“ODM King” Huaxin Technology Aims for Hong Kong Listing: Behind 170 Billion Yuan in Revenue Lie Negative Cash Flow and Three Consecutive Years of Declining Gross Margins

ZC Asia has learnt that Huaxin Technology, the world’s largest consumer electronics ODM manufacturer, is currently accelerating its plans for a dual “A+H” listing. On 30 March 2026, the company successfully passed the Hong Kong Stock Exchange’s listing hearing.

Revenue Exceeds 170 Billion, Profit Growth Lags Significantly

Benefiting from competitor Wingtech’s exit from the ODM market and the explosive growth of AI servers, Huachen Technology delivered a report card for 2025 showing significant scale expansion. Annual report data reveals that the company achieved annual revenue of 171.437 billion yuan, a substantial year-on-year increase of 56.02%; net profit attributable to shareholders exceeded 4 billion yuan, up 38.55% year-on-year.

In terms of business structure, the mobile terminal business contributed revenue of 80.21 billion yuan, up 57.17% year-on-year, primarily driven by the rapid increase in ODM shipments of smartphones and tablets. In 2025, the company’s mobile terminal product sales volume reached 282 million units, representing a year-on-year increase of nearly 37%, far exceeding the global smartphone industry’s growth rate of less than 2%.

Meanwhile, revenue from the computing and data business, centred on AI servers, reached 75.475 billion yuan, a year-on-year increase of 51.93%. According to data from Analysys, the global AI server market grew by nearly 120% year-on-year in 2025, and as a leading contract manufacturer, Huachen Technology fully benefited from this industry boom.

However, this high growth in scale has not translated into a corresponding increase in profits. The company’s net profit excluding non-recurring items grew by 38.3% year-on-year, which was more than 17 percentage points lower than the revenue growth rate. The core reason lies in the continuous decline in gross margin—in 2025, the company’s overall gross margin had fallen to 7.97%, compared to 10.9% and 9.3% in 2023 and 2024 respectively, marking a “three-year consecutive decline”.

AI servers: “revenue growth without profit growth”, with the limitations of the contract manufacturing model becoming apparent

Looking at the business segments, Huachen Technology faces margin pressure across almost all core sectors. In 2025, the gross margin for the mobile terminal business fell by 0.7 percentage points, that for the computing and data business by 1.5 percentage points, whilst the gross margin for the AIoT and innovation business was virtually halved.

The AI server business is particularly noteworthy. Although revenue in this segment has grown rapidly, the company’s heavy reliance on external procurement for core components such as GPUs means it essentially acts as an assembler and integrator, resulting in a classic “high turnover, low gross margin” model. The larger the scale of the business, the more pronounced the drag on the overall gross margin. This also implies that the “second growth curve”, on which the market has pinned high hopes, has yet to truly break through the profit ceiling of traditional ODM manufacturing.

A deeper structural contradiction lies in the significant overlap between Huqin Technology’s major clients and suppliers. In 2025, four of the company’s top five clients were also among its top five suppliers. Taking the largest client as an example, whilst the company sold goods worth 25.5 billion yuan to them, it also procured goods worth nearly 18.9 billion yuan from them. This “buy-sell model” has largely reduced the contract manufacturing business to a mere transfer of materials, with bargaining power squeezed from both ends.

Operating Cash Flow Turns Negative, Expansion Driven by High Debt

In stark contrast to the high revenue growth, Huqin Technology’s cash flow situation is deteriorating. In 2025, the company’s net cash flow from operating activities stood at -223 million yuan, whilst net profit attributable to shareholders exceeded 4.1 billion yuan during the same period. This marks the first time in recent years that the company’s operating cash flow has turned negative.

The direct cause of this situation is the sharp expansion of accounts receivable and inventory. By the end of 2025, the company’s outstanding accounts receivable and notes receivable had reached 34.37 billion yuan, compared to just 14.42 billion yuan at the end of 2023; inventories also surged from 4.3 billion yuan to 14.6 billion yuan. The expansion of businesses such as AI servers has placed a significant strain on working capital, whilst lengthy customer payment cycles have resulted in profits remaining largely on the books.

To support its ongoing expansion, Huachen Technology has relied heavily on external financing. Wind data shows that since its listing in August 2023, the company has taken out cumulative bank loans exceeding 13.4 billion yuan, the majority of which are short-term loans. As of the end of 2025, the company’s short-term loans, long-term loans and non-current liabilities due within one year totalled over 19.5 billion yuan, with the debt-to-equity ratio climbing to 72.62%, a significant increase from 59.54% at the end of 2023.

It is worth noting that the company’s cash and cash equivalents on the balance sheet amounted to 14 billion yuan, and in 2025, interest income of 400 million yuan exceeded interest expenditure of 308 million yuan. This was primarily due to higher interest rates on overseas deposits; however, this ‘high-deposit, high-borrowing’ model is inherently unsustainable.

Urgency of Hong Kong IPO Questioned; Capital Operations Spark Controversy

Against a backdrop of tight cash flow and high debt ratios, Huqin Technology has rapidly pushed ahead with its Hong Kong IPO. Having submitted its listing application in September 2025, it passed the listing hearing in just over six months; market reports suggest the fundraising target is approximately US$600 million to US$800 million. If the listing is successful, the company’s cumulative fundraising in the capital markets over a period of less than three years will almost certainly exceed 10 billion yuan.

However, a series of capital operations has raised external doubts regarding the company’s genuine funding requirements. In the run-up to its application in March 2026, the company announced a dividend of 1.216 billion yuan for the 2025 financial year, having already distributed 869 million yuan and 912 million yuan in 2023 and 2024 respectively, totalling approximately 3 billion yuan over the three years. Concurrently, the company spent approximately 2.393 billion yuan to acquire a 6% stake in Jinghe Integrated, whilst also subscribing to shares in several semiconductor companies as a cornerstone investor.

Furthermore, in 2025, the company’s five major employee shareholding platforms collectively sold 38.9559 million shares, realising approximately 3.578 billion yuan, with an average selling price of around 91.58 yuan per share. Subsequently, the company launched a low-price share incentive scheme with a grant price of just 47.95 yuan per share, roughly half the average selling price. The fact that certain senior executives benefited from the divestment platforms whilst simultaneously acquiring new shares at a low price has sparked market speculation regarding potential conflicts of interest.

For Huqin Technology, whilst a Hong Kong listing may alleviate short-term financial pressure and reduce the debt-to-equity ratio, the key to determining its long-term value lies in whether it can fundamentally resolve structural issues such as declining gross profit margins, tight cash flow and weak profitability. Investors should focus not on the continued expansion of revenue scale, but rather on whether there will be substantive improvements in the three core indicators: gross profit margin, operating cash flow and accounts receivable turnover.

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.