New stock preview | Increased production of high-end products strengthens the logic of domestic substitution. Will Rigol Technologies (688337.SH) investing in Hong Kong stocks lead to a "golden opportunity"?

For more than twenty years, Rigol Technologies (688337.SH), the largest electronic measurement instrument supplier in China, has been deeply involved in the field of electronic measurement instruments and seems to be ready to explore broader horizons. Recently, Rigol Technologies applied for listing on the Hong Kong Stock Exchange, with CITIC SEC as the exclusive sponsor. The history of Rigol Technologies can be traced back to 1998, when the company developed and produced the first commercial desktop digital oscilloscope in China in 2002. Over the past twenty years, Rigol Technologies has broken the overseas monopoly with its independent core technology, and its products are widely used in the fields of communication, semiconductor, new energy, and more. After the listing on the Science and Technology Innovation Board in 2022, Rigol Technologies accelerated the iteration of high-end products and actively expanded into overseas markets. Now, with Rigol Technologies aiming for the Hong Kong stock market, this move may be closely related to the company's further global expansion aspirations. In the prospectus, Rigol Technologies stated that the company will focus on the "G-THSA" strategy framework, strengthen competitiveness, seize global market opportunities, and the long-term goal is to become a world-class brand. As a pioneer in domestic substitution of electronic measurement instruments, Rigol Technologies' fundamentals can perhaps be glimpsed from the company's prospectus. Continuous increase in financial data as competitiveness strengthens Driven by the rapid advancement of 5G, 6G, optical communication, artificial intelligence, and smart Siasun Robot & Automation technologies, the global electronic measurement instrument and solution market is experiencing robust growth. With a product portfolio that includes digital oscilloscopes, microwave RF instruments, DC precision instruments, and modular instruments, which are hailed as the "eyes of engineers," Rigol Technologies' strong independent research and development capabilities have continuously enhanced its competitiveness globally. Reflected in the financial statements, the most direct change is Rigol Technologies' revenue indicators. Data shows that from 2022 to 2024, Rigol Technologies achieved revenues of 631 million yuan, 671 million yuan, and 776 million yuan, respectively, with steady growth each year. In the first half of 2025, the company's revenue was 355 million yuan, also showing objective growth compared to the same period last year. It is reported that the revenue of Rigol Technologies is mainly from domestic sources, driven by domestic substitution and continuing growth. In terms of product and solution segments, Rigol Technologies derives most of its revenue from digital oscilloscope products. Benefiting from significant breakthroughs in high-end digital oscilloscopes in recent years, the product's performance has reached international advanced levels, with the sales revenue of this product maintaining growth in the period. Especially last year, the sales revenue of digital oscilloscope products equipped with a self-developed core technology platform significantly increased to 84.93%, an increase of 8.9 percentage points compared to the same period last year, contributing key increments to the company's performance growth. However, it is worth noting that the proportion of digital oscilloscopes has not been continuously increasing. The revenue shares of this product from 2022 to the first half of 2025 were 52.7%, 51.5%, 47.1%, 44.5%, indicating a more significant diversification of Rigol Technologies' revenue structure. In addition to the digital oscilloscope category, Rigol Technologies also has significant revenue streams from microwave RF instruments and DC precision instruments, with the two major product lines contributing revenue shares of 13% and 23% in the first half of 2025, respectively. It is also worth mentioning that the company's modular instruments began to contribute scaled revenue in the first half of this year, with revenue of 7.633 million yuan, accounting for 2.2%. Regarding the solution business, from 2022 to 2024, the revenue scale of this business increased from an initial 57.935 million yuan to 130 million yuan, with the corresponding revenue share increasing from 9.2% to 16.8%. In the first half of this year, the business recorded revenue of 54.896 million yuan. In addition, Rigol Technologies also has a small portion of revenue coming from rental income and sales of raw materials and other businesses, but in recent years, their proportion has been less than or equal to 2%. Compared to the strong upward trend in revenue, Rigol Technologies' profitability indicators show some volatility. Data shows that from 2022 to the first half of 2025, the company's overall gross profit was 321 million yuan, 358 million yuan, 426 million yuan, and 184 million yuan, with corresponding gross margins of 50.9%, 53.4%, 54.9%, and 51.9%. In the first half of this year, Rigol Technologies' comprehensive gross margin decreased by 2.7 percentage points