New Share Prospect | Annual Revenue of 8.36 billion yuan VS Optical Chip Business "Selling More and Losing More", How is the Investment Value of Hisense's Neza Technology?

Hisense's sixth IPO is about to appear on the Hong Kong stock market. On March 5, the Hong Kong Stock Exchange website disclosed that Guang Communication and optical connection product supplier Nazheng Technology (hereinafter referred to as "Nazheng Technology") officially submitted an application for listing on the main board of the Hong Kong Stock Exchange, intending to be listed on the Hong Kong main board, with Citigroup and CITIC SEC as joint sponsors. The company is a supplier of optical communication and optical connection products, mainly engaged in the research and development, manufacturing, and sales of optical modules, optical chips, and optical network terminals. In terms of market share, Nazheng Technology can also be regarded as a leader in the industry. In 2024, based on global optical module revenue, the company held a market share of 2.9%, ranking fifth among all professional optical module manufacturers globally; based on China's optical module revenue, the company held a market share of 7.2%, ranking third among all professional optical module manufacturers globally. It is worth mentioning that the controlling shareholder of the company is Hisense Group, with Hisense Group holding 48.61% directly or indirectly through its subsidiary, Century Jinlong. This also means that once Nazheng Technology successfully lands on the Hong Kong stock market, the lineup of listed companies of this well-known home appliance giant will expand further from the existing five companies to six, mainly including Hisense Visual Technology, Hisense Home Appliances Group, San Electric Holdings, Gan Zhao Lighting, and Shijiazhuang Kelin Electric. So, what is the investment value of this leading optical communication company backed by "big tree"? Net profit surged by eight times in 2025 vs. "selling more and losing more" in the optical chip business As a global leading supplier of optical communication and optical connection products, Nazheng Technology is also one of the few companies globally that have both R&D and mass production capabilities in optical modules and optical chips. From a product matrix perspective, Nazheng Technology's products mainly include optical modules, optical chips, and optical network terminals. With the mass delivery capability of high-quality products in categories such as AI, cloud computing, FTTx, transmission networks, and wireless applications, the company empowers cloud service providers, telecom and network equipment suppliers, and operators around the world. In recent years, as the demand for AI computing power drives the rapid growth of the optical module market, Nazheng Technology's performance has also shown significant high-growth characteristics. According to the prospectus data, the company achieved revenues of 4.239 billion yuan, 5.087 billion yuan, and 8.355 billion yuan in 2023, 2024, and 2025, respectively, with year-on-year growth of 20% and 64% in the latter two years. Among them, the optical module business is its core growth engine, with revenues soaring from 1.056 billion yuan in 2023 to 5.469 billion yuan in 2025, the revenue proportion increasing from 24.9% to 65.5%, mainly driven by the demand for AI and cloud computing applications. Under the high revenue growth, Nazheng Technology's net profit has also seen a significant leap but remains unstable. The company's profits for the period were 216 million yuan, 89 million yuan (a 59% year-on-year decrease), and 873 million yuan (an 875% year-on-year increase) in 2023, 2024, and 2025, respectively; with profit margins of 5.1%, 1.8%, and 10.4% for the period. However, this does not mean that Nazheng Technology's fundamentals are flawless. The poor performance of the optical chip business, with "losing more and more by selling more" and "exchanging price for quantity" with core products, remains an inevitable development concern for the company. According to GMTEight's observations, the income from the core capability symbolizing the optical chip business has plummeted from 112 million yuan in 2023 to 28.93 million yuan in 2025, accounting for only 0.3%. More worrisome is that the gross profit margins were as low as -157.4% and -121% in 2024 and 2025 respectively, with consecutive years of gross losses mainly due to revenues not covering fixed costs. At the same time, the gross profit margin for the company's data and optical module business has dropped from 28.9% in 2023 to 24.4% in 2025, far below the industry leader Zhongji Innolight's level of about 40% during the same period. The average selling price is only about a third of the industry leader's, reflecting the company's aggressive pricing strategy to capture market share. Driven by these factors, Nazheng Technology's gross profit margin remains at a middle to lower level in the industry. From 2023 to 2025, the company's gross profit margins were approximately 20.62%, 17.36%, and 20.02%. As can be seen, although Nazheng Technology has successfully seized the industry trend and achieved rapid revenue growth, its profitability and financial quality still need time to be tested. Seize the opportunity in the high prosperity and high growth track for long-term development If the GPU is the "heart" of AI-era computing power, then optical modules are the high-speed "blood vessels" connecting the massive computing power nodes, and optical chips are the core "engines." This also means that, benefiting from the growing demand for connections in the AI era, especially in AI computing network demand, the optical communication industry in which Nazheng Technology operates is expected to see high growth opportunities in the coming years. Looking at it from a comprehensive perspective, as the core components of optical communication and optical connection, the global market size of optical modules is expected to reach 295.4 billion yuan by 2029, with a compound annual growth rate of 18.5% from 2024. In addition, from 2024 to 2029, the global data communication optical module market is expected to grow at a compound annual growth rate of 20.4%, while the global telecom optical module market is expected to grow at a compound annual growth rate of 14.6% during the same period. The global optical chip market is also expected to maintain strong growth momentum, increasing from 66.5 billion yuan in 2024 to 665 billion yuan in 2029, with a compound annual growth rate of 21.7%. With the continuous breakthroughs in speed, integration, and energy efficiency of emerging technologies, optical chips are expected to continue to be the key drivers of the next generation of optical communication. At the same time, driven by the rapid deployment of FTTx networks globally and the continuous growth in demand for high-speed and stable connections, the global market size of optical network terminals is expected to increase from 2024 to 2029 to 71.8 billion yuan, with a compound annual growth rate of 10.2%. In this development background, Nazheng Technology has also seized the industry trend with its forward-looking technological layout and vertical integration capabilities. It is reported that the company is one of the first domestic manufacturers to achieve mass production of 800G high-speed optical modules, has delivered 1.6T optical module samples for verification, and is in the process of developing next-generation 3.2T products, keeping pace with the industry's technological iteration rhythm. In addition, as one of the few companies globally with independent R&D and mass production capabilities for "optical modules + optical chips," it has achieved mass production of 75mW high-power DFB laser chip and is developing high-end 100G/200G EML laser chip. However, this does not mean that the track in which Nazheng Technology is located is always smooth sailing. On one hand, the optical module industry is highly dependent on downstream capital expenditures and exhibits significant cyclical fluctuations. The financial data of Nazheng Technology is highly representative: net profit declined by 58.5% in 2024 due to the industry destocking effect, while it surged by 875% to 873 million yuan in 2025 due to the explosion in AI demand. This kind of "strong but volatile" characteristic is the norm in the track. On the other hand, despite the huge market space, the competition is fierce. Leading manufacturers (such as Zhongji Innolight and Eoptolink Technology Inc.) dominate the high-end market with high-speed rate products and high gross profit margins, while second-tier manufacturers face "interlayer anxiety" in terms of scale and technology. There are still technological bottlenecks in high-end optical chips (such as 100G EML), leading to the phenomenon of "increased revenue but no increase in profit" or oversupply of low-end production capacity for some companies. In summary, as a follower in the AI computing power trend, Nazheng Technology's long-term development space is promising, but growth risks cannot be ignored. Can it break free from the low-margin trap of "exchanging price for quantity"? Can the optical chip business turn losses into profits and truly demonstrate vertical integration advantages? These are the key factors in realizing its high value.