Text / Six Gold
Producer / Node Finance
At the end of last year, SenseTime rang the bell on the Hong Kong Stock Exchange, becoming the world's largest IPO in the field of AI; now the market has also ushered in the first financial report after senseTime's IPO.
According to the financial report, sensetime's revenue in 2021 was 4.7 billion yuan, an increase of 36.4% year-on-year; the adjusted net loss was 1.418 billion yuan; the revenue of this report was higher than the market expectation; and the adjusted net loss was also better than the market expectation, indicating that after the listing, SenseTime was still bringing positive feedback to the market in a way that exceeded expectations.
/ 01 /
Hard tech assets that are smoothly commercialized
How precious is it?
Let's first dismantle the most talked-about part of SenseTime's earnings report – commercial performance.
Now the commercialization ability of the entire AI industry is facing many doubts in the market: for example, some companies are not well commercialized, all rely on investment to "continue to live"; some companies very much want to have breakthrough progress, but cash flow can not keep up with the pace of expenditure, in the AI industry, whether it is the development of technical infrastructure, or a large number of technology research and development breakthrough costs, need to continue a lot of capital investment. Such investment is indispensable in the initial stage of the development of the AI industry. But this also forms a contradiction, that is, investors are concerned about how the AI industry can get out of the laboratory to make more money in the shortest possible time, and the industry is more interested in the future development space and market size.
For SenseTime, it seems to have found a "sustainable balance" very quickly – last year, SenseTime achieved a 152% increase in the large-scale production of artificial intelligence algorithms and maintained a high R&D investment of up to 65%, and at the same time, investors see hope that it will accelerate its landing in the four major commercialization sectors of smart cities, smart business, smart life and smart cars.
Among them, SenseTime's two traditional advantages, smart cities and smart businesses, are still growing strongly.
The smart city sector achieved revenue of 2.14 billion yuan, an increase of 56.5% year-on-year; last year's new coverage of 46 cities, realizing the penetration from megacities such as Shanghai to second-tier cities such as Qingdao; and now a total of 140 cities have deployed SenseTime City Ark products. In addition, the future management of mainland cities will become more and more refined, and the ability of SenseTime will be more and more needed; industry insiders estimate that the penetration will be greater in the future.
The smart business segment achieved revenue of 1.96 billion yuan, an increase of 31.8% year-on-year; at present, the number of customers covered by smart business has reached 922, of which more than 200 are Fortune 500 companies and listed companies; and while achieving customer scale growth, the single customer income of smart business has increased by 21.3%.
The smart life sector lays a solid foundation. Up to now, the mobile phones equipped with SenseTime SDK have shipped a total of 1.5 billion units, covering China's leading mobile phone manufacturers; in addition, SenseMARS Meta-Universe Empowerment Platform is supporting more than 200 mobile applications and mobile games, empowering more than 60 large shopping malls, museums and airports...
Last year, SenseTime's smart car revenue was 180 million yuan, an increase of 16.2% year-on-year, and during the year, SenseTime had more than 30 signed customers, don't look at the current revenue of smart cars, accounting for only 4%, but SenseTime's intelligent driving and smart cockpit products have accumulated 23 million units of pre-installation fixed points, covering more than 60 models mass-produced in the next five years, and will soon achieve large-scale growth in business.
Therefore, for SenseTime, the future commercial landing of the four major sectors is not only a prospect, but a certain opportunity.
In addition, SenseTime's gross profit margin has always been the leader in the industry, with gross profit margins of more than 50% in 2018 and 2019, and further improving gross margins in 2020 and 2021 at about 70%; high gross profit is also the most important basis for getting rid of losses and achieving profitability in the future.
/ 02 /
High R&D
It remains the most valuable investment in the field of AI
Some people still question why SenseTime is still losing money when the commercial prospects are good and the gross profit margin reaches 70%. In fact, as an investor, we should rationally look at the sources of losses of hard technology companies:
First of all, SenseTime's loss mainly comes from the non-cash profit and loss brought about by the change in the fair value of preferred stock, because SenseTime was only listed on December 30, 2021, so the profit and loss of preferred stock did not have time to clear zero, and this part of the loss did not have to worry too much, and there would be no impact after 2022. And in general, the more financing, the more valuation growth, the better the market performance of the company will record a large change in the value of preferred stock losses.
Secondly, SenseTime's main loss also comes from the continuous high R & D investment, 4 years of R & D investment of 8 billion, 2021 R & D investment reached 3.06 billion yuan, the total revenue accounted for 65.1%.
This proportion of R&D investment, if compared with Internet companies, may make people feel that the investment is a bit "crazy", but looking at the global AI finals, SenseTime may be the only representative of China, and you will feel that this investment is worthwhile and necessary.
Because by the end of 2021, SenseTime's high R&D investment has been exchanged for 11,494 global patent assets, an increase of 96% compared with the end of 2020, of which 78% are invention patents, the number of patents, to make a small comparison, the average number of patent applications of listed companies on the Science and Technology Innovation Board is 323. Compared with patents, SenseTime has been mentioned more than 560 top papers in the field of computer vision, ranking first in the world, even exceeding the number of Google, Microsoft and MIT in the same field. Moreover, the IDC report pointed out that SenseTime ranked first in the Chinese visual market, and in the first half of 2021, it exceeded the sum of the 2nd and 4th places.
As the company with the largest R&D investment and the most achievements in the field of AI, SenseTime has ranked among the top in the world in terms of hard power such as patents and talents; and AI companies such as Google and Microsoft can be compared, and in the final circle of AI, we can see the strength of Chinese companies.
