New Stock Analysis | "Standing in the Light" vs Fierce Competition: How Solid Is Optical Module Company Nazhen Technology?

Title context: New Stock Analysis | "Standing in the Light" vs Fierce Competition: How Solid Is Optical Module Company Nazhen Technology? Text: Under the AI computing power wave, optical modules are one of the most certain links in this industry chain. When Nvidia's GPUs are being snapped up, the torrent of data between data centers must be carried by optical modulesaccording to Goldman Sachs estimates, by 2028, the global optical module market size is expected to reach US$148 billion. Against this backdrop, Nazhen Technology (09856), the optical communications entity under Hisense Group, passed the Hong Kong Stock Exchange hearing and launched its Hong Kong IPO from September 14 to September 17, with Citi and CITIC SEC as joint sponsors. It is understood that Nazhen Technology plans to globally offer approximately 172 million H shares at HK$32.96 per share, with a board lot of 100 shares and an entry fee of approximately HK$3,329.24, and is expected to list on the Main Board of the Hong Kong Stock Exchange on September 22. Separately, according to market sources, Nazhen Technology has received HK$15.545 billion in margin financing from brokers, which, based on the public offering amount of HK$567 million, represents an oversubscription of 26.42 times. In this IPO, Nazhen Technology introduced 24 cornerstone investors, including Primavera Investment Fund, GBAHIL, CFTC Paragon SP, HK BVF I LPF, Orient Asset Management, GF Fund, E Fund, GigaDevice Semiconductor Inc., Qianhai International Fund Management Co., Ltd., and other well-known companies and institutions at home and abroad, with total subscription amounts of approximately US$340 million. Data center optical modules "sprinting" and optical chips "climbing the slope" The prospectus shows that Nazhen Technology is a mature supplier of optical communications and optical connectivity products, committed to the R&D, manufacturing, and sales of optical modules, optical chips, and optical network terminals, providing services to domestic and international customers. This company from Qingdao ranks fifth globally by 2025 global optical module revenue, with a market share of 4.0%, and third in China by optical module revenue, with a market share of 10.1%. It is also one of the few manufacturers globally with both optical module and optical chip R&D and mass production capabilities. The company's predecessor can be traced back to Ligent Tech, jointly founded in 2002 by Hisense Group and the team of returning scientist Huang Weiping. Over more than two decades, it has completed a capability loop from optical module packaging to optical chip design and manufacturing. Looking back at its financial trajectory, from 2023 to 2025, Nazhen Technology's revenue increased from RMB4.239 billion to RMB8.355 billion, with a three-year compound growth rate of 40.4%. Behind the halo, however, there were sharp fluctuations on the profit side: net profit fell from RMB216 million in 2023 to RMB89 million in 2024, then rebounded to RMB873 million in 2025. It is worth noting that the RMB873 million net profit in 2025 included a one-off gain of RMB353 million from the sale of a joint venture. The company's gross margin was likewise affected by fluctuations on the profitability side, falling from 20.6% in 2023 to 17.4% in 2024, recovering to 20.0% in 2025, and further rising to 24.2% in the first half of 2026the drivers of this V-shaped curve came from an increased share of high-gross-margin data center optical modules and a higher revenue contribution from overseas markets. From the perspective of business structure, Nazhen Technology's growth engine has already switched. Revenue from data center optical modules soared from RMB1.056 billion in 2023 to RMB2.776 billion in 2024 and RMB5.469 billion in 2025, with its share of total revenue rising all the way from 24.9% to 65.5%; in the first half of 2026, this proportion further rose to 69.4%, with revenue reaching RMB3.745 billion, up 36.6% year on year. Behind this curve is the strong demand from AI training and inference for high-speed optical modules. The company has already mass-produced 800G optical modules and delivered 1.6T products, LPO optical modules have entered mass production, NPO and CPO technologies are under development, and 3.2T products are already being advanced, with a product iteration pace that keeps up with the global first tier. At the same time, the business that once started it all is retreating into a supporting role. Revenue from FTTx telecom optical modules shrank from RMB1.108 billion in 2023 to RMB602 million in 2025, with its share falling from 26.1% to 7.2%; the revenue share of optical network terminals also dropped from 32.8% to 21.4%. Amid this advance and retreat, the company has in effect completed an identity transformation from a "telecom access equipment vendor" to an "AI computing power supplier." Viewed within the industry