improving automation across the product line to meet market growth; strengthening business promotion and overseas market expansion to further enhance global presence; making strategic investments and acquisitions in the optical communication value chain domestically and internationally to consolidate the entire industry chain advantage; and supplementing operating funds and supporting ongoing business operations and growth.