With the gloom surrounding A-share withdrawals still lingering, Feisu Innovation enters the Hong Kong stock market with 98% of its revenue coming from overseas

ZC Asia has learnt that with the formal closing of the share offering today (18 March), Feisu Innovation (03355.HK), set to list on the Hong Kong Stock Exchange next Monday (23 March), has become the focus of attention in the current IPO market. As of 17 March, the company’s margin subscription had reached HK$87.4 billion, with the public offering oversubscribed by approximately 513 times. Additionally, 11 cornerstone investors, including Hao Fund, WT Asset Management, Shenzhen Venture Capital and funds under GF Securities, have subscribed for a total of approximately US$90.22 million, accounting for around 42% to 46% of the global offering.

Feisu Innovation provides one-stop network solutions via its proprietary platform, FS.com, with products spanning network equipment, optical modules and fibre optic cabling. According to Frost & Sullivan, the company is the world’s second-largest online DTC network solutions provider by revenue in 2024, with a market share of 6.9%.

Financial data shows that the company’s revenue has maintained growth in recent years. In the first nine months of 2025, it achieved revenue of RMB 2.175 billion, an 11% year-on-year increase, with adjusted net profit of RMB 461 million, up 20.6% year-on-year. Meanwhile, its gross margin has shown a steady upward trend, reaching an impressive 53% in the first nine months of 2025.

However, a closer examination of the profit composition reveals a clear imbalance in the company’s growth drivers. In the first nine months of 2025, the company’s sales and distribution expenses accounted for as much as 17.9% of revenue, whilst R&D expenses accounted for only 5.7%. As of May 2025, of the 256 patents it held, only 13 were original invention patents, most of which were filed in 2021 or earlier. For a technology company bearing the name ‘Innovation’, such levels of R&D investment and technological reserves stand in stark contrast to its ‘Innovation’ label.

Internal Control Deficiencies Previously Cited by Regulators

It is reported that Feisu Innovation had applied for a listing on the Shenzhen Stock Exchange’s Main Board, but after undergoing 14 months of inquiries and scrutiny, it voluntarily withdrew its application in May 2024. However, this did not mark the end of the story. In January 2025, a penalty notice issued by the Shenzhen Stock Exchange revealed the true reason behind the withdrawal. On-site inspections uncovered multiple core regulatory violations at Feisu Innovation, and it was found that the company’s responses to the review enquiries were severely at odds with the actual situation.

Firstly, there were issues regarding data authenticity. The company’s internal controls relating to its information systems were deficient, failing to accurately reflect information such as product sales figures and review data on the front-end marketplace. For a pure e-commerce platform, the authenticity of sales and review data is the lifeline of its business model; this deficiency undoubtedly struck at the very heart of the matter.

Secondly, there was the issue of log retention. In its responses to the review enquiries, the company claimed to have retained complete system operation logs since October 2022; however, the on-site inspection revealed that these had only been fully preserved since June 2023. This implies that during the critical six-month period prior to this, there is a risk that the company’s core operational data cannot be traced.

Even more serious are the loopholes in financial internal controls. The company has not established relevant procedures for reversing closing entries or reversing audits; employees with access to the financial system can perform such operations directly without approval. This leaves significant scope for financial data to be arbitrarily tampered with.

In light of the above facts, the Shenzhen Stock Exchange has imposed self-regulatory measures in the form of written warnings on Feisu Innovation, its actual controller Xiang Wei, the sponsor China Merchants Securities, and the auditor Deloitte Huayou. Although Feisu Innovation stated in its Hong Kong IPO prospectus that it had rectified the relevant issues, this “stain on its integrity” left on the A-share market will undoubtedly become an obstacle that is difficult to circumvent in the process of rebuilding trust with Hong Kong investors.

Last-minute Dividend Payout and High Levels of Both Debt and Deposits

Five days prior to the company’s initial filing with the Hong Kong Stock Exchange—namely on 22 May 2025—the shareholders’ meeting approved a dividend scheme, distributing 200 million yuan in a last-minute payout, accounting for 50.38% of the 2024 net profit. Based on shareholding proportions, the actual controller, Xiang Wei, alone received over 100 million yuan. What is the logic behind such a use of funds—raising capital from the market whilst simultaneously distributing large sums of cash to existing shareholders?

Even more perplexing is the anomalous phenomenon of “high cash and high debt” in its financial data. As of the end of 2024, the company held as much as 1.15 billion yuan in wealth management products and deposits, with restricted funds accounting for a negligible proportion. However, during the same period, the company’s bank loans surged to 573 million yuan, causing its interest expenses (13.631 million yuan) to exceed interest income (6.651 million yuan) for the first time. This behaviour—holding substantial idle funds to purchase wealth management products whilst simultaneously borrowing large amounts of interest-bearing debt—not only erodes the company’s profits but also casts significant doubt on the authenticity of its funding needs and the effectiveness of its financial internal controls.

98% of Revenue Derived from Overseas Markets 

Setting aside its internal issues, Feisu Innovation also faces a more fundamental structural risk: virtually all of its revenue comes from overseas. According to the prospectus, over 98% of the company’s revenue is generated from overseas markets, with the US market playing a dominant role. In 2024, the US market contributed 46.8% of the company’s revenue, and in the first three quarters of 2025, this proportion rose further to 54.2%, meaning that over half of the company’s revenue comes from a single country. As the second-largest market, Europe contributed 34.5% of revenue in 2024, with the US and European markets together accounting for over 80%.

This highly concentrated market structure leaves the company extremely vulnerable to the impact of geopolitical tensions and tariff fluctuations. In the second quarter of 2025, the maximum tariff rate applicable to certain products surged to 188% at one point, directly causing the proportion of tariff costs to rise to 12.5% year-on-year for the first nine months of 2025. Although the company has stated that it is adjusting its procurement strategy to mitigate the impact, this ‘Sword of Damocles’ hanging over its head has never been removed. Against the backdrop of intensifying global trade frictions, with overseas revenue accounting for over 98% of the total, the company has effectively placed almost all its eggs in a single basket labelled ‘the international trade order’.

For investors, how to make a rational judgement amidst this clamour and the underlying reality is perhaps the most pressing question to consider at present.

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.