The explosive growth in demand for AI computing power has made optical modules, the core components for high-speed data center interconnections, one of the hottest sectors in both A-share and Hong Kong stock markets. Specialized in silicon photonics technology, photonic interconnect product provider CREALIGHTS (1191.HK) is set to list on the Hong Kong Stock Exchange's Main Board next Monday. The company's revenue has surged nearly sevenfold over two years, and coupled with market speculation about potential collaboration with leading North American manufacturers, market interest has been high ahead of its listing. However, its core weakness of revenue growth without corresponding profit growth is hard to ignore. The low-margin JDM business model drags on profitability, and questions remain about the validity of valuation benchmarking, suggesting that a rational assessment of the company's medium to long-term investment value is still necessary.
Revenue Growth and Profitability Challenges
CREALIGHTS is positioned squarely in a core AI industry segment. As a provider of photonic interconnect products, its offerings are widely used in AI data centers, covering transmission rates from 100G to 800G, with a deep focus on silicon photonics technology.
The company's revenue growth trajectory is exceptionally strong. According to its prospectus, revenue for 2023, 2024, and 2025 was RMB 180 million, RMB 860 million, and RMB 1.22 billion respectively, representing a near sevenfold increase over two years, with a particularly high growth rate of 391.5% in 2024. This explosive growth stems from the company's strategic shift from low-speed to high-speed products completed in 2022, successfully capturing the robust demand for 400G and 800G high-speed optical modules in AI data centers.
However, the impressive revenue growth fails to mask profitability challenges. Net losses for 2023-2025 were RMB 110 million, RMB 20 million, and RMB 100 million respectively, indicating persistent losses with a significant widening of the loss in 2025 compared to 2024. The underlying reasons involve dual constraints from business structure and profit model.
On one hand, the company's over-reliance on the domestic market, with a continuously declining share of overseas business, directly depresses overall profitability. In 2025, overseas revenue was only RMB 120 million, nearly halving from RMB 240 million in 2024. As the proportion of domestic business increased significantly, intense competition in the domestic market has kept product pricing under constant pressure, making it difficult to improve gross margins.
On the other hand, the high proportion of revenue from the JDM (Joint Design Manufacturing) model, which carries significantly lower product gross margins, is a core factor. In 2025, JDM model revenue accounted for 45.3% of total revenue, with a corresponding gross margin of only 3.1%. This is far below the 48.7% gross margin for the ODM model and the 11.1% for the own-brand model, dragging down the company's overall gross margin. The overall sales gross margin for 2025 was only 9.0%. While this marks a clear improvement from the gross loss in 2023, it remains at a relatively low level within the industry.
New Partnerships and Ongoing Profitability Constraints
The prospectus indicates that in Q2 2026, the company entered into a strategic cooperation agreement with a leading industry partner for the development and commercialization of CPO/NPO solutions for AI computing infrastructure applications. Additionally, in Q1 2026, the company signed a three-year JDM cooperation agreement with a major optical connectivity provider.
There is widespread market speculation that these partners are leading North American manufacturers, although the prospectus itself does not disclose specific customer names. It is crucial to note the distinct nature of these two collaborations. The former is a strategic partnership focused on joint R&D and commercialization of cutting-edge technology. Its business model and profit contribution are unclear at this stage, but success could significantly enhance the company's technological barriers and long-term value. The latter, however, is a JDM model with inherently low gross margins. Even if this collaboration brings incremental orders worth billions, its actual impact on improving profitability remains to be seen.
Strong Institutional Backing and Recognition
The company's shareholder background shows support from various capital sources. It has secured multiple rounds of investment from state-owned capital with Suzhou ties, Alibaba, Xiaomi, and funds with Beijing connections, providing rich industrial resources and capital endorsement that offer solid support for technology R&D and market expansion.
For this IPO, a total of six cornerstone investors were introduced, with an overall subscription amount of approximately HKD 760 million, accounting for 49.9% of the base offering size. The cornerstone investor base is diverse, including local state-owned capital, international asset managers, leading public funds, industrial capital, and long-term private equity. JSC International, with Beijing state-owned capital background, is the largest investor with HKD 250 million. UBS Global Asset Management, as an overseas long-term investor, allocated HKD 160 million. Two hard-tech industrial capital firms, Biwin Storage and Kingsoft Cloud, invested a combined HKD 240 million. Furthermore, well-known medium-to-long-term institutions such as Gaoyi Asset Management and E Fund Management also participated. The concentrated participation of diverse, long-term capital fully demonstrates institutional recognition of the company's strategic positioning and long-term development value.
Valuation Gap and Market Sentiment Considerations
Some market views suggest benchmarking CREALIGHTS against the A-share optical module leaders—Zhongji Innolight, Eoptolink, and TFC Optical Communication. Based on the issue price, CREALIGHTS trades at a Price-to-Sales (P/S) ratio of approximately 7.3x. While this appears to offer valuation room compared to A-share peers that often trade at multiples of tens, this comparison logic has significant flaws.
CREALIGHTS' 2025 revenue of RMB 1.22 billion still lags behind the scale of industry leaders. Combined with its fundamentals of persistent losses and a low overall gross margin, the current P/S ratio more objectively reflects its current profitability shortcomings rather than providing a basis for converging with the high valuations seen in A-shares. Simple benchmarking can easily lead to misaligned expectations.
Simultaneously, the optical module sector is currently at the center of the AI investment theme. IPO subscription funds and short-term speculative capital are likely to flood in on the first trading day, driving a sharp, pulse-like surge in the stock price. However, as seen with the case of Xizhi Technology, such concept stocks often exhibit a pattern of "initial surge followed by a pullback" post-listing—its stock price soared 383% on the first day, but the current price has retreated over 50% from that closing price, though it still retains about a 110% gain compared to the issue price, showing clear signs of short-term IPO and thematic sentiment digestion.
For investors who secured allotments, CREALIGHTS may deliver decent returns. However, for investors planning to build positions after listing, timing is crucial. The period of peak sentiment premium immediately after listing may not be the safest entry window. A more prudent approach might be to wait for market enthusiasm to normalize and then make judgments based on the company's progress in improving profitability.
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