From January 17th to 20th, AI leader Innovation Qizhi opened a IPO. The offer price per share is HK$26.3-27.3 for 100 shares per lot. Judging from the performance on the first day of the offering, Innovation Qizhi has oversubscribed by more than 1.4 times. Market news also pointed out that as of now, the international placement part has been fully subscribed, which shows that the prospectus situation is hot.
In addition, the shareholder background and sponsor of Innovative Qizhi can be described as a star lineup, which is highly matched among the hard technology companies listed in Hong Kong.
The co-sponsors of the innovative Qizhi offering are UBS UBS, CICC and China Renaissance Capital. In addition, the prospectus shows that the innovation factory holds 26.24% of the shares, and the innovation workshop holds 1.68% of the shares. In addition, Top investment institutions with rich experience in technology investment, such as SoftBank and CICC, are also among them. In terms of shareholder structure, professionalism and diversity are impeccable. Moreover, the original shareholders showed a high degree of enthusiasm in the pre-listing financing. Shareholders and sponsors can reflect the texture of a company.
This seemingly obscure company is actually the same as SenseTime's TOP 5 track. Why can it have an all-star lineup of shareholders + sponsorships, and can it replicate the trend of successful people after listing?
Chinese intelligent market pattern disruptor
The mission of Innovative Qizhi Enterprise is "Artificial Intelligence Empowers Business Value", which mainly provides full-stack AI products and solutions for the enterprise-level ARTIFICIAL solutions market, including AI platforms, algorithms, software, AI-enabled devices and related services.
I noticed this company a little earlier than the market. At the end of last year, IDC China released its 2021 first half of the AI market share report. According to the report, the computer vision market reached $990 million in the first half of 2021, an increase of 33.0% year-on-year. In terms of scale, China's top five computer vision manufacturers have ranked among the world's leading ranks.
Among them, the growth rate of innovative Qizhi in the computer vision application market is obvious, ranking among the top 5, one place ahead of the previous report; its name is juxtaposed with SenseTime, Megvii Technology, Cloudcong Technology (three of the four AI dragons) and Hikvision, the first leader of security, and YITU Technology in the AI Four Little Dragons is missing. Few investors thought that the well-known Chinese intelligent market pattern would be broken by an "unknown" AI company.
And "not well-known" is only because the innovation of Qizhi mainly serves the enterprise market. In fact, the AI leader, incubated by Kai-Fu Lee, is well-known in the industry. For example, Gartner, known as the global technology vane, lists innovative Qizhi as a global machine vision "Example Vendor" and an artificial intelligence computer vision "Cool Vendor". In the field of machine learning, Innovation Qizhi ranked among Forrester's chinese medium-sized machine learning vendors, and China's fourth largest machine learning platform manufacturer (IDC). In addition, the company has won many awards such as MIT's 50 Smartest Companies, Financial Times' Most Innovative Companies, 2020CB Insights AI100, Harvard Business Review's Ram Charan Management Practice Award, Fast Company's Best Innovation Company in China 50, Chinese Intelligent Industry Unicorn Top 50, and many other awards.
At a time when computing power is greatly improved, AI companies only need to do two things: technology, and the combination of technology and application scenarios. The former represents the underlying core competitiveness, while the latter demonstrates the ability to commercialize. But it is not easy to do well in either aspect. The success of innovation Qizhi comes from the company's excellent performance in both aspects.
On the one hand, Innovation Qizhi is at the level of the first echelon in research and development. First, the company is one of the few companies in China with a proprietary deep learning platform, independently developing three proprietary AI platforms: Innovative Chichi ManuVision (Machine Vision Intelligence Platform), MatrixVision (Edge Video Intelligence Platform), orion (Distributed Machine Learning Platform). The three platforms are efficient and adaptable. In addition, the company has applied for 634 AI-related patents and successfully registered 125 AI-related patents, including 79 invention patents.
Secondly, on the basis of the underlying AI infrastructure of the three major AI platforms, the company continues to accumulate AI technology assets. These technical assets are highly condensed, lowly coupled and reusable, and have accumulated over time and projects into an asset pool that becomes a vast moat for innovation. The pool supports efficient project delivery that meets customization requirements, automates some aspects of workflows, and reuses programs across disciplines.