There was another episode before SenseTime went public a few months ago, and SenseTime was once again on the U.S. blacklist. As a result, the more the United States tries every means to obstruct its listing, the more it reflects the hard technology strength of SenseTime. In the second international placement of SenseTime, it quickly obtained full subscription (accounting for 90% of the total number of issuances; cornerstone subscription ratio reached 60%), which shows the institution's favor for hard technologies such as SenseTime.
Shortly after the listing, Hang Seng Index Company soon announced that SenseTime was included in the Hang Seng Technology Index and hang Seng Composite Index; CICC also issued a research report pointing out that SenseTime is a company with different rights in the same shares, and it is estimated that it will be able to join the Hong Kong Stock Connect after the expiration of the listing period around August this year, indicating that SenseTime is still a very scarce target of hard technology assets in the market.
Due to the current decline in the market value of Internet companies in technology stocks, hard technology has been regarded as a new core asset after Internet companies. However, in the investment logic, the essential difference between hard technology and the Internet is that the Internet seeks speed and hard technology seeks depth.
Therefore, in order to make the hard technology assets of SenseTime generate value at the market level, and to do a good job in technology input and output, it is the premise and foundation, and investors also need to evaluate the enterprise from a more long-term perspective, rather than applying the previous Internet's "faster, faster" to evaluate the development of the enterprise.
/ 03 /
Sensetime, a technology and talent in Shikura
Growth will still accelerate
At the beginning of SenseTime's listing, many institutional research reports believed that the model of heavy warehousing technology and talents made the business scalability higher, and the boost to the overall AI industry was also very high.
Some of the information disclosed in its first financial report also shows that SenseTime, as a typical representative of hard technology, has also converted its production, education and research results very quickly. In other words, SenseTime is already ahead of the curve in transforming "valuable technology" into a "profitable product."
In 2021, SenseTime officially demonstrated a new artificial intelligence infrastructure - SenseCore AI device.
SenseCore's role is to effectively transform massive amounts of data to produce the most advanced artificial intelligence models in various industries, while continuously optimizing production and operating costs and improving commercialization efficiency. At present, SenseTime has produced more than 34,000 commercial models through SenseCore, an increase of 152% compared with the end of 2020.
With the continuous strengthening of SenseCore's capabilities, the ergonomics of SenseTime's artificial intelligence research and development have also improved year by year, and the average number of commercial models produced by R&D personnel per person per year has increased to 5.94 in 2021, an increase of 72% and 13 times compared with 2020 and 2019, respectively, which also creates conditions for accelerating the commercialization of AI. For example, someone from SenseTime once told the media: "In 2015, the production of a high-precision neural network model required 10 people to do half a year, and now it has been shortened to two people doing a day, and the computing power consumed has also been reduced by half." "Now that efficiency may be even higher."
According to the judgment of the agency, the market penetration of AI is still in the early stages, and most cities, enterprises, and IoT devices such as automobiles are still in urgent need of AI penetration. However, the construction of China's digital economy is accelerating, and the penetration rate of AI in various industries will increase rapidly.
However, in the process of comprehensive digital upgrading in any industry, there are a large number of fragmented needs and fragmented scenarios, and the development of AI models in these scenarios consumes a lot of data, computing power and manpower, and the cost is too high. However, if the coverage problem of fragmented scenarios cannot be solved, AI applications cannot be commercialized on a large scale, and there is no way to form a real value closed loop like the current Internet.
So you can understand SenseTime's AI device as a base, and SenseTime leads other companies to walk out of the ivory tower of technology through this base. More enterprises can participate in the research and development of artificial intelligence models in fragmented scenarios, and work together to make the market cake bigger, reduce the application cost of AI, and also help more industries to upgrade digital intelligence.
It is worth mentioning that in January this year, SenseTime Artificial Intelligence Computing Center (AIDC) was officially inaugurated in Shanghai Lingang. As an important part and physical carrier of the computing infrastructure layer in "SenseCore", after the official production of asia's largest artificial intelligence computing center, SenseTime has a computing power of up to 3740p, and other algorithm companies have been unable to catch up with SenseTime in the efficiency of algorithm training.
The completion of AIDC also promotes SenseCore to have a wider application in commercial applications such as virtual and real, allowing SenseTime to quickly graft AI capabilities into different sectors such as SenseTime Ark Enterprise Open Platform, SenseTime City Open Platform, Mars Mixed Reality Platform, and SenseTime Shadow Platform.
Finally, the annual report shows that SenseTime still has 21.52 billion yuan on its books, and it is very possible to increase investment in the future to explore a certain aspect of profitability through the scale effect.
As a newly listed new stock, after the financial report is issued, the stock price fluctuations are generally very large. However, SenseTime can show the market's rare stability and old growth, the general view of the market is that SenseTime is quite mature in revenue and expenditure management, and uses money on the blade in exchange for a stable profit model and growth, after all, SenseTime has not only not fallen into cash flow problems because of high research and development investment, but also explored a path of deterministic growth in four revenue sectors.
At the end of 2021, the State Council launched the "14th Five-Year Plan for the Development of the Digital Economy", proposing that by 2025, the added value of the core industries of the digital economy will account for 10% of GDP. China will enter a new economic cycle with data as the factor of production, and with the acceleration of the extensive digitization process in various industries, the demand for artificial intelligence will be further accelerated, which also puts forward higher requirements for the large-scale production of AI. Therefore, at least in the next five years, SenseTime's business model and development path are very compatible with the general trend of economic policy, and the balance between input and output can be further optimized in the future, bringing more market confidence to scarce hard technology assets.
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