Tianfu Communication's decision to list in Hong Kong is not a sign of weakness or a desperate search for capital.

According to the Hong Kong stock application documents, from 2023 to 2025, the company's revenue surged from RMB 1.926 billion to RMB 3.226 billion and then to RMB 5.115 billion. Net profit for the year climbed from RMB 736 million to RMB 1.350 billion and further to RMB 2.028 billion. Net cash flow from operating activities reached RMB 902 million, RMB 1.263 billion, and RMB 1.868 billion, respectively. Based on A-share annual report metrics, the company's operating revenue in 2025 was approximately RMB 5.163 billion, with net profit attributable to shareholders around RMB 2.017 billion. As of the end of 2025, its cash and cash equivalents stood at approximately RMB 2.864 billion.

This performance reflects high growth, robust profitability, and strong cash flow within the AI computing power cycle. The real challenge, however, does not stem from the company's fundamentals but rather from the Hong Kong market's stringent scrutiny of growth quality, which often applies a discount.

This discount must be contextualized within A-share valuation benchmarks. As of April 24th market data, Tianfu Communication's total A-share market value was approximately RMB 252.3 billion, with a PE-TTM (Price-to-Earnings Trailing Twelve Months) of around 116 times. Under April 23rd metrics, its PE remained above 120 times. This suggests that if the Hong Kong listing proceeds, the goal is not to revalue a low-priced manufacturing company but to subject it—already highly valued in the A-share market—to a reevaluation by international long-term funds regarding liquidity, customer concentration, technological iteration, and profit sustainability.

The document disclosed on April 10th remains the Hong Kong Stock Exchange's H-share application version, explicitly warning that the information is incomplete, subject to significant changes, and that the listing application has not yet been approved. The core content of the April 23rd announcement was the further appointment of Huatai Financial Holdings (Hong Kong) Limited as the overall coordinator, which does not signify substantial progress in the listing application. Previously, the company had appointed Goldman Sachs, Merrill Lynch, and CICC Hong Kong Securities as joint sponsors and overall coordinators.

The company is still in the application progression stage. The real question is how much of a discount Hong Kong is willing to offer relative to the A-share high valuation.

Tianfu Communication's fundamentals are robust.

In its application documents, the company positions itself as a "leading global one-stop platform technology enterprise in the optical interconnect field," primarily engaged in the research, development, production, and sales of passive and active optical components, while also offering co-development services for optical module integration. Its products are mainly used in high-speed interconnect scenarios such as data communication, telecommunications, AI computing power, and data centers.

The industry window has indeed opened. The expansion of AI data centers is driving the iteration of optical modules from 400G to 800G and 1.6T. Technologies like CPO (Co-Packaged Optics), silicon photonics, and thin-film lithium niobate are pushing optical interconnects toward higher integration, lower power consumption, and higher precision.

Judging from the disclosed annual reports or performance data of peers, leading optical module companies like Zhongji Xingtong and Yitong Sheng achieved significant revenue and profit growth in 2025, while upstream companies like Yuanjie Technology also benefited from increased data center demand. The prosperity of the optical module, optical chip, and optical device supply chain is not unique to Tianfu Communication.

The most concerning set of data pertains to customer concentration. From 2023 to 2025, the company's revenue from its top five customers accounted for 82.2%, 87.5%, and 90.6%, respectively. Revenue from the largest single customer represented 54.0%, 62.2%, and 63.9%. By 2025, the largest customer contributed 63.9% of the company's revenue based on sales income, with the top five customers collectively contributing 90.6%.

The certification cycle in the optical communication supply chain is long, with deep collaborative development, naturally leading to order concentration among top clients. Gaining entry into core customer systems indicates that product, delivery, quality, and collaborative development capabilities have been verified.

The Hong Kong market will not just look at "verification" but also "dependence."

This dependence extends one layer further. Tianfu Communication is not just tied to a few direct clients; its performance elasticity ultimately lies beneath the global AI infrastructure capital expenditure cycle. The pace of data center, AI server cluster, power infrastructure, and switching network construction by North American cloud providers determines the strength of demand for high-speed optical modules and optical engines. If cloud providers like Microsoft, Google, and Meta continue to ramp up AI capital expenditures, upstream supply chain companies naturally benefit. However, if capital expenditure slows down or constraints in power, liquid cooling, or data center delivery delay computing power deployment, order elasticity will also transmit upstream.

