CIG (HKEX: 06166) shares experienced a significant rise in early trading, climbing more than 8%. At the time of writing, the stock was up 5.99% to HK$146.8, with a turnover of HK$756 million.

The surge follows the company's announcement on June 4th confirming the completion of a placement of 15.6 million new H shares. The shares were placed at a price of HK$126.66 each, raising net proceeds of approximately HK$1.967 billion.

Allocation of Proceeds

The company has outlined the intended use of the funds. Eighty percent of the net proceeds are earmarked for the strategic stockpiling of core components. A further ten percent will be used to supplement working capital, with the remaining ten percent allocated for other general corporate purposes.

Following the placement, the shareholding of the controlling shareholder and parties acting in concert has been diluted from 10.34% to 9.90%.

Proactive Supply Chain Strategy

The company recently stated that it had anticipated the supply chain tensions resulting from upstream demand growth and had proactively established a multi-dimensional supply chain security system. CIG has engaged in collaborations with multiple suppliers for critical materials such as silicon photonic chips, CW light sources, DSPs, and Faraday rotator glass for optical isolators.

These partnerships are secured through various methods including supply guarantee agreements, targeted fixed asset investments, and direct or indirect equity investments. This strategy aims to lock in supply and upstream production capacity in advance. The company has already built reasonable inventories of key materials to ensure its operational and production requirements are met.