compared to the same period last year, and the decrease in gross margin may be related to increased production costs at overseas production bases, changes in product structure, and tariff impacts. During the same period, the company's net profit was 92.488 million yuan, 108 million yuan, 92.303 million yuan, and 162 million yuan. Will high-end and globalization support long-term growth? As a foundational industry, electronic measurement instruments are linked to downstream research and development and high-end manufacturing, and in a sense, can be considered as a critical industry for a country. According to a report cited in Rigol Technologies' prospectus, Frost & Sullivan predicts that the global electronic measurement instrument market will reach 571 billion yuan in 2024, and is expected to continue growing at a compound annual growth rate of 5% from 2025 to 2029. In the submarkets, the growth rate of digital oscilloscopes is expected to be the highest due to strong downstream demand, and the compound annual growth rate in the coming years is also expected to remain above 6%. However, in terms of industry competitive landscape, currently, overseas companies still dominate the global electronic measurement instrument market. Data shows that American companies dominate the top three in the market, with the highest market share held by 7 companies, all of which are American or Japanese companies. Nevertheless, it is worth noting that Chinese companies, represented by Rigol Technologies, are steadily increasing their market share. In 2024, Rigol Technologies' market share was approximately 1.1%, ranking eighth globally. In terms of industry characteristics, the prominent feature of the electronic measurement instrument industry is that the market space for high-end products is larger, with better industry barriers and competition. Taking oscilloscopes as an example, according to records from Rigol Technologies' investor relations activities, the market space is divided into multiple categories based on bandwidths of 1GHz, 13GHz, 33GHz, and 60GHz bandwidtabortions. The mainstream market is concentrated in the 1GHz to 60GHz range, with the high-end market space above 13GHz bandwidth accounting for as much as 70%; foreign products like Tektronix have bandwidths mostly above 60GHz, while domestic brands mainly have bandwidths below 13GHz. Currently, the domestication rate of high-end oscilloscopes and other electronic measurement instruments is less than 10%, leaving ample space for domestic substitution. Over the years, Rigol Technologies has been focusing on the research and development of core chips for oscilloscopes, with over ten years of continuous investment and iteration. The core chips developed by the company are highly customized ASIC architectures, which not only cover the core functions of analog-to-digital conversion (ADC), but also integrate multiple dimensions of instrument-level performance optimization modules such as frequency compensation, temperature drift control, automatic calibration, etc., achieving a high degree of coupling between chip design and instrument system performance requirements. By the end of 2024, the company had successfully launched three major chip platforms - "Phoenix," "Fairy," and "Centaur," with the proportion of oscilloscope products equipped with self-developed chips increasing to 85%, thus significantly demonstrating its technological closure capabilities and industrial maturity. Admittedly, domestic electronic measurement instrument brands started late, and it is not easy for followers to quickly gain a foothold in the high-end market. However, the positive aspect is that the development speed of domestic brands' new products is faster, especially in the case of oscilloscopes, where the iterative speed of domestic high-end oscilloscopes is significantly faster than that of overseas companies. With the current research and development momentum, the gap between the two is continuously narrowing, which is something worth looking forward to. In addition to accelerating entry into the high-end market, as mentioned earlier, Rigol Technologies is also exploring global development opportunities with the "G-THSA" strategy framework. The "G" at the forefront refers to globalization, with plans to establish customer-centric global sales, marketing, and service networks, strengthen global supply chains, develop next-generation products and solutions globally, while the company will also conduct global strategic investments and acquisitions to consolidate its market position. In GMTEight's view, the most core chips of many instrument brands are primarily outsourced, while Rigol Technologies has been self-developing chips for over a decade, making it a company with high technological independence. As a follower, challenging the world leader in high-end technology is not an overnight task for Rigol Technologies, and the company still has a lot of work to do in the future. However, from an investment perspective, the growth expectations under the process of domestic substitution have already been reflected in the financial statements. If successfully listed on the Hong Kong stock market in the future, Rigol Technologies completing an "A+H" listing might be a potential stock worth long-term attention.