Platform-based companies emphasize horizontal replication, customer diversification, and pricing independence; core suppliers focus on delivery, orders, and supply chain integration. Tianfu Communication's narrative leans toward a platform model, but its revenue reality more closely resembles a high-value supply chain company deeply tied to the capital expenditure cycles of top clients and cloud providers.

This will impact pricing.

If the market views it as a platform company replicable across clients, products, and technology routes, it can strive for a technology premium in its valuation. If seen as a high-end manufacturer bound to a few large clients within the AI optical interconnect cycle, its valuation will revert to core supplier logic.

The former values replication; the latter, dependence. The first valuation fork for Tianfu Communication after its Hong Kong listing lies here.

Tianfu Communication's growth axis has shifted.

From 2023 to 2025, the company's revenue from passive optical components was RMB 1.175 billion, RMB 1.564 billion, and RMB 2.065 billion, respectively, with its revenue share declining from 61.0% to 48.5% and then to 40.4%. Revenue from active optical components grew from RMB 741 million to RMB 1.642 billion and further to RMB 2.970 billion, with its share rising from 38.5% to 50.9% and then to 58.1%.

High-speed optical engines have become the revenue engine.

This aligns with AI computing power logic. The larger the AI cluster, the higher the data transmission pressure between servers, switches, and GPUs, making optical interconnects increasingly critical. With amplified demand for 800G and 1.6T, active optical components naturally exhibit greater elasticity.

However, the fastest-growing business is not the one with the highest gross margin.

In 2025, the company's overall gross margin was 52.9%, down from 56.3% in 2024. The gross margin for passive optical components fell from 68.2% in 2024 to 63.3% in 2025. The gross margin for active optical components slightly decreased from 46.3% to 46.1%, significantly lower than that of passive components. Under A-share annual report metrics, the company's gross margin for optical communication components was 53.62%, a year-on-year decrease of 3.67 percentage points.

This is the cold signal.

Active optical components can drive revenue growth but not necessarily thicken profit margins. As the proportion of active business continues to rise, the company may face structural pressure of "still-fast revenue growth but stagnant gross margin improvement."

Tianfu Communication's past strengths lay in precision manufacturing, material processing, and process platforms for passive optical components. Active optical components have a heavier cost structure, involving packaging, testing, optoelectronic collaboration, and system-level delivery. In the high-speed optical engine, optical module, and related system chains, if key optical chips, electronic chips, DSPs, materials, or equipment are more controlled by upstream suppliers or core customer systems, the company's advantages in packaging, coupling, and precision assembly may still be constrained by cost transmission and pricing boundaries.

Technology routes cannot focus solely on the unilateral victory of optical interconnects.

In intra-rack, board-level, or extremely short-distance interconnect scenarios, electrical connections, copper cables, and related high-speed interconnect solutions still offer advantages in cost, power consumption, reliability, and deployment maturity. Copper cables will not replace medium- to long-distance high-speed optical interconnects but will form a phased division of labor with optical interconnects in certain extremely short-distance scenarios.

For Tianfu Communication, the question is not whether optical interconnects have a future but whether the company can transition from passive precision manufacturing and high-speed optical engine packaging to new value segments like CPO, silicon photonics coupling, external light sources, and high-density board-level interconnects.

Trends provide incremental growth; technology routes determine profit boundaries.

Tianfu Communication also bears an easily amplified label: globalization.

Revenue breakdowns by region in the application documents show that from 2023 to 2025, the company's overseas market revenue was approximately RMB 1.592 billion, RMB 2.473 billion, and RMB 3.839 billion, respectively, consistently accounting for over 70%. The document notes that Asian revenue mainly includes Singapore and Chinese bonded zones but excludes mainland China.

This means that "high overseas market revenue share" cannot be directly equated with "all end customers located overseas" or "end demand entirely from overseas markets." Overseas revenue may reflect end demand but may also be influenced by customer registration locations, delivery sites, bonded zone arrangements, Singapore platform structures, or supply chain settlement models.

The Thailand factory must also be viewed separately.

The application version indicates that the production base in Chonburi, Thailand, commenced commercial operations in 2025, with a designed annual capacity of 1.857 million units and actual production of 277,000 units, resulting in a capacity utilization rate of 14.9%. The company explains that the Thailand base is still in the production ramp-up phase and is actively engaging with customers to validate related products.

