Is Dongshan Precision wronged as its stock price fell below the issue price right at the opening bell?
On October 28, Dongshan Precision's Hong Kong stock was listed on the Main Board of the Hong Kong Stock Exchange at an issue price of HK$86.8, opening at HK$82.4, and trading below its issue price on the first trading day.
On the same day, the final public offering subscription in Hong Kong reached 0.52 times, with 4,484 valid applications; 20 cornerstone investors subscribed for a total of USD 680 million, accounting for nearly half of the global offering shares, all locked up for 6 months.
These data indicate that the pricing power of Hong Kong stock IPOs is changing at the moment, the old experience of retail investors participating in new share subscriptions is increasingly insufficient, and the valuation logic behind A+H dual listing is more realistic than many people have expected.
Where the short-term pressure has been shifted to by the offering structure
First, let's explain several basic concepts of Hong Kong stock IPOs.
Margin subscription refers to retail investors financing through brokers to subscribe for new shares. The 0.39 times figure indicates that retail investors' demand for leveraged new share subscription is very weak. The public offering is the part available for subscription by local retail investors in Hong Kong, and 0.52 times means this part is not fully subscribed.
The final result shows that among the 11.3784 million shares initially available for subscription, 5.4729 million shares have been reallocated to the international offering, leaving only 5.9055 million shares in the public offering, accounting for 5.19% of the global offering.
This means that retail investors did not rush to subscribe, and the issuer did not insist on propping up the price, directly transferring a considerable part of the chips to institutional investors.
The cold performance on the grey market and trading below the issue price on the first trading day are natural extensions of this logic, which is not unexpected.
On the other hand, 20 cornerstone investors subscribed for a total of USD 680 million, accounting for nearly half of the global offering shares, all subject to a 6-month lock-up period. The list includes Aurora SF under Yonggang Group, Yonglian Investment, JPMorgan Asset Management (Asia Pacific), Alibaba Investment under Alibaba, CPE Bodhi, Montage HK, Ruiyuan Fund, China Orient Asset Management, Tianhong Fund, New China Asset Management, Spring River Greater China Fund, etc. This structure is noteworthy.
Retail investors are avoiding the volatility on the first trading day, while institutions are buying the industrial positioning 6 months later.
The role of cornerstone capital is to partially transfer the liquidity risk on the offering side to the secondary market 6 months later.
Nearly half of the shares are locked up for 6 months, so the short-term selling pressure is indeed reduced, but the pricing pressure at the unlock window is also postponed. Trading below the issue price on the first day shows that short-term marginal selling orders find an exit in a pool with very thin chips, which cannot explain the long-term pricing yet.
Moreover, the public offering only accounts for 5.19%, so the actual tradable chips of H shares are very thin. Price discovery under thin liquidity is naturally easily amplified by sentiment. The stock price fell by HK$4.4 on the first day, a decrease of about 5%, which is not large compared with the 26.47% A/H discount, but it occurred in a pool with very thin chips, so its signal significance is amplified.
For the issuer, handing over nearly half of the shares to cornerstone investors locked up for 6 months is equivalent to exchanging certainty for a relatively cold first trading day; for retail investors, the 0.52 times subscription means that new share subscription is no longer a voucher of "earning as soon as you buy", but a risk voucher that requires judgment on the industrial realization 6 months later.
The research of CITIC Securities mentioned that in the third quarter of 2026, Hong Kong stock IPO offerings maintained high popularity, but the returns from new share subscriptions dropped significantly, the quarterly break-even ratio reached 45.2%, and the average and median first-day returns fell to 17.8% and 0.0% respectively; for the whole year, the break-even ratio of Hong Kong stock IPOs in 2026 was 21.9%, and the average and median first-day returns were 52.9% and 14.1% respectively, both reaching the best level since 2018.
The average is much higher than the median, indicating that the returns from new share subscriptions are pulled up by a few hit projects, and the median return of most projects is very thin.
Dongshan Precision's 0.52 times public offering and about 5% drop on the first trading day, when placed in this distribution, is a normal performance near the median. Hong Kong stock new share subscription is transforming from institutional arbitrage to risk pricing. The cold sentiment on the retail side and hot sentiment on the cornerstone side is the most intuitive cross-section of this new pricing mechanism.
The offering structure explains the direct source of trading below the issue price on the first day, and at the same time postpones the short-term pressure to 6 months later.
The two markets are calculating different accounts for the same company
The issue price of HK$86.8 is about 26.47% lower than the A-share closing price of RMB 101.09 on October 27. Some people think that H shares are cheap and there is arbitrage space. For A+H dual listing, the same share cannot be freely transferred between the two markets, and the two markets have their respective liquidity, investor structure, exchange rate expectations and risk preferences.
The A-H share price difference reflects the different discount rates given by the two markets to the same asset, and there is no arbitrage space.
Special attention should be paid to the time sequence.
Dongshan Precision's A shares have fallen by 39.61% cumulatively since October, closing down 4.12% at RMB 101.09 on October 27; the H-share issue price is discounted by about 26% on the basis of this already lowered A-share reference.
A-shares first fell to form a reference, and then H-shares made an offshore discount on this reference.
As an offshore market, the Hong Kong stock market usually gives harsher valuations to non-financial variables such as customer concentration, geopolitical risks, capacity expansion cycles, and family governance. Trading below the issue price by HK$4.4 on the first day, a decrease of about 5%, is not large compared with the 26% A/H discount, and is more like an immediate reaction of offshore investors to the "6-month lock-up period + thin public offering + Hang Seng Index adjustment".
Looking at the new H shares in the PCB sector again, the situation of collective pressure is very clear.