As an AI technology company, scientific and technological strength is the foundation of its competition and constitutes the most important competitive barrier. This is the first reason for the success of Innovation Qizhi.
On the other hand, commercialization is not only a prerequisite for enterprises to have endogenous, but also a major source for AI companies to gain core competitive advantages.
Innovative Qizhi has a good ability to land scenes. The company combines technology research and development with practical application scenarios, and provides a full set of AI products and solutions to customers in the manufacturing and financial services industries based on three major platforms.
In view of the actual pain points, Innovation Qizhi develops AI original technologies suitable for practical application in the industry, especially research on small sample learning, zero sample instance segmentation, etc., and is committed to breaking the restrictions of sample data on deep learning technology, which has high practical value in scenarios and fields where samples are generally missing in traditional manufacturing, and the research results have been accepted by ECCV, CVPR and other international tops.
With the blessing of the two major advantages, At present, Innovation Qizhi has achieved a market leadership position in China's enterprise-level AI solution industry. According to Frost & Sullivan, in terms of revenue, Chuangxin Qizhi is the third largest AI technology-driven solution provider in China's enterprise-level AI solution market and the largest AI technology-driven solution provider in China's manufacturing AI solution market.
Bullish resonance, AI+ manufacturing/finance has become the golden track
The experience of scientific and technological innovation investment tells us that the success of innovative Qizhi is not only because of its strong competitiveness, but also because of its "going with the flow" and deep ploughing of the track. The artificial intelligence industry is rooted in the soil of China's prosperous manufacturing and financial industries, and has quickly burst out of vitality by riding the east wind of policy.
From the industrial side, as the "world factory", China has the world's largest, most complete categories, the most complete industrial supporting manufacturing system, has a pivotal position in the global supply chain, today, "Made in China" accounts for more than 35% of the world, the scale is the sum of the United States, Japan and Germany, undoubtedly for the industrialization of intelligent technology to provide the most abundant cultivation soil.
But the brilliant results can hardly hide the current tremendous pressure. The "Seven Pus" highlight the aging and low birthrate, the demographic dividend is gradually lost, and the extensive operation no longer meets the requirements of the times. To break the situation, transformation and upgrading will become inevitable. The essence of AI is the replacement of advanced productivity for backward productivity, and AI technology will become a powerful grip during the ebb and flow period of the demographic dividend.
From the policy side, the top-down implementation of manufacturing power and digital economy will become the long-term policy orientation of the mainland. Last year was the opening year of the 14th Five-Year Plan, the government has proposed a detailed plan, a large number of subsidies, tax incentives and other incentives in various places; it is expected that in 2022, the preliminary planning will be implemented in batches.
According to the Outline of the 14th Five-Year Plan, Chapter 8 proposes to "deeply implement the strategy of manufacturing power", Chapter 9 proposes "developing and expanding strategic emerging industries", and Chapter 15 proposes to "build new advantages in the digital economy". On November 30, 2021, the Ministry of Industry and Information Technology and other eight departments jointly issued the "14th Five-Year Plan" Intelligent Manufacturing Development Plan, which pointed out that by 2025, 70% of manufacturing enterprises above designated size will basically realize digital networking, build more than 500 intelligent manufacturing demonstration factories that lead the development of the industry, and build more than 120 industrial Internet platforms with industry and regional influence. The plan also proposes to enhance the supply capacity, intelligent manufacturing equipment and industrial software market satisfaction rate of more than 70% and 50% respectively, to cultivate more than 150 professional level, strong service capabilities of the system solution providers.
Driven by both enterprises and policies, artificial intelligence began to grow explosively. According to Frost & Sullivan, the market size of China's enterprise AI market reached about 139.4 billion yuan in 2020 and is expected to reach about 836.6 billion yuan by 2025, with a compound annual growth rate of 43.1%.
And Innovation Qizhi chose manufacturing and finance as a segment track, and the growth is also very impressive. According to Frost & Sullivan, the market size of Artificial Intelligence Solutions for China's manufacturing industry has reached about 9.1 billion yuan in 2020, and it is expected to reach about 64.9 billion yuan in 2025, with a compound annual growth rate of 48.3%. In 2020, the market size of AI-based IT infrastructure solutions in China's financial services industry will be 1.5 billion yuan, accounting for only 2.1% of the total explorable market of about 72.8 billion yuan, and the penetration rate is expected to increase rapidly.