This cannot be simply written off as "severe capacity idle." Low utilization in the initial stages of a new factory's operation is reasonable. However, this set of data already hints at the cost pressures of overseas layout: employee proficiency, yield rates, certification cycles, fixed cost amortization, and management span will all factor into the gross margin.

More importantly, the Thailand factory is not just an expansion move but also a geopolitical compliance move. The global semiconductor, optical communication, and smart manufacturing supply chains are being reshaped. Overseas major clients increasingly demand supply chain independence, delivery continuity, and "China+1" layouts. For Tianfu Communication, the Thailand base is not only a plus for entering international customer supply chains but may also represent a necessary overseas heavy asset investment to maintain orders.

The difficulty of such investments lies not in factory construction itself but in yield rates, delivery times, costs, management, and customer certifications post-construction. If capacity ramp-up is slow, fixed cost amortization will pressure gross margins; if certification progress is slow, revenue release will lag behind capital expenditures; if overseas operational spans lengthen, management costs will rise.

Revenue recognition requires deeper scrutiny.

The accountant's report discloses that the company recognizes revenue from customer contracts when control of goods or services transfers to the customer. Under direct sales models, revenue is typically recognized upon export customs clearance or product delivery and acceptance per contracts. Under consignment models, revenue is recognized when customers actually use or consume the goods. For integrated co-development services, revenue is recognized upon completion of related services and customer confirmation.

In other words, the company has multiple revenue recognition scenarios, including export customs clearance, delivery and acceptance, consignment consumption, and integrated co-development. Given the high customer concentration and overseas revenue share, the audit focus is not on invoices but on whether control has genuinely transferred.

Receivables are currently manageable but cannot be taken lightly.

From 2023 to 2025, the company's trade receivables and bills receivable grew from RMB 465 million to RMB 808 million and then to RMB 1.141 billion. Turnover days decreased from 82.4 to 69.5. As of February 28, 2026, RMB 767.6 million, or 67.3%, of the relevant trade receivables and bills receivable at the end of 2025 had been settled subsequently.

On the surface, collection efficiency seems acceptable. However, approximately one-third of the balance remained unsettled within the post-period window ending February 28, 2026. Considering that some amounts may still be within normal credit terms, subsequent observations should focus on the aging structure, changes in credit terms, and collection rhythms of major customers.

The consolidated metrics from the A-share annual report reveal that, as of the end of 2025, the company's accounts receivable balance stood at approximately RMB 1.181 billion, with a bad debt provision of around RMB 59.0519 million. The top five debtor accounts for accounts receivable and contract assets collectively amounted to approximately RMB 1.024 billion, representing 86.74% of the total end balance. Given that the largest customer contributed 63.9% of the revenue, assessing receivable risks cannot rely solely on aging analysis. It is also essential to consider whether credit terms have changed, along with any increases in bill settlements, extended payment terms, price discounts, returns, or post-period write-offs.

Inventory management is equally crucial and should not be overlooked.

At the end of 2025, the company's net inventory book value was approximately RMB 457 million. The A-share annual report indicates that the company accrued inventory obsolescence provisions of approximately RMB 32.4364 million in 2025, bringing the total end-of-period inventory obsolescence provisions to approximately RMB 57.0536 million. Considering the rapid iteration of high-speed optical communication products, including parallel routes like 800G, 1.6T, CPO, silicon photonics, and thin-film lithium niobate, any shift in customer solutions could expose specific materials, work-in-progress, and finished goods to risks of price reductions, delays, or even scrapping.

What do auditors focus on? Their attention extends beyond impressive revenue growth figures. They scrutinize whether contracts, orders, outbound shipments, logistics, customs clearance, acceptance, customer consumption records, statements, and collection flows can be closed-looped on a transaction-by-transaction basis.

Tianfu Communication boasts ample cash reserves.

As of the end of 2025, the company held approximately RMB 2.864 billion in cash and cash equivalents, with net cash flow from operating activities reaching approximately RMB 1.868 billion. The capital liability ratio disclosed in the Hong Kong stock application version was approximately 14.5%.

The devil, as they say, is in the details.

