Hisense's Sixth Subsidiary Makes a Second Attempt at the Hong Kong Stock Exchange: The "Losses," Dependencies, and Compliance Issues Behind the Surge in Net Profit

On March 5, 2026, Hisense Group’s subsidiary, Nazhen Technology, once again submitted an application for listing on the Main Board of the Hong Kong Stock Exchange, with Citigroup and CITIC Securities serving as joint sponsors.

Image source: Nazhen Technology Prospectus

Less than ten days after the initial filing expired in August 2025, this seamless IPO sprint is not only a key move for Hisense’s transformation from a home appliance giant to an AI hardware technology company but also reflects the urgency as the window for optical module tracks narrows. If successful, Nazhen will become the sixth listed company in the Hisense ecosystem, with a valuation of 10.8 billion yuan, racing toward unicorn status in the computing power sector.

01

IPO Sprint

Nazhen Technology’s listing path reveals a sense of urgency.

Since the initial filing in August 2025, the prospectus expired in February 2026 due to the need to supplement offshore structure compliance, shareholder transparency, and other materials. Less than two weeks later, Nazhen cleared the obstacles and relaunched its IPO.

In terms of ownership structure, Hisense Group directly and indirectly holds 48.61%, maintaining solid control.

Spring Capital holds 16.48%, making it the largest external institutional shareholder.

Xiamen State-owned Assets Supervision and Administration Commission invested 330 million yuan in July 2025, pushing the company’s valuation to 10.784 billion yuan.

The funds raised are planned for R&D, capacity expansion, overseas markets, and industry chain mergers and acquisitions, targeting core tracks such as 800G/1.6T optical modules and optical chips.

Relying on industry opportunities, Nazhen Technology is eager to go public to lock in capital and market advantages.

Based on 2024 revenue, Nazhen holds a 2.9% share of the global professional optical module market and 7.2% in China. While ranking in the top tier, it still lags far behind industry leaders like Zhongji Xuchuang and Innolux.

Top companies’ 1.6T optical module capacity accounts for 70%-80% of global demand, but Nazhen has only completed sample verification, with 3.2T products still in R&D. Technical and scale limitations pose the first challenge to a billion-yuan valuation.

02

“Asset Sales” to Support Operations

Nazhen Technology’s financial data shows an extreme “ice and fire” pattern.

From 2023 to 2025, revenue grew from 4.239 billion yuan to 8.355 billion yuan, a 64.2% year-over-year increase in 2025.

Net profit shows a V-shaped trend, plunging 58.5% to 89 million yuan in 2024, then skyrocketing 875% to 873 million yuan in 2025.

This explosive growth is actually mixed with financial tricks. For example, in 2025, 353 million yuan of net profit came from gains on the sale of joint ventures, accounting for over 40%. Excluding this, operating net profit was only 519 million yuan, indicating a slowdown in genuine growth.

At the same time, Nazhen incurred 116 million yuan in fair value losses on financial liabilities. Coupled with industry destocking effects in 2024, its resilience to industry cycles is weak, heavily relying on industry dividends and non-recurring gains.

Even more contradictory is cash flow and dividends. In 2024, operating cash outflow was 616 million yuan, yet the company paid large dividends for three consecutive years, totaling over 434 million yuan.

Meanwhile, it has owed social security and housing fund contributions of 33.1 million yuan for three years, raising questions about its financial management—raising funds through issuance while distributing large dividends.

Nazhen claims to have a full industry chain layout, but in reality, it is severely “biased.”

In 2025, optical module business generated 6.535 billion yuan, accounting for 78.2%. Among them, data communication optical modules earned 5.469 billion yuan, over 65%, with gross margins dropping from 28.9% to 24.4%, far below the over 30% and nearly 47% of top-tier companies. “Price competition for volume” has gained scale but lost pricing power.

As the core of the industry chain, optical chip business has been in long-term loss.

From 2023 to 2025, optical chip revenue plummeted from 112 million yuan to 28.93 million yuan, only 0.3% of total revenue. During the same period, gross margins turned negative, at 24.8%, -157.4%, and -121%, with cumulative gross loss exceeding 70 million yuan.

