IPO Analysis | Oversubscribed 1193.68 Times, Can Feisu Innovation (03355) DTC Model Support "Hard Tech" Premium?

On March 23, Feishu Innovation (03355) officially listed on the Hong Kong Stock Exchange. As the world’s second-largest online DTC network solutions provider, the company previously faced obstacles in the A-share market due to internal control and disclosure issues. Its successful listing marks the opening of the door to the capital market.

Market reactions show that Feishu Innovation received enthusiastic funding support. First, in attracting cornerstone investors, the company successfully attracted 11 institutions including Haoran Capital, Great Holding (Yuan Yonggang’s firm), WT Asset Management, Caitong Asset Management, Juming Investment, Qianzhan, Shenzhen Chuangtou’s SCGC Capital, Aether, GF Fund HK (Gf Securities), Shenzhen Kaifeng Investment, and Wider Huge, with a total subscription amount of USD 90.22 million.

Based on an issue price of HKD 41.6 per share, without exercising the over-allotment option, these 11 cornerstone investors subscribed to approximately 42.31% of the global offering shares, demonstrating institutional confidence in the company’s fundamentals.

Strong institutional subscriptions also ignited market enthusiasm. During the IPO, about 197,000 retail investors subscribed, with a margin subscription amount of approximately HKD 203.096 billion. Compared to the HKD 170 million raised from the public offering, the over-subscription multiple reached about 1,193.68 times, reflecting retail investors’ keen interest and high expectations.

This enthusiasm was also evident in pre-listing dark pool trading. On March 23, the dark pool quote from Livermore Securities showed Feishu Innovation at HKD 60.1, a 44.47% increase over the IPO price of HKD 41.6. At this price, each lot of 100 shares would yield a paper profit of HKD 1,850 before fees.

However, it is noteworthy that based on the issue price, Feishu Innovation’s IPO valuation is approximately HKD 16.64 billion, while its last pre-IPO funding round in March 2025 valued the company at about RMB 5.4 billion (roughly HKD 6 billion). This indicates a nearly 2.7-fold increase in valuation within just one year. Against this backdrop of significant valuation growth, market curiosity arises: how much growth potential remains for Feishu Innovation in the secondary market?

Focusing on the actual needs of small and medium-sized enterprises, differentiated development strategies have propelled the company to the top tier of the industry.

Feishu Innovation’s rise exemplifies how, amid a rigid traditional network equipment market dominated by a few giants like Huawei, Cisco, and New H3C, the company achieved differentiation through a unique DTC (Direct-to-Customer) model. Its growth path clearly demonstrates how business model innovation can carve out a blue ocean in a red ocean crowded with industry giants.

The traditional network equipment market has long been dominated by a few major players, with high industry concentration and strong barriers to entry. However, the market also faces multiple challenges: rapid technological iteration increases R&D pressure, homogeneous competition erodes profits, and reliance on multi-tier distribution results in lengthy supply chains, slow response times, and high costs.

Yet, challenges also present opportunities: the vast number of small and medium-sized enterprises (SMEs) with personalized, high-cost-performance network equipment needs are inadequately served by traditional service models, creating a sizable “long tail” market with long-term service gaps.

In this context, Feishu Innovation chose not to compete head-on with giants in R&D but instead pursued a fundamental business model innovation. Its core strategy is adopting an online direct sales (DTC) approach, using its self-operated platform FS.com to eliminate all middlemen.

This revolutionary model reshapes the value chain: it offers customers exceptional cost-performance and a convenient e-commerce experience, while enabling the company to respond swiftly and directly to global customer demands. Based on this, Feishu Innovation positions itself as a “network hardware supermarket,” offering over 120,000 SKUs of proprietary brand products, covering a full range of network equipment from optical modules, high-speed cables, switches, to fiber optic management. This “network hardware supermarket” layout meets the “one-stop shopping” needs of customers, especially SMEs, solving the pain point of dealing with multiple suppliers in traditional models.

Meanwhile, Feishu Innovation adopts a “self-designed + outsourced manufacturing” light-asset model, avoiding direct investment in factories, focusing resources on product design, platform operation, and brand building. It has established a delivery network covering over 200 countries and regions worldwide, enabling efficient local delivery and service, with over 99% of revenue generated from overseas markets.

This series of differentiated strategies has yielded remarkable results, making Feishu Innovation a formidable player in the global network equipment market. Based on 2024 revenue, it has become the second-largest online DTC network solutions provider globally, with a market share of 6.9%, and ranks first in the high-performance network solutions segment (100G and above). The company has served over 500,000 customers worldwide, including about 60% of the Fortune 500 companies.

As it expands, customer quality and stickiness also improve. In 2024, net revenue retention reached 102.3%, confirming ongoing purchase growth and high customer loyalty. Notably, clients purchasing three or more enterprise products contributed over 80% of total revenue, forming a stable revenue pillar. The average revenue per high-value customer increased significantly from about RMB 61,700 in 2022 to approximately RMB 75,600 in 2024, reflecting deeper cooperation and enhanced value extraction.