Key questions arise: Are the new production capacities adequately covered by orders? How can the utilization rate of the Thailand base be enhanced? What is the extent of R&D investment and customer validation projects corresponding to directions such as 1.6T, CPO, silicon photonics, and thin-film lithium niobate? Are there any identified targets for strategic acquisitions? How will the roles of internal cash and external fundraising be divided? These aspects of the capital closed-loop are crucial for the pricing of Hong Kong-listed stocks.

R&D investment presents a dual perspective.

The company's R&D investment is set to reach approximately RMB 267 million in 2025, up from RMB 232 million in 2024 and RMB 143 million in 2023. It has established three major R&D centers in Suzhou, Shenzhen, and Japan. By the end of 2025, the company will have a total of 774 R&D personnel and 194 registered patents, indicating a continuous increase in absolute investment.

However, R&D intensity is on a decline. The proportion of R&D investment in operating revenue dropped from 7.39% in 2023 and 7.14% in 2024 to 5.16% in 2025. This is partly attributable to rapid revenue growth and should not be simply interpreted as a contraction in R&D efforts. Nevertheless, as routes such as CPO, silicon photonics, and thin-film lithium niobate accelerate, Hong Kong-listed stock investors will question whether the decline in the R&D expense ratio will impact the company's upfront investment in next-generation technologies.

Governance issues warrant attention and cannot be entirely overlooked.

In 2021, the Jiangsu Securities Regulatory Bureau issued warning letters to Tianfu Communication's controlling shareholder, Tianfu Renhe, and its concerted actor, Suzhou Dream Chaser, for cumulatively reducing their stake in Tianfu Communication by 5.03% between July 2018 and March 2020. They failed to fulfill reporting and announcement obligations when their shareholding ratio fell below 5% and continued to reduce their stake during the restricted transfer period.

While this does not pose a material obstacle to the company's current H-share application, from the perspective of Hong Kong-listed stock investors, historical disclosure flaws in share reductions will still be factored into governance compliance observations.

Tianfu Communication is by no means a weak company.

It boasts revenue, profits, and cash flow. It is also well-positioned in the high-speed optical interconnect upgrade cycle driven by AI computing power. However, Hong Kong-listed stock pricing considers not only prosperity but also the quality behind it. Especially when A-shares have already assigned a market capitalization of approximately RMB 250 billion and a PE ratio exceeding 100 times, H-share investors will not merely ask, "Is the company good?" but also, "How much certainty can still be purchased at this price?"

The core contradiction for Tianfu Communication lies not in whether there is growth but in whether the capital efficiency behind the growth can be sustained.

Operating cash flow remains robust, and free cash flow has not turned negative. However, financing in Hong Kong necessitates an explanation of the capital closed-loop among capital expenditures, technological R&D, and overseas production capacities. Active optical devices have emerged as the main revenue driver but are not the highest-margin business. Accounts receivable and inventory turnover metrics have not significantly deteriorated, but under the backdrop of customer concentration and technological generational shifts, post-period payment collection and inventory digestion still require verification. The Thailand base serves as a fulcrum for globalization and geopolitical compliance but may impose cost pressures during the ramp-up period. The advantages of copper cables in certain short-distance interconnect scenarios also remind the market that optical interconnect is not a one-way street without disagreements.

In essence, Tianfu Communication's strengths are solid, but Hong Kong-listed stocks will not pay solely for the label of being an "AI optical interconnect leader." What it truly needs to prove is whether the high growth supported by a few major customers can withstand product generational shifts, customer bargaining power, global production expansion, short-distance interconnect diversions, fluctuations in AI capital expenditures, and technological route transitions.

Information Sources and References

[1] Company Financial Reports and Overseas Listing (H-Share) Application Documents

· HKEX Application Version (Disclosed on April 10, 2026): Provides details on the company's main business composition (shift in the proportion of passive and active optical devices), highly concentrated customer structure (top five customers account for 90.6%, largest customer accounts for 63.9%), overseas revenue breakdown, and capacity ramp-up data for the Thailand Chonburi production base (utilization rate of 14.9%). It also outlines detailed plans for expanding the intelligent manufacturing system and frontier technology R&D through Hong Kong fundraising.

· A-Share 2025 Annual Report (Stock Code: 300394): Presents data on the company's consolidated A-share operating revenue (approximately RMB 5.163 billion), net profit attributable to shareholders (approximately RMB 2.017 billion), year-on-year decline in gross margin of optical communication components (down 3.67 percentage points), provision for inventory write-downs (approximately RMB 57.0536 million at the end of the period), operating cash flow (approximately RMB 1.868 billion), and a breakdown of the volume and price of the high annual dividend plan.