landscape, this transformation is necessary. On the data center optical module track, Zhongji Innolight and Eoptolink Technology Inc. firmly occupy the global top two, with Suzhou TFC Optical Communication, Accelink Technologies, and others circling behind. Nazhen Technology's 4.0% global share means it must seize market share in the cracks between major players by relying on product iteration speed and cost efficiency, and the company's dependence on the AI capital expenditure cycle will increase substantially. In addition, optical chips, which the company repeatedly mentions, are the business with the greatest imagination. As the link with the highest technical barriers in the optical module industry chain, optical chips are regarded as Nazhen Technology's core strategic asset. But when it comes to the financial statements, this business has been loss-making in past years: external sales revenue shrank from RMB112 million in 2023 to RMB29 million in 2025, accounting for only 0.3%. The turning point came in 2026, as 75mW CW-DFB chips shifted from internal use to large-scale external sales, and first-half optical chip revenue rebounded to RMB85 million, with gross margin also turning sharply positive. However, at the current stage, the optical chip segment's contribution from external market-oriented sales is still limited. In the face of leading overseas chip manufacturers, there remains reliance on external procurement for high-end products such as EML chips, and large-scale commercialization of self-developed high-end chips still requires time. "Standing in the light," but not without worries If GPUs are compared to the heart of AI computing power, optical modules are the blood vessels that transport blood throughout the body. At present, the demand for these blood vessels is expanding at a speed beyond everyone's expectations at the beginning of the year. Optical modules, a component hidden inside server racks, are becoming the most certain shovel seller of the AI era. Recently, Goldman Sachs released a research report on the optical module industry, raising its global shipment forecasts across the board for 2026 to 2028. The upward revisions were quite striking: overall shipment forecasts were raised by 21%, 31%, and 31%; products of 800G and above were raised by 31%, 39%, and 36%; and products of 1.6T and above were raised by 29%, 61%, and 50%. Goldman Sachs estimates that the global optical module market will be US$68 billion in 2026, US$131 billion in 2027, and US$148 billion in 2028. Among this, the 800G-and-above segment will expand at a 69% compound annual growth rate, growing from US$45 billion this year to US$130 billion in 2028. In terms of shipments, 800G products are expected to ship 45 million units in 2026 and 1.6T products 33 million units; by 2027, 1.6T will double to 71 million units, while 3.2T will ramp up to 23 million and 68 million units in 2027 and 2028, respectively. But behind the high prosperity, the industry's competitive environment is becoming increasingly fierce. Participants in the high-speed optical module track continue to expand capacity, product prices gradually decline as technology matures, and multiple technical routes such as LPO, NPO, CPO, and XPO proceed in parallel, creating uncertainty in technology route selection. Therefore, regarding Nazhen Technology's future, there are still two details that need to be viewed cautiously. On the one hand, the company's R&D expense ratio fell from 13.1% in 2023 to 7.9% in 2025, and was only 5.9% in the first half of 2026. Yet in an industry where optical module technology iterates rapidly on an 18-to-24-month cycle, in the arms race toward 3.2T and even CPO, R&D intensity is clearly positively correlated with the iteration advantage of "technological leadership," and this deserves close attention. In addition, the company's customer concentration has been climbing steadily: revenue from the top five customers rose from 55.8% in 2023 to 70.2% in 2025, and reached 71.8% in the first half of 2026. Orders from major customers have supported rapid revenue growth, but have also linked bargaining power and the risk of single-customer fluctuations. Moreover, Nazhen Technology's customers and suppliers are highly overlapping. Controlling shareholder Hisense Group itself is both an important supplier of the company, and in some years revenue from "suppliers that are also customers" accounted for nearly half, so the company's ability to "walk independently" also needs time to be tested. Overall, this optical communications manufacturer is a rare target in the current track that covers the entire industry chain. Its growth is highly tied to the prosperity of AI computing power. It has both technical barriers and capacity advantages, while also facing multiple challenges such as industry cycles and technological iteration. Its long-term value will ultimately depend on the efficiency of technology commercialization, the depth of customer expansion, and its ability to respond to risks.