Recently, Wuhan Guangting Information Technology Co., Ltd. (hereinafter referred to as "Guangting Information") announced its 2021 annual report. According to the annual report released by Guangting Information, its revenue in 2021 was 432 million yuan, an increase of 29.26% year-on-year; profit was 82.2688 million, an increase of 1.47% year-on-year. In general, Guangting Information is in a state of increasing revenue and not increasing profits. From 2017 to 2021, the revenue growth rate of Guangting Information was 11.16%, 49.77%, 25.46%, 9.78% and 29.26%, respectively. In four years, revenue increased from 162 million yuan to 432 million yuan, an increase of 2.67 times. However, its profits have basically stagnated, and the profit of Guangting Information in 2017 reached more than 80 million, and in 2021 it is still more than 80 million.
Guangting information revenue and profit
Guangting Information was listed on the Growth Enterprise Market of the Shenzhen Stock Exchange in December 2021, and originally planned to raise 387 million yuan through IPO, but the result exceeded nearly 1.1 billion yuan, which shows that the capital market was more recognized by it at that time.
However, after a brief rise in stock prices, the market value of Guangting Information has slowly opened a "bear road". The current market capitalization (as of the close of april 19, 2022) is 4.905 billion, which is more than 50% lower than the highest point.
Guangting Information stock price trend
What made Guangting Information change from a darling of the capital market to an outcast in just a few months? This needs to be found in terms of its own business structure and business model.
One foot stepped into the vent of the smart electric car
First of all, let's take a look at why Guangting Information was sought after by the capital market when it was first listed.
In the past ten years of development, Guangting Information has gradually expanded its business from car navigation system to vehicle infotainment system, liquid crystal instrument display system, vehicle communication system, advanced driver assistance system (ADAS), chassis electronic control system, electric drive system and other fields. At present, there are five main parts to the business of Guangting Information, namely intelligent cockpit, intelligent electronic control, intelligent driving, intelligent networked vehicle testing, and mobile map data services. Customers mainly include two categories, auto parts suppliers and automotive manufacturers. In terms of auto parts supply, its customers include Nidec, Yanfeng Visteon, Faurecia Clarion, Denso, Magneti Marelli, Aptiv, Magna, etc.; automaker customers include Nissan Automobile, Renault Samsung, Changan Automobile, etc.
Guangting information business system
Revenue distribution of Guangting information business
Intelligent cockpit, mainly providing separate or integrated intelligent cockpit and vehicle networking solutions, including user experience (UX) design and human-machine interface (HMI) software development services, instrument platform software solutions, software and hard separation solutions, virtualized cockpit overall solutions and T-BOX software solutions. In 2021, the sales revenue of smart cockpits was 177 million yuan, an increase of 56.17% over the same period in 2020, and the proportion of revenue reached 40.88%.
Intelligent electronic control, mainly to provide customers with new energy motor controller solutions, electronic power steering system application software development services, electronic servo braking system application software development services. In 2021, the revenue of guangting information's intelligent electronic control business was 58.4281 million yuan, down 26.04% from the same period in 2020. It should be pointed out that the decline in the intelligent electronic control business is due to short-term fluctuations caused by the adjustment of the organizational structure of its main customer Nidec, and it will basically be able to resume growth in 2022. In 2021, the revenue of intelligent electronic control business accounted for 13.52% of the company's operating income.
Guangting Information's intelligent networked vehicle testing business mainly provides automotive manufacturers, auto parts suppliers and autonomous driving algorithm companies with services such as test evaluation, data products and technology platforms in the fields of intelligent cockpit and automatic driving, and is also one of the new business growth points of Guangting Information. In 2021, the sales revenue of the intelligent connected vehicle test business was 78.58 million yuan, an increase of 43.24% over the same period in 2020, mainly due to the substantial increase in orders for the autonomous driving test business of automotive electronic parts suppliers such as Magna and Aptiv. In 2021, the revenue of the intelligent network connection testing business accounted for 18.18% of the company's operating income.
Guangting Information's map data service provides customers with map-based custom development and mobile big data value-added services for various mobile travel application scenarios, and its main products include global navigation electronic map compilation system and L2+ automatic driving map update service platform. In 2021, the sales revenue of the mobile map data service business was 58.1427 million yuan, an increase of 52.46% over the same period in 2020, and the main reason for the revenue growth was the increase in orders for Huawei's intelligent driving business. In 2021, mobile map data service revenue accounted for 13.45% of the company's operating income.
Guangting Information's intelligent driving business mainly provides customers with ADAS application software development services for passenger cars and the development of technologies related to converged parking solutions (APA). In 2021, the sales revenue of the intelligent driving business was 12.6618 million yuan, an increase of 27.48% over 2020, mainly due to the increase in orders from customers Faurecia Clarion in APA-related businesses. In 2021, the intelligent driving business accounted for 2.93% of the company's operating income.
Comparison of revenue growth rates of various businesses of Guangting Information
We know that the current smart electric vehicle can be described as the world's largest industrial outlet. The market penetration rate of New Energy Vehicles in China was only 1% in 2015 and only increased to 5% in 2019, but in 2021, the entire market began to accelerate, and the penetration rate soared from 8.14% in January to 19.78% in August. By March 2022, the penetration rate of new energy vehicles has reached 28.2%. As the core of new energy vehicles, intelligent electric vehicles have also shown a trend of accelerated development.
