Summary of Key Points
Lixun Precision, a manufacturing giant with annual revenue of 330 billion yuan and net profit exceeding 20 billion yuan, experienced a stock price gap on its debut in the Hong Kong Stock Market, indicating divergent opinions from the market regarding its valuation. The purpose of this listing was not due to a lack of funds for daily operations but rather to establish an international capital platform to support the expansion of new businesses such as AI servers and automotive electronics, as well as the construction of global manufacturing bases, in order to address cash flow challenges and prepare for future global competition. The market's main concerns are: when these new businesses will become profit drivers, which company will take over from Apple as the main growth driver, and when global expansion will result in profits.
1. Generating 20 Billion Yuan in Profit Annually but Still Listing? It's Not About Lack of Funds, but Seeking an “International Passport”
Many people wonder why Lixun, which earns 20 billion yuan annually, would need to raise 24 billion Hong Kong dollars. In fact, this amount is not sufficient to significantly change its daily operations (for example, its net profit in 2025 is expected to be 16.6 billion yuan). The real reason is strategic necessity:
- Lixun's overseas business now accounts for 85% of its total revenue. It plans to build factories in Vietnam and India and acquire foreign companies, all of which require an international capital market platform (the Hong Kong Stock Market is more国际化 than the A-share market).
- Simply put, this listing is like obtaining a “ticket to enter global competition” – it will make future overseas financing, acquisitions, and attracting global capital easier. The goal is not to fill existing gaps but to prepare for the next round of expansion.
2. From an Apple “Employee” to a Versatile Player: New Businesses Are More Profitable than Traditional Ones
Lixun initially thrived thanks to its partnership with Apple, but it is no longer just a mere contract manufacturer for Apple:
- Traditional Business: Consumer electronics (such as AirPods and Apple Watch) account for 79.5% of revenue, but the gross margin is only 10.64%, indicating that these operations are less profitable.
- New Businesses: The revenue from automotive electronics (such as vehicle connectors and autonomous driving components) increased by 185% to 39.2 billion yuan, with a gross margin of 15.75%; AI server-related businesses (high-speed connectors, liquid cooling equipment) grew by 33% to 24.5 billion yuan, with a gross margin of 18.4% – new businesses are more profitable than traditional ones.
- Lixun's dependence on Apple has also decreased from 75% in 2023 to 56.7%, indicating that it is moving away from being solely reliant on one customer.
3. Why Is Cash Flow Tight? Global Expansion and New Businesses Are “Costing Money”
Although Lixun's profits are increasing, its cash on hand is decreasing (operating cash flow in the first quarter of 2025 was -7 billion yuan). The reasons are straightforward:
- Global Factory Construction: Building bases in Vietnam, India, and Mexico, purchasing machinery, and constructing factories have resulted in significant expenses that have not yet been fully recouped.
- Investment in New Businesses: AI servers and automotive electronics require substantial research and development (over 10 billion yuan was invested in R&D in 2025), with no immediate returns.
- Consequence: Short-term loans have increased from 35.3 billion yuan to 60.1 billion yuan, putting pressure on cash flow – thus, the company needed to list to raise funds to alleviate this situation.
4. What Does the Market Worried About? Three Questions Determine Lixun's Future
The stock price gap in the Hong Kong Stock Market reflects market skepticism about Lixun's future, with three key issues at play:
1. When Will AI Business Become a Major Profit Driver? Currently, AI-related business revenue is only 24.5 billion yuan, one-tenth of consumer electronics revenue. Although it is growing rapidly, it will take time for this segment to become a significant profit source.
2. Which Company Will Take Over from Apple? Automotive electronics and AI businesses combined account for only 23.6% of total revenue, far from being able to replace Apple as the main profit driver. The market wants to know which new business will emerge as the leading growth driver.
3. When Will Global Expansion Generate Profits? Overseas factories are still under construction, with fixed asset investments amounting to 65.9 billion yuan, and additional projects costing 4.2 billion yuan – when will these investments start to generate profits?
If Lixun can address these three issues, it can transform from a supplier for Apple into a true “global intelligent manufacturing platform.” If not, market doubts about its valuation will persist.
In Conclusion
Lixun's listing in Hong Kong is not about a lack of funds but about planning for the future. The company aims to shift from earning money from Apple to generating profits globally. However, this process requires time and capital. The market is testing whether Lixun can turn these investments into real profits.