Lingyi Intelligent Manufacturing's Hong Kong IPO Approaches: Can the “AI + Automotive” Narrative Support Its High Valuation?

ZC Asia has learnt that Lingyi Intelligent Manufacturing (002600.SZ), a leading precision manufacturing enterprise, has recently attracted significant capital inflows in the A-share market due to its deep integration with the core sectors of ‘AI terminals’ and ‘automotive electronics’, driving its valuation to new heights. Concurrently, the company has formally initiated plans for a listing on the Main Board of the Hong Kong Stock Exchange.

According to the company announcement, this Hong Kong listing aims to expand international financing channels, enhance global brand influence, and secure capital reserves for R&D and capacity expansion in cutting-edge businesses such as AI, automotive electronics, and robotics.

Dual-engine business structure

1. AI terminal business. This segment contributes approximately 90% of revenue, with products spanning smartphones, AI server thermal/power modules, and core components for XR devices. Its growth is deeply tied to the global consumer electronics innovation cycle, currently benefiting from increased per-unit value driven by AI smartphones, foldable screens, and server upgrades.

2. Automotive electronics and robotics business. The automotive division has secured positions within the supply chains of leading manufacturers such as Tesla and BYD. Although currently accounting for only about 5% of revenue, it is experiencing rapid growth (exceeding 50% in recent years). More significant for long-term prospects is the company's full commitment to the embodied intelligence (humanoid robotics) sector. It has demonstrated manufacturing capabilities spanning from joint modules to complete systems, with cumulative deliveries exceeding 5,000 units, aiming to become a global top-three hardware manufacturer.

The company's core strengths lie in its precision manufacturing technologies, quality control systems, and global production footprint, cultivated through long-term service to top-tier clients. However, significant challenges remain: high dependence on major clients poses ongoing concerns for earnings stability; new businesses like automotive electronics remain in investment phases, with profitability significantly below the company average; and while the robotics sector holds vast potential, its technological pathways and commercialisation timelines remain highly uncertain.

Steady Revenue Growth Amid Profitability and Cash Flow Pressures

Reviewing the company's financial performance over the past five years reveals robust expansion. Revenue scaled steadily from RMB 28.1 billion in 2021 to RMB 37.6 billion in the first three quarters of 2025, demonstrating strong market penetration capabilities. Full-year net profit for 2025 is projected to grow by approximately 40% year-on-year, reaching RMB 2.5 to 2.7 billion, reflecting significant momentum.

However, behind the profit statement, the company's profitability faces persistent challenges. The comprehensive gross margin has fluctuated within the 15% to 17% range for an extended period, reflecting the intense competitive landscape in the precision manufacturing sector and the structural impact of the company's expansion into lower-margin businesses such as automotive electronics. The company is currently in a peak period of capital expenditure, with cash flow from investing activities remaining persistently negative as substantial funds are channelled into R&D for new businesses and capacity expansion. Concurrently, the debt-to-equity ratio remains at approximately 55%. A successful fundraising through a Hong Kong listing could significantly optimise its capital structure, alleviating burdens for future development.

Multiple risks converge, testing the high valuation

Foremost is the risk of new business ventures failing to deliver. The market's current high valuation largely rests on optimistic expectations regarding AI terminal volume growth, automotive electronics expansion, and robotics commercialisation. Should progress in any of these areas fall short of expectations, it could trigger a ‘double whammy’ of declining performance and valuation. Secondly, the risk of customer concentration remains a Damocles' sword hanging overhead, with fluctuations in orders from core clients directly impacting revenue.

The most immediate and tangible risk stems from its current elevated valuation. As of mid-January 2026, the company's A-share dynamic price-to-earnings ratio approached 60 times, significantly exceeding the industry average. This valuation evidently incorporates optimistic growth projections for the coming years. For its Hong Kong listing, international investors typically prioritise immediate profitability and cash flow, potentially leading to pricing logic that diverges from A-share markets. The final pricing of H-shares may serve as a crucial reference point for A-share valuations, potentially triggering a rebalancing of the valuation framework.

Disclaimer: The content herein is for reference only and does not constitute any form of investment advice. Should any information contained herein prove inaccurate, incomplete, or potentially misleading, please refer to the company's official announcements. Market risks exist; investment requires caution.