LIGENT (09856.HK), the optical communications arm under the Hisense Group, is set to debut on the main board of the Hong Kong Stock Exchange on September 22. The IPO price is set at HK$32.96 per share, raising approximately HK$5.67 billion before the greenshoe option, with Citigroup and CITIC Securities acting as joint sponsors. Against a backdrop of sustained market attention on the optical communications sector, LIGENT enters the scene carrying the dual labels of AI data center optical modules and self-developed optical chips. However, underlying concerns — the sustainability of its high growth momentum, rising concentration of major customers, declining R&D investment in both absolute terms and as a percentage of revenue, and gross margins that remain on the lower end within the industry — have made the valuation pricing of this "fifth-ranked optical module maker" the core issue under market scrutiny.
AI Computing Drives Earnings Surge: Net Profit in 2025 Up Nearly Ninefold
From a fundamentals perspective, LIGENT's revenue growth curve is steep enough. From 2023 to 2025, the company's revenue climbed from RMB 4.24 billion to RMB 8.35 billion, with a compound growth rate exceeding 40%. In the first half of 2026, revenue reached RMB 5.39 billion, up 27.9% year-on-year, while net profit stood at RMB 660 million, up 28.8%. The growth engine has already shifted — the share of data center optical modules in total revenue surged from 24.9% in 2023 to 69.4% in the first half of 2026, driven by strong demand from AI data centers for 800G and 1.6T high-speed optical modules. The company has initiated mass production of 800G optical modules, delivered 1.6T products, achieved mass production of LPO optical modules, and is advancing 3.2T products. Ranked by global optical module revenue in 2025, the company stands fifth with a 4.0% market share, and third in the Chinese market with a 10.1% share.
The profit side shows an even more pronounced surge. Net profit was only RMB 90 million in 2024, then skyrocketed to RMB 880 million in 2025, an increase of 878.7% year-on-year. The net profit margin improved dramatically from 1.8% in 2024 to 10.4% in 2025, further rising to 12.3% in the first half of 2026. This streak of profitability improvements across multiple reporting periods provides solid fundamental support.
Cornerstone Subscription Looks Substantial, but the Structure Shows "Quantity Over Quality"
On the cornerstone investor front, LIGENT has brought in 24 cornerstone investors (on a combined basis), subscribing to approximately USD 340 million in total, accounting for about 47% of the total offering proceeds. In comparison, during the same period, Xinghuan Technology attracted only 2 cornerstone investors with subscriptions totaling approximately HK$73.82 million, while Sifang Jingchuang's 4 cornerstone investors subscribed to about HK$120 million, and the company proactively halted its listing process on the eve of its debut. On the surface, LIGENT's subscription structure appears significantly stronger than its peers during the same window.
However, extending the observation period to the second half of 2025 through now, and comparing projects of similar scale and within the same industry, the quality of LIGENT's cornerstone investors actually raises concerns. First, the sheer number — 24 cornerstone investors — while collectively accounting for nearly half of the proceeds, means the average investment size per institution is not substantial. With a total cornerstone amount of USD 340 million, each institution subscribes to roughly USD 14 million on average — a relatively light position in institutional allocation terms, reflecting an overall cautious attitude from institutional players.
Second, among the 24 cornerstones, only Barings carries the attributes of a true Hong Kong-listed foreign long-term investor, and its investment size is the smallest of all, at just USD 5 million. Previously, several foreign long-term investors have suffered losses from participating in Hong Kong IPOs due to poor aftermarket performance, shrinking their overall willingness to participate. The absence of this signal in LIGENT's cornerstone lineup warrants attention.
Can the High Growth Momentum Last: Low Gross Margins, Cash Flow Divergence, Declining R&D Intensity, and Related-Party Transactions
LIGENT's current growth is highly dependent on demand for high-speed optical modules driven by AI computing power, and how long this strong momentum can be sustained carries significant uncertainty. Examining four dimensions — gross margins, cash flow, R&D investment, and related-party transactions — the concerns about sustainability become clearly visible.
Gross margin levels are on the lower side, with revenue growth accompanied by narrowing per-unit profitability. From 2023 to 2025, the company's overall gross margins were 20.6%, 17.4%, and 20.0% respectively, improving to 24.2% in the first half of 2026. Yet this still lags significantly behind leading optical module players — Zhongji Innolight reported a gross margin of approximately 45.8% in the first half of 2026, Eoptolink around 48.4%, and TFC Communication around 60.9%. More notable is the divergence in trends: as the main revenue growth driver, the gross margin for data center optical modules has declined from 28.9% in 2023 to 24.4% in 2025 — while revenue scale expands, the profit space per unit product is narrowing. Measured by the 24.2% overall gross margin, the company sits at a relatively low position within the industry.
Net profit and operating cash flow continue to diverge. From 2023 to 2025, net operating cash flows were RMB 800 million, RMB -620 million, and RMB 1.39 billion respectively. In the first half of 2026, net profit reached RMB 660 million, yet operating cash flow was a net outflow of RMB 1.26 billion — a gap exceeding RMB 1.9 billion. The source of this gap is significant working capital absorption: inventory levels have continued to climb, prepayments and other receivables increased by RMB 1.46 billion in the first half of 2026, and trade receivables and notes receivable grew from RMB 1.19 billion at the end of 2023 to RMB 2.41 billion by the end of June 2026. The company explains that the cash outflows are related to raw material prepayments, inventory buildup for capacity expansion, and customer payment terms, but the persistent divergence between net profit and operating cash flow remains an unavoidable issue when assessing earnings quality.
R&D investment intensity is declining. The company's R&D spending increased from RMB 550 million in 2023 to RMB 660 million in 2025, with absolute value maintaining growth, but the R&D expense ratio fell from 13.1% to 7.9%. In the first half of 2026, R&D spending was RMB 320 million, with the ratio further dropping to 5.9%. During a critical window when optical module technology is rapidly iterating from 800G to 1.6T and 3.2T, the declining R&D intensity could impact the competitive pace of next-generation products. In horizontal comparison, Zhongji Innolight and Eoptolink reported R&D expense ratios of approximately 2.6% and 2.1% respectively in the first half of 2026 — LIGENT's intensity is not low, but given its smaller revenue base, the absolute scale of R&D investment still trails leading players by a noticeable margin.
Related-party transactions and customer concentration constitute governance-level concerns. After listing, Hisense Group (through Century Jinlong) is expected to hold approximately 40.11% of the company's shares. During the reporting period, the company engaged in continuing connected transactions with the Hisense system, including goods supply, property leasing, shared services, and financial services, and deposited substantial funds with Hisense Group's finance company (approximately RMB 1.87 billion in deposits in 2024), while issuing and accepting commercial bills through that finance company (approximately RMB 2.66 billion in 2024). On the customer side, dependence on top customers has deepened persistently: revenue from the top five customers rose from 55.8% in 2023 to 70.2% in 2025, reaching 71.8% in the first half of 2026. Additionally, in 2025, revenue from parties that serve as both suppliers and customers accounted for 49.3%. During the upward phase of AI computing investment, this structure facilitates rapid revenue growth. However, once downstream demand approaches saturation or major customers scale back capital expenditures, the company's performance will face considerable pressure.
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