With the explosive growth of generative artificial intelligence and large model technologies, the global computing infrastructure sector has seen an unprecedented surge in investment. As the indispensable "vascular system" of computing clusters, the optical communications industry is undergoing rapid upgrades and structural transformation. Recently, optical communications and optical connectivity product supplier Nazhen Technology passed the Hong Kong Stock Exchange hearing and is set to list on the main board. According to Frost & Sullivan, based on 2025 global optical module revenue, Nazhen Technology ranked fifth among professional optical module manufacturers worldwide with a 4.0% market share; in China, it ranked third with a 10.1% share. Additionally, the company is one of the few vertically integrated enterprises globally that possesses both independent R&D and production capabilities for optical modules and optical chips. Facing the rapid release of AI computing power dividends and the swift evolution of downstream technologies, can Nazhen Technology lead the fierce global competition and achieve a valuation leap through the capital markets?

Betting on AI High-Speed Interconnect, Hitting an Inflection Point

According to information obtained, Nazhen Technology's business landscape covers data communications optical modules, telecommunications optical modules, optical chips, and optical network terminals. Reviewing its financial performance during the track record period, the company's revenue grew 20.0% from RMB 4.239 billion in 2023 to RMB 5.087 billion in 2024, then accelerated to RMB 8.355 billion in 2025. In the first half of 2026, the company achieved revenue of RMB 5.393 billion, maintaining rapid year-on-year growth. On the profit side, net profit rose from RMB 89.5 million in 2024 to RMB 873 million in 2025, with the net margin expanding from 1.8% to 10.4%. This sharp rise in profitability was driven on one hand by an increased share of high-margin products, and on the other hand by the recognition of a RMB 353 million gain from the disposal of a joint venture in 2025.

The fundamental driver behind the company's performance leap lies in its strategic shift of product structure toward the data communications sector. In the past, domestic telecom operators' investment cycles and 5G construction pace played a decisive role in demand for telecom optical modules and FTTx terminals. Around 2024, domestic telecom market demand experienced a phased correction, and the company's telecom optical module revenue slowed. However, global demand for 200G and higher-rate data communications optical modules from AI clusters and cloud computing surged exponentially, quickly filling the gap and propelling overall performance. In the first half of 2026, the company's gross margin improved to 24.2%, with increased shipments of overseas markets and high-end data communications products being the primary contributor to margin improvement.

Notably, the vertical integration of technology is one of Nazhen Technology's core moats. Optical chips, as the highest-cost and most technically demanding underlying components in optical modules, have long been heavily dependent on external supply or overseas imports. Nazhen Technology has achieved full-process self-sufficiency from epitaxial growth, grating processes, and optical waveguide etching to automated packaging and testing. The company's self-developed CW-DFB laser chips achieved commercialization in the second quarter of 2025, gradually transitioning from internal use to large-scale external sales, and achieved mass production in the first quarter of 2026. This not only opened up a second growth curve but also significantly improved the cost structure of upstream core components.

Challenges Beneath the Halo, Navigating Industry Cycles

Although Nazhen Technology has reaped substantial gains from the AI wave, a deeper look at the prospectus reveals objective risks in its competitive landscape and operations. The optical communications industry is characterized by high fragmentation and intense competition. Despite ranking fifth among global professional manufacturers, Nazhen Technology's share of the global optical module market is only 4.0%, still a considerable size gap compared to industry leaders. Currently, the top five professional manufacturers hold a combined 61.1% market share, reflecting high concentration, while numerous niche players and new entrants exist across the industry. In the optical network terminal box segment, the top ten globally hold only 34.8% combined, indicating even higher fragmentation and sustained pricing pressure.

Furthermore, high customer concentration is a prominent operational characteristic. In 2023, 2024, 2025, and the first half of 2026, the top five customers accounted for 55.8%, 66.9%, 70.2%, and 71.8% of revenue respectively, showing a year-over-year upward trend. Among them, the single largest customer's revenue contribution has consistently remained above 20%. According to available information, downstream buyers in both the data communications and telecom sectors are large cloud service giants, network equipment vendors, and telecom operators. This customer structure means that if core clients adjust capital expenditure plans, switch suppliers, or extend product certification cycles, the company's order stability and cash flow could face severe disruption.

Additionally, technology roadmap iterations and capital expenditure pressures represent common industry-wide tests. Optical communications technology is evolving rapidly, with data communications optical modules transitioning from 400G/800G to 1.6T and beyond, while optical chips are advancing toward single-wavelength 400G and higher power technologies. If the company's R&D layout fails to precisely align with technology milestones, or if the commercialization of new technologies underperforms expectations, the substantial sunk R&D investments could face recovery risks. From 2023 to 2025, the company's R&D expenditures reached RMB 553 million, RMB 623 million, and RMB 664 million respectively, maintaining extremely high levels. Looking ahead, the company plans to allocate most of the IPO proceeds to continued R&D and talent acquisition, aiming to recruit over 450 R&D personnel in the next five years. Under high-intensity R&D investment, how to sustain product iteration advantages while maintaining profitability stability remains a long-term balancing act after listing.

In summary, Nazhen Technology, leveraging its collaborative R&D capabilities in optical chips and optical modules, has successfully capitalized on the AI-era computing expansion tailwinds, achieving a qualitative transformation in its financial metrics. However, when confronting realistic challenges such as overseas expansion, high customer concentration, and intense industry price competition, the company still needs to rely on continuous technological innovation and the enhancement of its global manufacturing supply chain to solidify its moats. Its future valuation anchor will depend on the scale of external sales of high-end optical chips and the pace of penetration among overseas hyperscale data center customers.