However, it is worth noting that in the context of the outbreak on the demand side, the bottleneck of ai market development is mainly on the supply side. The strong Hengqiang is becoming more and more intense, and the landing ability of AI enterprises has become the key to competitive differentiation.
Get into the fast lane of growth
Among the TOP 5 leaders, the growth momentum of Innovation Qizhi is still very strong. From 2018 to 2020, the company's operating income was 37.21 million yuan, 229 million yuan and 462 million yuan, respectively, with a compound annual growth rate of 252.5%; in the first three quarters of 2021, the company achieved revenue of 553 million yuan, an increase of 85.8% year-on-year. It is not uncommon for companies to grow rapidly when their revenue is small, and after the revenue has a considerable size, the high growth rate is very indicative of the growth potential.
The company focuses on the two core tracks of manufacturing and financial services, and provides AI products and solutions around the four business themes of "manufacturing intelligence, edge vision, intelligent data center, and intelligent data governance". Among them, the revenue generated by manufacturing artificial intelligence products and solutions accounted for the largest proportion of total revenue, from 36.6% in 2018 to 50.8% in the first three quarters of 2021. Revenue growth in related sectors was also the strongest, with revenue from manufacturing in the first three quarters of 2022 increasing by 250.5% year-on-year, becoming a powerful engine for the company's growth.
Dismantling the momentum of revenue growth, we can see that the company's business model has basically gone through and formed a positive cycle.
On the one hand, Innovation Qizhi continues to open up new customers and grab new market shares. According to the prospectus, the number of customers in its manufacturing industry has increased significantly from 16 in 2018 to 93 in 2020; due to the high concentration of competition in the financial industry, it is inevitable that the financial customers will be more concentrated, but the number of customers in the innovative financial industry has increased from 2 in 2018 to 18 in 2020.
Innovative Qizhi can expand rapidly among new customers, thanks to the 1*N market strategy. As a leading AI leader, the company has a large number of benchmarking cases, and mature AI application scenarios continue to emerge. The company first creates a successful benchmark project for AI landing in a certain scenario through lighthouse customers, and then uses the reusability of technical assets, ABS and RDP to quickly replicate to more customers in the same field, so as to achieve horizontal expansion.
On the other hand, Innovation Qizhi encourages customers to go from a single application scenario to the use of AI to solve more scenarios, thereby creating customer stickiness, that is, the "1+N" strategy. Whether it's a leading player in manufacturing or finance, the validation process for IT vendors is lengthy. Innovative Qizhi continues to maintain in-depth cooperation with customers, which can efficiently achieve more project transformation and extension. This is also clearly verified by financial data. In 2020, the repurchase of high-quality customers in terms of amount was as high as 112.7%, and the average revenue per customer in the manufacturing and financial industries increased by 61.5% and 209.1% respectively year-on-year.
Under the rise of volume and price, the company has entered the fast lane of growth, and the performance potential has accelerated. With the expansion of revenue volume, the company's scale effect and profit elasticity are highlighted. The adjusted net loss ratio narrowed year-on-year from 122% in 2018 to 14.6% in the first three quarters of 2021, and the loss is rapidly being offset by the reduction in average costs due to business revenue growth and scale effects. Following such a trend of rapid narrowing of losses, the company is expected to achieve self-hematopoiesis soon.
Admittedly, the problem of unprofitable is a common occurrence among AI companies; but this does not mean that the company has no potential or is not in the business explosion period. Most AI unicorns have high incentive fees, fair value change gains and losses from valuation increases, and therefore usually lose money significantly. Even if you deduct non-profits, you still can't achieve profitability. In turn, there are some so-called "AI technology companies" in the market that have already achieved profitability, which should be more vigilant by investors.
Therefore, for AI companies, it is often difficult to evaluate the value of ai companies from traditional financial indicators. In addition, there is also a deviation in the valuation of the current business to measure its investment value, which is more important to pay attention to the speed of business boundary expansion or new business volume.
Whether from the perspective of core competitiveness or growth rate, innovation Qizhi has performed more brightly, and the future market performance is worth looking forward to.