Addicted to M&A, Huiju Technology plans to raise over 1.6 billion via rights issue to continue expansion

On February 10th, after the Hong Kong-listed company $TIME INTERCON(01729.HK), a subsidiary of $LUXSHARE-ICT(002475.SZ), disclosed its rights issue plan, its stock price opened lower and then gradually recovered. As of press time, the decline was 1.73%.

This company, which has precisely positioned itself in hot sectors such as data centers, servers, and automobiles, has become a rare star stock in the Hong Kong market in recent years, with its stock price cumulatively rising over 300% in 2025. However, this rights issue move has prompted the market to re-examine the confidence and risks behind its rapid expansion.

Raising HK$1.63 Billion to Fuel M&A

The rights issue plan proposed by Welkin Technology shows that the company intends to place 108 million new shares at HK$15.22 per share, with an estimated net proceeds of HK$1.6345 billion. The use of these funds is very clear: 50% will be used for strategic investments and acquisitions, 30% for global business expansion, and the remaining 20% for supplementing working capital.

It is worth noting that the placement price represents a discount of approximately 14.97% to the previous trading day's closing price of HK$17.90 and an 8.85% discount to the average closing price of the previous five trading days. The discounted placement directly led to the dilution of the equity of the controlling shareholder, Luxshare Precision, whose shareholding ratio will decrease from 69.62% to about 66.02%, and the dilution of other shareholders' equity, which became the trigger for the stock price decline that day.

This is already Welkin Technology's second refinancing within six months. In August 2025, the company raised HK$330 million through the issuance of consideration shares as part of the consideration for acquiring all equity of Dejinchang Investment, thereby obtaining copper material production bases in China, Thailand, and Vietnam, extending upstream in the industrial chain. In July 2025, the company also acquired a 49% stake in the century-old Leoni Automotive Cable Solutions business through an associate, quickly entering the high-end automotive cable sector.

Within just six months, Welkin Technology has successively completed two major acquisitions and initiated two rounds of refinancing, with a pace of expansion that is remarkable. Management stated in the announcement that the proceeds from the rights issue will strengthen the company's capital structure and provide funding support for global expansion and subsequent acquisitions, but the market still has doubts about the sustainability of its "buy, buy, buy" model.

Rapid Performance Growth Amid Sector Tailwinds, Concerns Emerge Simultaneously

The rise of Welkin Technology is inseparable from its reliance on the resource advantages of Luxshare Precision and its precise sector selection. As a provider of customized interconnect solutions, its main business covers wire harnesses, digital cables, and server products, serving multiple fields such as telecommunications, data centers, medical equipment, and automobiles, precisely catching the industry trends of AI computing power construction and automotive electrification.

Relying on Luxshare Precision's customer and technical resources, Welkin Technology has deeply bound itself to several global tech giants. According to research reports from China Merchants Securities and others, $BABA-W(09988.HK), ByteDance, and Google are all customers of Welkin Technology.

AI-related businesses have become the main driver of Welkin Technology's high performance growth. In the first half of 2025, its server segment revenue surged 318.1% year-on-year, and data center segment revenue grew 66.8% year-on-year, becoming the core engine driving performance.

However, behind the impressive performance, risk signals have already emerged. In the first half of 2025, the company's gross profit margin dropped significantly from 18.5% in the same period last year to 13.2%, and its net profit margin also fell from 8.0% to 6.5%. The main reason is the rapid increase in the proportion of the lower-margin server business, which dragged down the overall profitability.

Financial data also shows that as of June 30, 2025, the company's trade and other receivables amounted to HK$2.79 billion, accounting for nearly 60% of its current revenue, and receivables aged 91 to 180 days increased significantly year-on-year, indicating rising credit impairment risks. At the same time, the company's inventory size reached HK$3.26 billion as of June 30, 2025, an increase of about 134% compared to the end of 2024, indicating significantly increased inventory turnover pressure.

For Welkin Technology, the biggest current challenge is how to digest the integration pressure brought by rapid expansion. After acquiring Dejinchang, the company needs to synergize its copper material production capacity with its existing business to mitigate raw material price fluctuation risks. The Leoni business involves multiple production bases and customer networks worldwide, making the integration work of cultural fusion, supply chain synergy, and personnel management complex and lengthy.

This rights issue is a continuation of Welkin Technology's expansion strategy, but if it cannot effectively balance growth speed and development quality, it may exhaust market confidence.

For investors, the investment value of Welkin Technology depends not only on the long-term prosperity of sectors such as AI and automobiles but also on its M&A integration capabilities and financial risk control level. In the future, whether the synergy effects of the Leoni and Dejinchang businesses can materialize, whether receivables can be effectively collected, and whether gross profit margins can stabilize and recover will become key variables determining its valuation reconstruction. Under the spotlight of the capital market, this rapidly expanding company is standing at a crossroads where opportunities and challenges coexist.

Author: Yao Yuan