Changpeng Wan
In the whirlwind of AI-driven market euphoria, Shenghong Technology has emerged as a standout performer. This Guangdong-based PCB manufacturer saw its stock price skyrocket by over 500% this year, fueled by speculation and confirmation of its role in NVIDIA’s supply chain. As the company files for a Hong Kong IPO, aiming for a dual listing, it faces scrutiny over substantial insider selling and questions about its long-term strategy beyond the AI boom.
Financial Performance and Growth Trajectory
Shenghong Technology, established in 2006 and listed on the Shenzhen Stock Exchange in 2015, has demonstrated impressive financial growth. From 2022 to 2024, the company’s revenue climbed from RMB 7.885 billion to RMB 10.731 billion, with net profit jumping 72% year-on-year in 2024 to RMB 1.154 billion. The first quarter of 2025 was particularly strong, with revenue surging 80.3% to RMB 4.312 billion and net profit soaring 339.2% to RMB 921 million. This growth was largely driven by soaring demand for HDI products, whose sales volume exploded from 260 million in Q1 2024 to 1.65 billion in Q1 2025, a 533% increase. Profit margins also improved significantly, with gross margin rising to 33.4% in Q1 2025, up from 18.1% in 2022, and net margin reaching 21.3%.
Revenue Streams and Geographic Diversification
A notable aspect of Shenghong’s business is its reliance on international markets. From 2022 to 2024, overseas revenue accounted for over 60% of total sales, increasing to 78.4% in Q1 2025. This diversification has helped the company capitalize on global demand for high-precision PCBs, especially in AI and computing infrastructure.
Liquidity and Debt Concerns
Despite robust earnings, Shenghong faces liquidity challenges. As of December 2024, cash and equivalents stood at RMB 927 million, while short-term borrowings totaled RMB 1.9 billion. This gap suggests potential pressure on operational flexibility, necessitating external financing—partly addressed through its upcoming IPO.
The NVIDIA Connection: Catalyst for Growth
Shenghong’s association with NVIDIA has been pivotal to its recent success. The company established its HDI division in 2019 and entered NVIDIA’s supply chain for AI accelerator cards in 2023. By 2024, it achieved Tier 1 supplier status after passing certification for GPU200 products. While NVIDIA isn’t explicitly named in filings, descriptions of a ‘Nasdaq-listed U.S. tech leader in AI infrastructure’ align closely with NVIDIA’s profile. In Q1 2025, Customer E—likely NVIDIA—contributed RMB 89.5 million, or 2.1% of revenue.
Customer Concentration Risks
However, this partnership introduces concentration risks. Dependency on the top five customers grew from 28% in 2022 to 51% in Q1 2025, with the largest client accounting for 33.6% of revenue. Trade receivables from the biggest customer also spiked to 32.72% of total, up from 12.8% at end-2024, heightening credit exposure.
Executive Cash-Outs and Market Skepticism
Founder Chen Tao’s journey from grassroots entrepreneur to billionaire exemplifies corporate success, but recent actions have sparked investor unease. Chen and his wife Liu Chunlan sold shares worth RMB 1.694 billion in May 2025 via their vehicle Shenghua Xinye. By August, five executives, including Liu and Chen’s brother Chen Yong, cashed out an additional RMB 450 million, totaling over RMB 2.1 billion in divestments. These moves coincided with Chen’s public comments that Shenghong was ‘undervalued’ compared to peers, creating a perception conflict.
Fundraising Amidst Divestments
Parallel to insider selling, Shenghong launched a private placement aiming to raise RMB 1.9 billion for expansions in Vietnam and Thailand, alongside working capital. With project costs estimated at RMB 3.2 billion, a funding gap of RMB 1.87 billion remains, underscoring the need for the Hong Kong IPO proceeds.
Strategic Expansion and IPO Objectives
The Hong Kong listing is designed to support global manufacturing scaling, including new HDI and MLPCB facilities in Thailand and Vietnam. Proceeds will also automate production processes and bolster R&D, critical for maintaining technological edge beyond the current AI cycle.
Investor Relations Challenges
On investor platforms, concerns have been raised about the timing of share sales and fundraisers, potentially undermining market confidence. Management has responded by emphasizing focus on operational performance and long-term value creation, but skepticism persists.
Future Prospects and Industry Positioning
Shenghong stands at a crossroads: leveraging its NVIDIA-linked boom to build enduring capabilities or remaining vulnerable to tech shifts and client dependence. The IPO could provide capital to diversify and innovate, but must overcome trust deficits from recent insider actions. For investors, the key will be monitoring execution on expansion plans and ability to cultivate a broader client base. As AI demand evolves, Shenghong’s success will hinge on translating short-term gains into sustainable competitive advantages.