The H-share issue price of Shenghong Technology is HK$209.88, and it closed at HK$143.6 on October 27, down about 31.6% from the issue price; the offering price of Jingwang Electronics is HK$69.88, and it closed at HK$54.95 on October 27, down about 21.4% from the issue price.
Dongshan Precision trading below the issue price, when placed in this sector, is a sample in the same round of adjustment.
The offshore market's discount rate for the heavy-asset capacity expansion cycle is rising. Capacity expansion means the time gap between capital expenditure, depreciation, capacity ramp-up and order fulfillment. The Hong Kong stock market is currently more willing to pay for realized cash flow, rather than paying in full for 2027's capacity in advance.
Dongshan Precision's industrial positioning is not bad. Calculated based on 2025 revenue, the company ranks third in the global PCB market with a share of 4.2%; second in the global FPC market; first in the edge AI device PCB market with a 26.9% share; and seventh in the global optical module business with a share of 2.9%.
In the first half of 2026, the revenue reached RMB 27.798 billion, a year-on-year increase of 63.95%; the attributable net profit reached RMB 2.957 billion, a year-on-year increase of 290.09%; the gross profit margin rose from 13.59% in the same period of the previous year to 20.15%, and the net profit margin rose to 10.74%.
The raised funds are mainly invested in the expansion of high-speed EML chips, optical modules and high-end PCB production lines, while reserving funds for industrial chain mergers and acquisitions and repaying part of the debts. This narrative is a transition from connection and bearing to a computing power infrastructure device platform, and the direction is correct.
Where is the problem? I think it lies in the time horizon.
The industrial narrative is long-term, while the offering pricing is immediate; the fundraising and investment projects are capital expenditures, while the secondary market demands free cash flow.
The expansion of high-speed EML chips and optical modules meets the demand of servers, data centers and optical communications, but before the capacity is realized, the financial statements have to bear depreciation and expenses first.
Trading below the issue price reflects that the market requires proof with orders and cash flow first. The 26.47% A/H discount is essentially the discount fee charged by the offshore market for this "proof period".
Non-financial factors in valuation
In addition to the offering structure and cross-market price difference, there are two other non-financial factors affecting pricing.
The first is the characteristics of a family business. Yuan Fugen, Yuan Yongfeng and Yuan Yonggang hold a total of about 31.41% of the shares directly. Yuan Yonggang serves as the chairman of the Strategy and ESG Committee, and Yuan Yongfeng is an executive director.
Concentrated control is conducive to long-term capital expenditure and M&A execution. Dongshan Precision has expanded through multiple M&As from sheet metal fabrication to PCB, FPC and optical modules, and this governance structure has indeed played a role.
Offshore institutions usually give a certain discount for minority shareholder governance, related party transactions and succession arrangements. This discount is not obvious in the A-share market, but will be amplified in the Hong Kong stock market, because Hong Kong stock institutional investors have higher requirements for governance transparency and pay closer attention to the capital allocation efficiency under family control.
The second is customer concentration. In the first half of 2026, the sales revenue from Apple, the largest customer, reached RMB 8.36 billion, accounting for 30.1% of the company's total sales; the total sales of the top five customers reached RMB 15.032 billion, accounting for 54.1%.
In the consumer electronics supply chain, this is the source of order certainty; in the context of global trade frictions and supply chain restructuring, it is also the source of bargaining power and geopolitical risks.
High growth and high dependence are two sides of the same coin. The certainty of the Apple supply chain supported the profit recovery in the past, and the concentration of the Apple supply chain also constitutes a discount item in offshore valuation.
Putting these two factors together with the previous offering structure and A/H discount, Dongshan Precision's Hong Kong stock pricing is actually calculating its own accounts from four aspects, such as the certainty of the Apple supply chain, the growth potential of the computing power chain, the capital expenditure risk of the capacity expansion cycle, and the family governance discount.
Trading below the issue price on the first day is the first vote of these four forces in the thin liquidity market.
This voting result cannot prove the right or wrong of the industrial logic. It shows how much discount the offshore market is willing to give to these four things under the current environment.
Looking ahead, I think there are three observations to make.
In the short term, H shares will still fluctuate widely around the issue price. The public offering only accounts for 5.19% and the chips are thin, so price discovery will not be completed once after trading below the issue price on the first day; the window around the 6-month cornerstone unlock is the key moment, when institutions will truly vote with their feet. The A/H share price difference will fluctuate repeatedly, but it is not appropriate to view it with arbitrage thinking. The two markets cannot freely convert shares, and the share price difference is more like an observation indicator of risk preference. As long as customer concentration and governance discount are not eliminated, the share price difference is difficult to disappear unilaterally. The wave of H shares trading below issue price in the PCB sector cannot prove that the computing power demand is falsified. It shows that the valuation reference has shifted from the overall sector market to individual stock realization ability. Only by increasing the revenue proportion of high-end PCB, optical modules and EML chips can the valuation reference be switched from cyclical stocks to computing power devices.
For Dongshan Precision, the value of the Hong Kong stock platform does not lie in the first day stock price, but in international financing, M&A ammunition and debt structure optimization.
After the completion of the A+H layout, the real test is whether the fundraising and investment capacity can ramp up as scheduled, whether the dependence on Apple can be diluted by optical modules and edge AI PCBs, and whether family governance can use transparency to narrow the long-term discount given by institutions.
Three variables can be observed, such as capacity realization, customer structure, and unlock liquidity.
For the market, the conclusion drawn from Dongshan Precision's data set is very clear: Hong Kong stock new share subscription has entered the median era. The aura of the average belongs to a few hit projects, and the temperature of the median is the real experience of most companies.
Trading below the issue price is a risk discount given by the market to hard assets in the expansion period, and the conclusion of industrial logic still needs time to verify.
This article is from the WeChat official account "Dongzhen Business Review", author: Dongzhen Business Review, authorized for release by 36Kr.