TRIGIANT (Stock Code: 01300) announced on September 20 that its indirect wholly-owned subsidiary, Jiangsu Trigiant Technology Co., Ltd., has signed a property rights transaction contract with the seller to acquire 100% of the equity in Qinghai Zhongli Optical Fiber Technology Co., Ltd. for RMB 455 million (approximately HKD 526 million). This price represents a premium of RMB 310 million over the minimum bid price listed for the target company's 100% equity on the Chongqing Property Rights Exchange. The company has positioned this deal as a critical step toward completing its "optical fiber preform - optical fiber - optical cable" full industry chain and seizing opportunities arising from AI computing power demand. Following the announcement, TRIGIANT's share price strengthened consecutively, surging over 16% in early trading on September 21 to HKD 3.44. However, behind the market's optimism lie several concerns deserving closer scrutiny: the fairness of the pricing, the true quality of the target asset, and the integration and capital pressures the company will face post-acquisition.

Acquiring a "Negative Asset" at a Premium Exceeding RMB 300 Million; Target Was Previously Divested by Its Parent at a Rock-Bottom Price

Qinghai Zhongli Optical Fiber Technology Co., Ltd. was established on July 5, 2013, and registered in Xining. It is the only national-level "Little Giant" specialized and innovative enterprise in western China simultaneously engaged in the R&D and production of both optical fiber preforms and optical fibers. The company currently operates 400 tons of optical fiber preform capacity across its first and second phases, with a third phase of 600 tons awaiting production, bringing total planned capacity to 1,000 tons. However, this seemingly "scarce" western optical preform manufacturer has a less-than-glorious operating history. Qinghai Zhongli was formerly a wholly-owned subsidiary of Jiangsu Zhongli Group. Affected by its parent's bankruptcy restructuring and market fluctuations, Qinghai Zhongli suffered continuous losses, faced debt-related lawsuits, operated with insufficient capacity utilization, and saw its key third-phase project stalled, at one point teetering on the brink of shutdown. In fiscal year 2024, Qinghai Zhongli recorded a loss of RMB 470 million. In the first three quarters of 2025, the company generated revenue of just RMB 53.87 million, posted a net loss of RMB 54.61 million, and generated operating cash flow of merely RMB 283,000. By the end of September, its net assets had fallen to negative RMB 37.37 million, rendering it insolvent.

This is precisely why Zhongli Group transferred 100% of Qinghai Zhongli's equity to Qinghai state-owned capital in late 2025 for just RMB 951,500, as part of its effort to divest inefficient assets. In other words, Qinghai Zhongli was valued at only RMB 950,000 in a transaction less than a year ago, while TRIGIANT's acquisition price now stands at RMB 455 million – an increase of nearly 480 times the earlier sale price. Although Qinghai state capital has since worked on debt resolution and operational revitalization of the target, such a dramatic valuation leap itself warrants investor caution regarding the fairness of the pricing. More notably, the RMB 455 million closing price represents a premium of RMB 310 million over the minimum bid price listed on the Chongqing Property Rights Exchange, meaning TRIGIANT secured the asset in public bidding at a price far exceeding the base offer. Given that the target remains in a recovery phase from insolvency and the third-phase capacity has yet to commence production, the magnitude of this premium is particularly noteworthy.

Beyond the RMB 455 Million Consideration Lies RMB 259 Million in Hidden Debt, with a Six-Month Production Commencement Pledge Acting as a Hard Constraint

RMB 455 million does not represent the full cost of this transaction. According to the contract terms, the buyer must unconditionally support the target company in repaying debt to the Xining West Economic Development Zone Qingyin New Materials Project Management Center (Limited Partnership) on or before December 31, 2026, pursuant to a civil mediation document. As of June 30, 2026, this debt totaled approximately RMB 259 million. This means TRIGIANT's actual capital commitment in this acquisition will significantly exceed the RMB 455 million equity consideration. Furthermore, the buyer must urge the target company to commence production of the third-phase 600-ton optical fiber preform project within six months from the completion of equity transfer registration, and must pay a performance bond of RMB 15 million to the seller's designated account within five business days from the contract date. If the target fails to start production within the specified timeframe, the seller has the right to forfeit the performance guarantee.