Even achieving autonomous mass production of 100G EML chips has not translated into commercial profitability and has instead dragged down overall performance.

The weakness in optical chips hits core competitiveness. As the “heart” of the industry chain, leading manufacturers are accelerating self-developed capacity, but Nazhen’s long-term losses in optical chips and failed vertical integration strategies undermine its competitiveness.

Additionally, raw material costs have consistently accounted for over 85% of total costs, with high-end chips relying on imports. Amid a global EML chip capacity gap of 42%, supply chain security risks intensify, and the “full industry chain” story lacks substantial value.

03

Related-party Transactions Near Half

Nazhen’s path to listing is always intertwined with “Hisense dependence” and compliance risks.

Hisense Group is both the controlling shareholder and a key supplier and customer, with procurement accounting for 2%-7%, including wholly owned subsidiaries of Hisense.

More critically, from 2023 to 2025, revenue from overlapping customer-supplier relationships accounted for 50.6%, 15%, and 49.3%, respectively. In 2023 and 2025, nearly half of the revenue came from related-party transactions.

Although the company claims pricing is fair, Hong Kong stock review places high emphasis on business independence and the fairness of related-party dealings. Under such tightly bound relationships, concerns over利益输送 (benefit transfer) could hinder IPO approval.

Meanwhile, customer concentration remains high, with the top five customers accounting for 70.2% of sales in 2025, and the largest customer exceeding 20%. Industry capacity releases have triggered price wars; if major customers cut spending or switch suppliers, performance could plummet.

Furthermore, although the offshore structure and shareholder changes were supplemented during the initial filing, issues like subsidiary litigation and social security arrears remain, which could impact compliance in the stricter Hong Kong regulatory environment, diluting the safety margin of the billion-yuan valuation.

04

Industry Opportunities and Valuation Battles

From an industry perspective, Nazhen has indeed seized the AI computing power opportunity.

By 2026, the global optical module market is expected to surpass $30 billion, with demand for 800G and 1.6T doubling. Leading cloud providers are adopting high-speed optical modules in new products, providing growth momentum.

Leveraging Hisense’s manufacturing and supply chain system, the company’s overseas capacity expansion aligns with the wave of domestic substitution.

However, challenges are already emerging. Accelerated technological iteration, fierce competition in CPO/LPO routes, and the continuous expansion of global capacity have intensified price wars. Top-tier advantages are expanding; mid-to-low-end gross margins are under pressure; industry valuations are diverging. Due to profit and technology shortfalls, Nazhen struggles to enjoy the same premium.

Based on 2025 operating net profit, Nazhen’s PE ratio is approximately 20.8x, seemingly below the industry average, but this valuation relies on unsustainable high growth, loss-making core businesses, and high risk.

Using a DCF model, its fair valuation range is estimated at 10.5 to 12.5 billion yuan. The current valuation of 10.8 billion yuan is only at the lower bound of reasonableness, with significant upside limited.

Nazhen’s secondary attempt to list in Hong Kong is a capital experiment for the traditional home appliance giant’s transformation into AI hardware technology.

With AI dividends, Hisense’s empowerment, and institutional backing, a billion-yuan valuation is supported. But issues like inflated performance, losses in optical chips, reliance on related-party transactions, and compliance risks make the valuation highly uncertain.

For Hisense, Nazhen is a key piece in its transformation into a hard-tech company. Whether it can become a “computing power ace” depends not on short-term growth but on whether it can shed reliance on one-time gains, reverse optical chip losses, and reduce related-party and customer concentration risks.

The capital market is never short of stories about opportunities; it values core competitiveness more. As the optical module industry shifts from rapid growth to high-quality competition in 2026, Nazhen must move beyond “price competition” at the low end, address technological and profitability shortcomings, to turn its billion-yuan valuation from a bubble into real value.

This IPO is not only a test of capital operation but also a test of industry-rooted strength.