· HKEX Appointment Announcement (Disclosed on April 23, 2026): Updates on the latest listing progress regarding the company's further appointment of Huatai Financial Holdings (Hong Kong) Limited as the overall coordinator.

[2] Industry Regulatory and Listing Review Information

· Hong Kong Exchanges and Clearing Limited (HKEX) Information Disclosure Platform: Offers the latest disclosure rules for Tianfu Communication's Hong Kong listing, application version data prompts (clarifying that the application version data is incomplete and may undergo significant changes), and financial compliance verification criteria for "A+H" dual-platform operations in areas such as customer rights confirmation, control transfer (direct sales, consignment, integrated co-development), and post-period settlement of accounts receivable.

· Historical Compliance and Regulatory Public Information: Records of historical governance issues cited from the Jiangsu Regulatory Bureau of the China Securities Regulatory Commission's 2021 warning letter issued to the company's controlling shareholder and concerted actors (Tianfu Renhe and Suzhou Dream Chaser) for illegal share reductions and disclosure flaws.

[3] Industry Data and Macro Background Information

· Public Information on AI Computing Power and Capital Expenditure Cycles: Background on the expansion of data centers by core North American cloud providers (Microsoft, Google, Meta, etc.), deployment rhythms of AI server clusters, and the macro industry dividends from the high-speed iteration of optical interconnect modules from 400G to 800G and 1.6T.

· Optical Interconnect Technology Evolution and Industrial Chain Landscape: Industry research observations on the evolution of next-generation optoelectronic integration technology routes such as CPO, silicon photonics coupling, and thin-film lithium niobate, as well as the phased division of labor and technological competition between copper cables (electrical connections) and optical interconnects in ultra-short-distance interconnect scenarios.

Disclaimer

1. Regulatory and Compliance Disclaimer: All financial data breakdowns, customer concentration analyses, discussions on overseas asset-heavy operational costs, and arguments on the rationality of fundraising amid high on-balance-sheet cash flows in this article are based on independent journalistic analysis of the company's publicly disclosed A-share annual reports, H-share application versions, and related appointment announcements. They aim to explore the financial logic and institutional valuation reshaping trends in the capital markets. The conclusions herein do not constitute substantive judgments or endorsements by regulatory authorities (China Securities Regulatory Commission or Hong Kong Exchanges and Clearing Limited) regarding the company's H-share listing application. Whether the company ultimately meets listing conditions and the issuance pricing shall be subject to the official review results of regulatory authorities and exchanges.

2. Industry and Technology Disclaimer: This article is for informational reference and industry research purposes only and does not constitute any form of technology route recommendation, supply chain procurement advice, or business cooperation guidance. The discussions on the evolution of high-speed optical modules, generational shifts between active and passive optical devices, and capacity yield discussions at the Thailand base aim to serve observations on the computing power infrastructure industry and should not be used as a basis for specific supply chain screening or technology bets. Industry technology iteration is uncertain, and any actual commercial decisions regarding optical communication routes must be combined with the latest industry dynamics and independent engineering expertise.

3. Investment Disclaimer: This article is written based on publicly available and transparent data and strives to be objective, rational, and neutral. However, it does not provide a permanent guarantee of the absolute real-time nature and completeness of the underlying data. The quantitative characteristics mentioned herein, such as "risks of deep binding with a few customers," "declining gross margins in active businesses," "drag from overseas factory ramp-ups," "inventory write-down risks," and "Hong Kong-listed stock funding quality discounts," are all cited from statutory disclosure documents and represent logical deductions at the time of writing. They do not constitute buy/sell recommendations, invitations, or investment advisory opinions for Tianfu Communication (A-shares and proposed H-shares) or any securities related to the computing power industry chain. Significant liquidity and valuation differences exist across capital markets. Investors should fully understand the investment risks of Hong Kong-listed and A-shares and make independent and prudent investment decisions.

4. Conflict of Interest Disclaimer: Caijing Chaoxun, the author of this article, and the publishing platform have no conflicts of interest with the companies mentioned herein or their related business partners. Investors should make investment decisions based on independent judgment and bear corresponding risks. Investment involves risks; enter the market cautiously.

Note: This article is based on public information analysis and integration. If there are any errors, please contact us promptly for corrections.