FS Innovation launched its global offering on March 13, with pricing expected on March 19 and trading set to commence on the Hong Kong Stock Exchange on March 23. The offering price range is HK$35.2 to HK$41.6 per share, with a base issuance of approximately 40 million shares, corresponding to a base fundraising scale of HK$1.41 billion to HK$1.66 billion. Including the over-allotment option, the total issuance expands to 46 million shares, raising between HK$1.62 billion and HK$1.91 billion.
Capitalizing on the high-growth sector of AI computing network infrastructure, FS Innovation has positioned itself favorably through its global footprint and strong profitability. A rebound in its 2025 performance has further reinforced its image as an undervalued stock. However, beyond the allure of AI hardware, concerns remain over its business model as an original equipment manufacturer (OEM) and cross-border e-commerce player, valuation inconsistencies, historical internal control issues, and risks associated with its overseas operations—all of which are difficult for investors to overlook.
The high-performance network hardware market in which FS Innovation operates is entering a golden period of development, with an expected compound annual growth rate of 19.8% from 2024 to 2029. The surge in demand for AI computing centers and overseas data centers further expands the company’s growth prospects. Benefiting from these tailwinds, FS Innovation has demonstrated fluctuating yet overall growth in recent years, with both revenue and profit showing notable recovery in 2025 and profitability continuing to improve.
Financial data shows that from 2022 to 2024, the company’s revenue was RMB 1.988 billion, RMB 2.213 billion, and RMB 2.612 billion, respectively, with corresponding net profits of RMB 365 million, RMB 457 million, and RMB 397 million. Net profit declined by 13.13% year-on-year in 2024, primarily due to increased operating expenses. In the first three quarters of 2025, revenue rebounded to RMB 2.175 billion, up 11.31% year-on-year, while net profit reached RMB 423 million, a significant increase of 20.63%. Operating expenses as a percentage of revenue also decreased, indicating a return to higher profitability.
In terms of profitability, the company's gross margin rose from 45.41% in 2022 to 52.55% in the first three quarters of 2025, while its net margin improved from 18.33% to 19.46%. Its gross margin advantage is particularly notable within the industry.
Operationally, FS Innovation’s global customer network serves as a core strength. The company is highly focused on overseas markets, serving over 500,000 customers across more than 200 countries and regions, including approximately 60% of Fortune 500 companies. In 2025, 82,300 customers placed orders through its online platform, with average revenue per customer reaching RMB 36,100 and a net revenue retention rate as high as 97.5%. This stable and highly loyal customer base provides a solid foundation for sustained growth.
Additionally, centered around its self-operated website FS.com, the company has developed over 120,000 stock-keeping units under its own brand, offering an integrated solution ranging from optical interconnection hardware to cloud network management platforms. This positions it to capture value from the ongoing expansion of AI computing networks.
Despite strong performance and favorable industry trends, the lineup of cornerstone investors for FS Innovation’s Hong Kong IPO appears relatively weak. The company has secured 11 cornerstone investors, collectively subscribing to 50% of the offering size based on the lower end of the price range. However, the group lacks backing from major international institutions, and domestic participants are mainly small to mid-sized private equity firms, public funds, and existing shareholders. The inclusion of individual investors further underscores the limited recognition from professional institutional investors.
Among the Chinese private equity participants, Haoran Capital, WT Asset, Shanghai Juming, Qianzhan, Aether, and Kaifeng together invested USD 53.43 million, with Aether being an affiliate of existing shareholder Xiaohujing Private Equity. On the public fund side, Caitong Asset Management and GF Fund invested USD 9.61 million and USD 5 million, respectively. Although Shenzhen Capital Group contributed USD 6.41 million and carries government-backed funding credentials, it is also an existing shareholder rather than a new market participant. Moreover, Great Holding and Wider Huge, both ultimately owned by individual investors, further highlight the lack of strong institutional endorsement during the pre-listing marketing phase.
The relatively weak cornerstone investor support reflects underlying market skepticism regarding the company’s valuation rationale and core business model, raising concerns about its post-listing performance.
Based on the base issuance size and the lower end of the price range, the company’s implied market capitalization is approximately HK$14.1 billion. Using the 20.6% year-on-year net profit growth in the first three quarters of 2025 to estimate full-year attributable net profit of RMB 476 million, the corresponding forward price-to-earnings ratio for 2025 is about 26.4x. This valuation appears significantly discounted compared to A-listed peers in the hardware sector, which often trade above 50x P/E, leading many to view FS Innovation as attractively priced.
However, this comparison is fundamentally flawed because FS Innovation is not a traditional equipment manufacturer. Its core business model combines OEM production with direct-to-customer online sales, essentially operating as a high-end cross-border e-commerce platform focused on enterprise hardware, rather than a hard-tech firm with proprietary manufacturing capabilities. As such, it is not directly comparable to A-share hardware companies.
In its A-share IPO prospectus, the company itself categorized comparable peers into two groups. Beyond product-based peers, more relevant comparisons are firms with similar business models, such as Yiheda, which serves business clients through its own online platform, and Anker Innovations, which derives a high proportion of sales from overseas online channels.
When measured against these model-based peers, FS Innovation’s valuation appeal diminishes significantly. Anker Innovations trades at a forward P/E of just 20.5x for 2025, while Yiheda’s is 31.4x. Both companies also possess their own manufacturing facilities, giving them greater control over the supply chain. In contrast, FS Innovation relies heavily on OEM production without in-house manufacturing, resulting in weaker supply chain control and relatively lower product value-added. Given its less advantageous business model and fundamentals, the current valuation may not offer the significant bargain that some claim, which helps explain the lack of interest from major institutional cornerstone investors.
From a market performance perspective, FS Innovation may initially attract attention due to its AI hardware theme and "undervalued" label. With a scarcity of recent AI-related new listings in Hong Kong, and given the strong association of its products—such as optical modules and switches—with AI computing, the market may mistakenly equate it with hardware manufacturers, potentially driving short-term share price gains.
However, if investors later recognize its true nature as an OEM-based cross-border e-commerce operator, and if the company does not move toward in-house production, its stock price could face downward pressure. The company’s use of IPO proceeds, earmarked for business expansion, R&D, and channel development, does not include plans to develop proprietary manufacturing capacity. A case in point is Worobot, which, despite strong ties to overseas markets and limited product differentiation, saw its shares surge initially on concept hype before experiencing a sharp correction.
Beyond valuation concerns, FS Innovation faces multiple operational and historical risks. First, the company is almost entirely dependent on overseas markets, with foreign sales accounting for 98–99% of revenue from 2022 to the first three quarters of 2025. The U.S. market represents about half of sales, while Europe contributes roughly 30%. Against the backdrop of U.S.-China tech tensions, the company remains highly exposed to geopolitical risks, tariff fluctuations, and exchange rate volatility, posing challenges to operational stability.
Second, the company has a problematic history with its A-share IPO attempt. It withdrew its application in 2024 and received a written warning from the Shenzhen Stock Exchange in early 2025 due to significant internal control deficiencies, including mismatched IT system data, inadequate segregation of financial personnel duties, and inaccurate disclosures. Its current Hong Kong IPO can thus be seen as an attempt to list despite unresolved governance issues.
Third, the company engaged in a significant dividend payout just before going public. In 2024, it distributed RMB 200 million in dividends, equivalent to half of its annual net profit, with approximately 60% flowing to the controlling shareholder’s personal account—raising suspicions of利益输送 and drawing market criticism.