LIGENT has officially kicked off its Hong Kong IPO, offering 172 million shares globally with expected gross proceeds of HK$5.67 billion. The company is set to debut on the Stock Exchange of Hong Kong on September 22. However, beneath the surface of its revenue growth narrative, a closer examination reveals that the company's profitability expansion has been anything but stable. Last year's profit figure was significantly flattered by a one-off gain from the disposal of a joint venture, which contributed over 40% of net income. Meanwhile, the gross margin for its data center optical modules has declined for two consecutive years, and its optical chip business has even suffered from loss-making sales.
While revenue has climbed, so too has the company's reliance on its top five customers, with concentration levels rising steadily. Adding to investor concerns is an overlap between its key customers and suppliers, as well as the fact that its parent group doubles as a major supplier. Digging deeper, the planned expansion via this IPO comes at a time when existing optical module capacity utilization is far from saturated, and some production bases have actually seen utilization rates fall. Furthermore, the company's practice of distributing hefty dividends while simultaneously raising fresh capital from the public market has drawn significant scrutiny.
Optical Module Gross Margin Slips for Two Straight Years, Optical Chip Sales Once Unprofitable
After a journey that began with an initial filing in August last year, a second submission in March 2026, and a HKEX hearing clearance in August, LIGENT is now within touching distance of a Hong Kong listing. As a supplier of optical communications and connectivity products, the company operates across three core segments: optical modules, optical chips, and optical network terminals. If successfully listed, it would become the sixth listed entity under the Hisense Group umbrella, joining the ranks of Hisense Visual Technology, Hisense Home Appliances, Sanden Holdings, Sanan Optoelectronics, and KELIN Electric.
According to the prospectus, LIGENT saw revenue grow year-over-year from 2023 to 2025, but its net profit trajectory was far more volatile. During this period, revenue stood at RMB 4.239 billion, RMB 5.087 billion, and RMB 8.355 billion, respectively. Net profit, however, fluctuated significantly—posting RMB 216 million in 2023, dipping to RMB 89 million in 2024, before surging to RMB 873 million in 2025. The substantial profit jump last year was largely fueled by a non-recurring gain: the company earned RMB 353 million from the disposal of its entire equity stake in a joint venture, Qingdao Xinghang, which accounted for 40.44% of that year's net profit. In the first half of 2026, revenue and net profit reached RMB 5.393 billion and RMB 656 million, respectively, reflecting year-on-year growth of 27.91% and 28.76%.
By business segment, demand driven by AI and cloud computing applications has propelled revenue from data center optical modules from RMB 1.056 billion in 2023 to RMB 5.469 billion in 2025, lifting its share of total revenue from 24.9% to 65.5%. Despite this topline growth, the segment's gross margin has eroded, falling from 28.9% in 2023 to 25.2% in 2024, and further to 24.4% in 2025. The company attributes this decline to competitive pricing strategies aimed at capturing market share, alongside higher fixed costs from capacity expansion. While the gross margin saw some improvement in the first half of 2026, it has yet to recover to 2023 levels.
The optical chip business has experienced significant revenue volatility, including a sharp drop in 2024, largely due to waning demand for existing chips while newer generations remain in development. More concerning, this segment has at times sold products at a loss. Gross margins for the chip business were 24.8%, -157.4%, and -121% in 2023, 2024, and 2025, respectively. The company explains that negative margins stem from insufficient revenue scale to cover fixed costs like depreciation and labor. Notably, gross margin for optical chips turned positive in the first half of this year, buoyed by the mass production of 75mW CW-DFB laser chips. However, analysts point out that LIGENT's mature, mass-produced chips are largely confined to low-end telecom access network applications. The high-speed 50G/100G EML laser chips that are critical for AI computing power remain in sample validation or customer delivery stages.
Customer-Supplier Overlap and Pre-IPO Dividends Raise Questions
Behind the revenue growth lies an increasing concentration of revenue from top customers. From 2023 to 2025, revenue from the top five customers was RMB 2.367 billion, RMB 3.401 billion, and RMB 5.869 billion, representing 55.8%, 66.9%, and 70.2% of total revenue, respectively—a steadily rising trend. By the first half of 2026, this figure had climbed further to 71.8%.
Adding to the concerns is the overlap between customers and suppliers. Between 2023 and 2025, there were 7, 4, and 5 suppliers, respectively, that also served as customers, with at least one of these overlapping parties ranking among the top five customers in a given year. Revenue from these overlapping customers accounted for 50.6% in 2023 and 49.3% in 2025—levels close to or exceeding half of total revenue. Furthermore, the controlling shareholder, Hisense Group, also acts as a supplier. Purchases from Hisense Group amounted to RMB 230 million, RMB 327 million, RMB 235 million, and RMB 158 million across 2023, 2024, 2025, and the first half of 2026, respectively, consistently ranking among the top five suppliers.
As revenue has grown, so too have inventories, trade receivables, and notes receivable, impacting cash flow. As of the end of June 2026, these two metrics stood at RMB 3.175 billion and RMB 2.412 billion, representing a combined 66% of current assets. In the first half of 2026, net cash flow from operating activities swung from positive to negative, landing at RMB -1.256 billion.
LIGENT plans to allocate the IPO proceeds toward new product R&D, expanding optical module and chip capacity, enhancing automation, strengthening business promotion and overseas expansion, as well as strategic investments and acquisitions in domestic and international markets. However, the rationale for capacity expansion is undercut by current utilization data. The company operates four production bases in Qingdao, Jiangmen, Thailand, and the United States. The Jiangmen facility's optical module utilization dipped from 84.9% in 2024 to 83.4% in 2025, before sliding further to 76.3% in the first half of 2026. The Qingdao base saw utilization fall from 76% in 2025 to 65.6% in the first half of 2026. While utilization at the Thailand and US bases has improved, neither has reached full capacity—recording 65% and 69.6% for Thailand, and 32.8% and 77.5% for the US over the same periods.
Notably, LIGENT has been distributing dividends while seeking fresh capital. From 2023 to 2025, the company declared and paid dividends of RMB 259 million, RMB 124 million, and RMB 51.3 million, respectively, cumulating to over RMB 434 million over three years. This generous payout policy stands in contrast to the company's outstanding social security obligations. Between 2023 and the first half of 2026, the company failed to make full social security and housing fund contributions for some employees, totaling RMB 37.8 million. If required to make up the shortfall, the maximum late payment penalties could reach approximately RMB 8.7 million as of the end of June 2026.
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