From a cash flow perspective, as of June 30, 2026, TRIGIANT held cash and bank deposits of RMB 535 million at period-end, with its debt-to-asset ratio reduced to 19.7%. Combining the RMB 455 million equity consideration with the RMB 259 million debt support brings total funding needs to over RMB 700 million, placing considerable pressure on the company's existing cash reserves. Moreover, the acquisition consideration will be funded from internal group resources, meaning the capital available for day-to-day operations and business expansion will narrow substantially.

Industry-Wide Capacity Expansion Has Arrived; the Window for the Optical Preform High-Prosperity Cycle Remains Questionable

In 2026, the optical fiber preform industry is riding a rare pricing upcycle. Driven by the massive fiber optic cable demand from AI computing network construction, prices for general G.652D preforms have surged over 180% compared to early 2025, while G.657.A2 preforms – used for high-density data center cabling – have nearly tripled by approximately 550%. However, this boom is attracting substantial capital inflows. Multiple listed companies, including Hengtong Optic-Electric, Far East Cable, Tongding Interconnection, Hoshine Silicon Industry, and Han's Laser Technology, have launched preform capacity expansion plans. One investor noted on an interactive platform that the combined 5,200 tons of new preform capacity from Han's Laser and Hoshine Silicon "is equivalent to adding a player of Yangtze Optical Fibre and Cable's scale to the market." Current preform capacity has already risen from an earlier 2,100–2,300 tons to approximately 3,200 tons in the second quarter of 2026, with an additional 400–500 tons expected in the first half of 2027, and longer-term capacity approaching 4,000 tons.

On September 10, the optical fiber index plunged 3.26%, with Huamai Technology hitting the daily limit down, reflecting clear market concerns about potential price corrections across the industry chain triggered by concentrated preform capacity expansion. An insider at one listed company told media, "As new capacity comes online over the next two years, medium-term price uncertainty persists and requires further market validation." Huamai Technology, in a more direct statement, said the recent price increases in optical cables are "not sustainable and carry a risk of price reversal." The industry's last lesson is not far off. The aggressive capacity expansion wave from 2015 to 2018 eventually led to overcapacity after 2018, with prices halving and a multi-year industry slump. Qinghai Zhongli was among the manufacturers that fell behind during that cycle. Whether this current expansion wave will repeat history remains uncertain, but the supply-side pressure stemming from simultaneous expansion by multiple leading companies is a medium-term risk that TRIGIANT must confront squarely when evaluating this acquisition.

Integration Challenges and Procedural Uncertainties Coexist

The procedural risks of the transaction itself cannot be overlooked. The property rights transaction contract has been signed, but the equity transfer registration has not yet been completed. The contracted deadline for repaying the RMB 259 million debt is December 31, 2026, leaving TRIGIANT with limited time to complete closing, sort out the target's debt relationships, and push forward the third-phase project's production commencement. If closing is delayed due to approvals, registration, or other reasons, the production timeline will compress accordingly, raising the risk of performance bond forfeiture. Additionally, whether the target company's prior parent bankruptcy restructuring proceedings have been fully concluded, and whether undisclosed contingent liabilities or lawsuits exist, remains unclear based on publicly available information. Although Qinghai state capital's intervention has helped resolve some of Qinghai Zhongli's earlier debt-related litigation issues, whether historical problems may resurface after the acquisition requires ongoing monitoring.

From a broader perspective, TRIGIANT's decision to pay RMB 455 million at a premium for an optical preform company – one valued at just RMB 950,000 a year ago and long insolvent – is fundamentally predicated on the assumptions that "preform prices will remain elevated" and "AI computing power demand will continue to drive growth." These assumptions hold some validity in the 2026 industry environment, but the strongly cyclical nature of the preform industry means current high profit levels cannot be linearly extrapolated. When capacity from later entrants such as Hengtong Optic-Electric and Han's Laser comes online in concentrated fashion around 2028, the medium-term trajectory of preform prices will directly determine this acquisition's ultimate returns. For TRIGIANT, committing nearly a full year's cash reserves to bet on an upward window in a cyclical industry – whether the risk-reward ratio is justified – is a judgment investors must independently make.