"Hisense Group's" Naizhen Technology Files for a Second IPO on the Hong Kong Stock Exchange: Outstanding Performance, but More Conspicuous Risks

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On March 5th, the Hong Kong Stock Exchange disclosed that Hisense Group’s subsidiary, Nazhen Technology, officially submitted an IPO application for the Main Board, with Citibank and CICC (Hong Kong) serving as joint sponsors. Founded in 2009, this company specializes in the research, development, production, and sales of optical modules, optical chips, and optical network terminals. It is also one of the few companies worldwide capable of self-developing and mass-producing both optical modules and optical chips.

Source: Nazhen Technology official prospectus

Notably, this is Nazhen Technology’s first listing attempt since its initial filing in August 2025. After the filing expires on February 25, 2026, it is making a second push to list on the Hong Kong Stock Exchange, simultaneously releasing core operational data for 2023–2025. However, behind the impressive technological branding and listing efforts, the prospectus also reveals significant concerns: increasing customer concentration, overlapping identities between some customers and suppliers, and issues involving subsidiaries involved in litigation and regulatory inquiries—all key issues that need to be addressed during this IPO process.

Volatile performance with rising customer concentration

Looking at operational results, Nazhen Technology has shown steady revenue growth over the past three years, with significant fluctuations in net profit. For 2023–2025, revenue was 4.239 billion, 5.087 billion, and 8.355 billion yuan respectively, with continuous expansion. In 2025, revenue increased by 64.2% year-over-year, mainly driven by global data center upgrades and the rapid growth in AI computing power demand, which sustained demand for core products like optical modules.

Net profit showed notable volatility: 216 million yuan in 2023, dropping 58.5% to 89 million yuan in 2024, then surging 875% to 873 million yuan in 2025. The sharp rebound was mainly due to a one-time gain of 353 million yuan from the disposal of joint ventures, not solely from core business growth.

Source: Nazhen Technology official prospectus

Nazhen’s performance growth is highly tied to its customer structure, and the rising customer concentration has become a core risk point for the market and regulators. This ratio is significantly higher than industry peers. The prospectus shows that dependency on top customers has strengthened annually: from 55.8%, 66.9%, to 70.2% of total revenue from the top five customers in 2023–2025, increasing by 14.4 percentage points over three years, with 2025 surpassing 70%, indicating accelerated concentration.

Although the largest customer’s revenue share decreased from 32.1% in 2023 to 21.8% in 2025, it still accounts for a significant portion of core income. This customer is a leading company in the optical communications industry, and its business fluctuations directly impact Nazhen’s revenue stability.

Source: Nazhen Technology official prospectus

High customer concentration poses potential risks: on one hand, it weakens the company’s bargaining power, making it more passive in negotiations over pricing and payment terms, which could pressure gross margins; on the other hand, if major customers reduce procurement due to industry cycles, strategic shifts, or operational issues, or if supply chain shifts occur, it could directly impact revenue stability.

Despite Nazhen’s technological barriers in optical modules and chips and efforts to diversify risk by expanding to small and medium-sized customers, data from the prospectus indicates these measures have not yet significantly alleviated the risk of customer concentration, which remains a key issue in the IPO review.

Frequent overlaps in customer and supplier identities raise regulatory concerns over fair transactions

In addition to high customer concentration, Nazhen’s report period shows instances of “overlapping identities between customers and suppliers,” raising broad market concerns about transaction fairness and business independence. While such overlaps exist in the optical communications industry, Nazhen’s overlap ratio and scope are relatively prominent.

The prospectus clearly states that from 2023 to 2025, seven, four, and five suppliers or related parties also served as customers, with at least one of these entities ranking among the top five customers each year, forming a “buy-sell” business pattern.

Source: Nazhen Technology official prospectus

From revenue and procurement data, the impact of these overlaps is especially notable: revenue from overlapping customers accounted for 50.6% in 2023, dropped to 15% in 2024, then rebounded to 49.3% in 2025. This indicates that roughly half of the revenue in 2023 and 2025 came from entities with supplier backgrounds. On the procurement side, the proportion of purchases from overlapping suppliers was 12%, 22.3%, and 4.6%, with 2024 seeing a doubling, reflecting deep cooperation. Nazhen mainly sells optical modules, terminals, and chips to these overlapping entities, while also sourcing raw materials and components, forming a two-way transaction relationship.

Among these, Hisense Group, the controlling shareholder, is a key participant and regulatory focus. Before the IPO, Hisense Group directly or indirectly through its subsidiary, Century Jinlong, held 48.61% of Nazhen’s issued shares, giving it absolute control. From 2023 to 2025, Hisense ranked among Nazhen’s top five suppliers, with procurement amounts of 230 million yuan (6.9%), 327 million yuan (5.9%), and 235 million yuan (3.3%) respectively. In 2023 and 2024, Hisense also served as a customer, purchasing optical communication products for its own business. Additionally, one of Nazhen’s contract manufacturers is a wholly owned subsidiary of Hisense Group, which paid manufacturing fees accounting for 1.9%, 2.4%, and 1.1% of total costs over the past three years, further deepening the relationship.

Source: Nazhen Technology official prospectus

Although Nazhen emphasizes that “there has been no mutual purchase or sale of the same products, and business is not interdependent, with pricing consistent with independent third parties,” industry research firm Frost & Sullivan notes that overlaps between customers and suppliers are common in the optical communications industry. However, the fact that nearly half of revenue comes from overlapping entities warrants thorough validation of the commercial substance and fairness of these transactions during the listing review.

Subsidiaries involved in litigation face regulatory scrutiny, raising compliance doubts

The involvement of Nazhen’s subsidiaries in litigation has become a critical hurdle in its second listing attempt. In November 2025, the CSRC’s “Supplementary Materials for Overseas Issuance and Listing Filing” explicitly requested the company to clarify the latest developments in lawsuits involving Qingdao Hisense Broadband and assess whether these issues pose substantial obstacles to the overseas listing. This reflects strict regulatory requirements for compliance of potential listed companies.

The prospectus and public information show that Qingdao Hisense Broadband, a core operating subsidiary, mainly engages in R&D, manufacturing, and sales of wired and wireless optical communication products and digital TV set-top boxes. Its performance directly impacts Nazhen’s overall results. The subsidiary previously sued a subsidiary of China CITIC Bank, Guo An Guangshi, over unpaid payments for set-top boxes and related fees. Although arbitration ruled in favor of Qingdao Hisense Broadband and enforcement was sought, some debts remain unpaid. The company has applied for bankruptcy liquidation of Guo An Guangshi, citing its inability to settle debts.

Beyond this lawsuit, regulators have raised multiple inquiries regarding Nazhen’s compliance, including details on shareholding transparency, domestic operational compliance, and changes in domestic entity ownership. Specifically, regulators require disclosures on the penetration of controlling shareholder Hisense Group, the domestic shareholder TransLight’s ownership transparency, and the legality of domestic operational entity changes.

From industry regulatory trends, stricter review of offshore-listed companies is evident, especially concerning subsidiaries involved in litigation, related-party transactions, and shareholding transparency.

As a core asset of Hisense Group’s optical communications division, Nazhen’s self-developed optical modules and chips, supported by group resources, have steadily grown. Its second listing attempt demonstrates strong intent. However, issues such as high customer concentration, overlapping identities, subsidiary litigation, and regulatory inquiries remain significant challenges. Its success in obtaining HKEX approval will depend on risk mitigation and compliance management. The listing will also influence Hisense Group’s optical communications industry chain layout, attracting ongoing market and investor attention. (Produced by “Weekly Financial Weekly - Financial Digest”)