Dongshan Precision offers investors an acquisitive, but debt heavy, tech component play 

After moving from its original sheet metal processing business into PCBs through acquisitions, the company has filed for a Hong Kong IPO to complement its existing Shenzhen listing

Key Takeaways:

• Dongshan Precision has filed for a Hong Kong IPO, offering investors a company that has transformed from sheet metal processor to the world’s third-largest PCB supplier
• The company’s aggressive expansion into AI and automotive markets risks overextending its finances with mounting debt

By Hugh Chen

If you don’t have it, just buy it.

That’s the mantra at Suzhou Dongshan Precision Manufacturing Co. Ltd. (002384.SZ), which is now hoping investors buy into its own acquisitive story with its application last week for a Hong Kong IPO. Starting out as a traditional sheet metal processer, the company has transformed itself into a major player in the printed circuit board (PCB) industry through a series of acquisitions over the last decade.

Dongshan Precision has kicked its acquisition playbook into high gear once again this year, announcing two major deals that will expand its footprint into optical communications and automotive components. As it continues its buying spree, it’s also hoping the Hong Kong IPO can raise funds to help pay for its many purchases.

The company has enlisted five advisors for the potential offering, led by UBS and leading domestic brokerage Citic Securities. While Dongshan Precision hasn’t disclosed the intended fundraising size, the heavyweight advisory lineup suggests a substantial IPO, likely to raise $100 million or more.

The company’s acquisition strategy has served it well to date. Its PCB asset purchases have made it into the world’s third-largest supplier of the component that’s a staple in most electronic devices. The company clearly views this as a winning formula, listing strategic M&A as one of its core competitive advantages and touting it as a proven playbook for growth into new areas.

However, this aggressive expansion strategy has also saddled Dongshan Precision with high debt, a significant risk that we’ll examine in more detail shortly. Moreover, expanding into new sectors like optical communications offers no guarantee of success, as these businesses operate under different dynamics and present fresh management challenges that could stretch the company’s capabilities.

Acquisition-driven growth

Dongshan Precision traces its roots to Dongshan Sheet Metal, founded in 1980. While the company had long sought to break into the consumer electronics business, it only achieved this goal in 2016 when it paid $600 million for U.S.-based Mflex, which specialized in flexible printed circuits (FPC), a type of bendable circuit board used in smartphones, tablets, and other portable devices.

Two years later, it acquired Multek, a subsidiary of contract manufacturer Flextronics that specialized in rigid printed circuit boards (RPCB), for $293 million, giving it the capability to produce all major types of PCBs.

Since then, PCBs have become Dongshan Precision’s main business, effectively replacing its traditional precision metal components and castings operations. In the first half of this year, the PCB segment generated 11 billion yuan ($1.5 billion) in revenue, representing 65% of its total. By contrast, the legacy precision components business now accounts for just 13.9% of revenue.

The company’s overall revenue is growing, though not especially fast, rising 2.4% to 17 billion yuan in the first half of this year from 16.6 billion yuan a year earlier. Its profit grew by a faster 39% to 758 million yuan from 560 million yuan over that time. Still, its relatively low margins reflect the highly competitive nature of the industry.

Within the PCB business, Dongshan Precision focuses primarily on flexible printed circuits used in mobile devices like smartphones and laptops, which accounted for 84% of total PCB sales during the period. According to third-party research cited in its prospectus, the company was the world’s second-largest FPC supplier and third largest in overall PCB shipments last year.

Its second-place FPC ranking translates to a sizable 23.8% market share, though it’s worth noting its third-place position in overall PCB sales represents just 4.8% of that massive market. This highlights the highly fragmented nature of the PCB industry, which has led to fierce competition in the relatively mature sector.

While Chinese companies now produce the majority of the world’s PCBs, competition remains intense. According to a recent research report by Shenzhen Enterprise Investment, 43 PCB companies were listed on China’s A-share markets as of this April, many in more tech-focused Shenzhen. Those include the likes of Victory Giant Technology (300476.SZ), Shennan Circuits (002916.SZ), and WUS Printed Circuit (002463.SZ).

Given such a competitive landscape, it should come as little surprise that Dongshan Precision is currently seeking to further diversify its business. And once again, the company is turning to its proven playbook of strategic acquisitions.

In June, it announced it would acquire Taiwan-based Source Photonics in a deal worth 5.9 billion yuan. Source Photonics specializes in optical transceivers, components that enable high-speed data transmission in data centers and telecommunications networks. This acquisition marks Dongshan Precision’s entry into the optical communications sector.

The Source Photonics deal followed another major acquisition announced in May, when the company agreed to pay 100 million euros ($115 million) for Groupe Mécanique Découpage, a French automotive components manufacturer.

With the Source Photonics acquisition, Dongshan Precision is positioning itself to capitalize on the AI boom that has driven surging demand for AI servers and other infrastructure needed for the huge amount of data processing required by AI. AI servers require not only the optical transceivers that Source Photonics provides, but also sophisticated PCBs – creating potential synergies that could help Dongshan Precision build relationships to sell higher-end circuit boards into this fast-growing market segment.

This opportunity prompted the company to announce in July that it would invest up to $1 billion to build high-end PCB facilities in the South China city of Zhuhai next to Macao, and also in Thailand.

Entering the high-end server market appears strategically sound, as this segment is currently driving much of the PCB industry’s growth. But the massive $1 billion investment, like the company’s acquisition-driven approach, carries inherent risks by further increasing its big debt.

Dongshan Precision’s debt-to-asset ratio has remained persistently high, generating substantial financial expenses. According to filings with the Shenzhen Stock Exchange, the company’s short-term debt reached a hefty 98.36 billion yuan – or more than $13 billion – by the end of the third quarter of 2025, up 35% from the end of last year.

Chinese investors seem quite enamored with Dongshan and its acquisitive story, with the Shenzhen-listed stock up 133% so far this year. But its shares still trade at a relatively muted forward price-to-earnings (P/E) ratio of 17, the same as Victory Giant and WUS Printed Circuit, reflecting the industry’s competitive and relatively mature state.

At the end of the day, strategic acquisitions have served Dongshan Precision well to date, transforming it from a traditional sheet metal processor into a global PCB powerhouse. However, as the company embarks on its most ambitious expansion yet while wrestling with mounting debt, the question becomes whether this proven playbook can continue delivering results without overextending the company’s balance sheet.

The upcoming Hong Kong listing may provide needed capital for its acquisitions. But investors will also be watching closely to see if Dongshan Precision can execute without stumbling as it moves into so many new business areas so quickly.

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