In terms of performance, Feishu Innovation’s revenue continues to grow, though profits fluctuate. From 2022 to 2024, revenues were approximately RMB 1.988 billion, RMB 2.213 billion, and RMB 2.612 billion, respectively, with adjusted net profits of about RMB 388 million, RMB 470 million, and RMB 408 million. In the first three quarters of 2025, the company returned to growth, with revenue of about RMB 2.175 billion (up 11.31%) and adjusted net profit of RMB 461 million (up 28.41%).

Specifically, the sustained revenue growth is mainly driven by core infrastructure network solutions and other stable business segments, with a focus on high-performance network solutions (transmission rates of 100G and above), which saw rapid growth from RMB 473 million in 2022 to RMB 831 million in 2024, with a CAGR of 32.55%. This segment’s proportion of total revenue increased from 23.8% to 31.9%, and further to 36.2% in the first three quarters of 2025, indicating ongoing optimization toward higher value-added products, which is also reflected in gross margins.

According to the prospectus, Feishu Innovation’s gross margin has steadily improved from 45.4% in 2022 to 52.6% in the first three quarters of 2025. This growth is driven by two factors: first, the gross margin of high-value-added high-performance network solutions continues to rise; second, the gross margin of basic performance solutions benefits from declining procurement costs, boosting overall margins.

However, the decline in adjusted net profit in 2024 is mainly due to increased expenses: sales and marketing expenses reached RMB 488 million, up 43.9%, as the company ramped up marketing to expand global market share and brand influence. Additionally, financial costs surged from about RMB 4.655 million in 2023 to RMB 18.544 million in 2024, an increase of 298.4%.

This indicates that the profit decline in 2024 results from the company’s strategic investment in marketing, R&D, and financing to accelerate global expansion and strengthen market position, with expenses outpacing revenue growth—an embodiment of a “sacrifice current profits for long-term growth” strategy.

Can the DTC model support “hard tech” premium?

From an industry perspective, as the second-largest online DTC network solutions provider globally, Feishu Innovation is expected to benefit continuously from industry growth. According to Frost & Sullivan, the global network hardware solutions market is undergoing structural change, with high-performance network solutions becoming the core growth engine.

From 2024 to 2029, the high-performance network solutions market is projected to grow from approximately USD 13.29 billion to USD 20.45 billion, with a CAGR of 19.8%. Meanwhile, the basic performance network solutions market will expand from USD 112.8 billion to USD 135.5 billion, at a CAGR of about 3.7%.

For Feishu Innovation, the next few years will see high-performance network solutions driven by AI infrastructure as a key industry opportunity. How well it captures this trend will largely determine its valuation post-IPO.

Based on disclosed information, the company has completed key technological layouts for the future and is working to establish global product standards. It has launched breakthrough products including 800G high-speed optical modules and switches, silicon photonics transceivers, high-density cabling solutions, and active wavelength division multiplexers to support AI and other high-performance scenarios.

Looking ahead, the company will continue to offer full-stack solutions compatible with mainstream open-source interfaces and protocols. For example, it plans to develop RoCE-based lossless data center networks and invest in 800G and next-generation 1.6T switches to meet the high-efficiency, lossless data transmission needs of large-scale AI training.

Additionally, it will upgrade cloud network management platforms to promote automation and intelligent operation of compute networks. By expanding high-performance network solutions into data centers, industrial internet, smart parks, and other scenarios, Feishu Innovation aims to empower various industries’ digital transformation and intelligent upgrading in the AI era.

While seizing industry opportunities, the company also faces significant challenges and risks. First, its business is highly export-oriented: over 97% of revenue in the first three quarters of 2025 came from overseas, with the US market accounting for 54% and Europe about 30%. This high concentration exposes it to risks from trade frictions, tariffs, geopolitical conflicts, and exchange rate fluctuations.

Second, industry competition is intensifying. Traditional giants like Cisco and Huawei are accelerating direct sales (DTC) strategies and launching competitive products for SMEs, which could directly impact Feishu Innovation’s core customer base and market space.

Deeper challenges lie in its business model: the “self-designed + outsourced manufacturing + online direct sales” light-asset approach relies entirely on external procurement of core components. While this maintains high gross margins, it also raises questions about whether the company is more akin to a “brand operator and cross-border seller” rather than a true hardware tech enterprise with core manufacturing capabilities. Especially in the high-growth AI computing sector, technological barriers, continuous innovation, and genuine product premium will face tougher tests.

Therefore, although the market often compares it to A-share hardware manufacturers to highlight valuation attractiveness, a more appropriate peer group might be companies like Anker Innovations and Yiheda, which have similar business models. From this perspective, its current valuation advantage may not be as significant.