Overall, the "outlet" of intelligent electric vehicles can be subdivided into four tracks: electric vehicle manufacturing, battery industry, software-defined automobiles, and automatic driving. Guangting Information is mainly in the software-defined car track, corresponding to its intelligent cockpit, intelligent electronic control, intelligent network testing, map data services, these four businesses contribute more than 80% of its revenue. It is reasonable to say that the intelligent electric vehicle industry is in a stage of rapid development, and the market space is extremely huge. Guangting Information is in such a super outlet, why is it abandoned by the capital market?
In order to understand this problem, we need to understand the business structure of Guangting Information from another perspective.
The proportion of software licensing business is too low, limiting the development space
In the above analysis, we mainly understand the business of Guangting Information from the industry field. Next, we reclassify its business from a business model perspective. In general, the profit model of Guangting Information can be divided into five categories: custom software development, software technical services, third-party testing services, software licensing, and system integration.
Custom software development is the business of entrusting Guangting Information to undertake part or whole of its software customization development business with the goal of realizing the functions of a single or multiple modules. The work products formed by the project and its ancillary intellectual property rights shall be owned by the client alone or jointly owned by the client and Guangting Information according to the contract. The custom development business is the most important source of revenue for Guangting Information, accounting for 43.96% of the revenue of this business in 2021.
Software technical services are to provide customers with technical personnel involved in their software development and testing services, including on-site technical support, data collection and collation services and maintenance services. In the process of on-site technical support services, the organization, schedule and quality control of the project are mainly led by the customer, and the intellectual property rights formed during the project development process belong to the customer alone. Data collection and collation services refer to the company to provide customers with management system supporting data collection, library building, collation and archiving and other work. Maintenance service refers to the company to provide customers with a certain period of service for a certain period of system upgrade, maintenance, troubleshooting and processing business. In 2021, the software technology services of Guangting Information accounted for 40.52% of the total operating income.
Third-party testing services are entrusted by Guangting Information to test and evaluate the products specified by the customer in accordance with the relevant technical specifications, and provide the customers with phased test results or one-time evaluation reports according to the test results. The third-party testing services provided by the company are mainly charged according to the number of assessment subjects, test rounds, test mileage and other standards. In 2021, guangting information third-party testing services accounted for 12.21% of operating income.
System integration is a customized system delivered by Guangting Information according to the needs of customers, including debugging and installation services for hardware equipment, software and systems. The system integration business of Guangting Information is mainly based on various industry applications of geographic information systems (GIS), and the target customers are mainly natural resource management departments at all levels. The system integration business accounts for a relatively low proportion of the company's operating income. In 2021, the system integration business accounted for 1.08% of the total revenue of Guangting Information.
Software licensing is a software license authorized by Guangting Information to use the software products independently developed by the company, and charges a fee according to the number or time of authorization according to the contract. In 2021, the software licensing business accounted for 1.93% of total revenue.
Guangting information business distribution
Such an analysis basically "cracked the case": the core business of Guangting Information is customized software development and software technology services, and the revenue of these two businesses accounts for more than 80%. And these two businesses have a common feature, both adopt a customized project model, Guangting information is based on customer needs for product technology development, the intellectual property rights of the development results do not belong to Guangting information. (Under the software technology service model, 100% of the intellectual property rights do not belong to the optical garden information; under the customized development mode, the optical garden information only enjoys a small amount of intellectual property rights in some technical products).
The business model of project customization has two natural disadvantages: on the one hand, these projects basically belong to "one hammer transaction", usually a project can not contribute revenue to the sustainability of Guangting Information; on the other hand, in the process of product research and development, Guangting Information does not dominate. How to design the product, what technology needs to be developed, these are the customers have the final say, and the light garden information has not formed a continuous research and development accumulation. Products that have been delivered to customers, Guangting Information also has no intellectual property rights.
Revenue distribution of Guangting information business
According to the different business models, the business of Guangting Information can be divided into two categories: project system and software licensing model, customized software development, software technical services, third-party testing, and system integration are all project systems. In the business structure of Guangting Information, 98.92% of the revenue comes from the project-based model, and only 1.08% comes from the software licensing model.
The proportion of Guangting information software licensing business
Different from the project system, the basis of software licensing is the software products independently developed by Guangting Information, which has complete intellectual property rights for these technical products and can carry out the research and development of technical products according to its own planning. Most importantly, under the software licensing model, revenue is calculated based on the number of customer licenses, which makes a fundamental difference.
For example, Guangting Information provides intelligent cockpit systems to customers in a project-based manner, charging a one-time project fee of 30 million yuan. After the end of the project, this system has little to do with the light court information, and the installed capacity of this intelligent cockpit system is 10,000 or 1 million, which is not much different for the light court information; if the light court information provides the same cockpit system for B customers in the form of software licensing, it is charged according to the authorized number. Assuming that a system charges 1,000 yuan, if there are 10,000 cars installing this smart cockpit, then Guangting Information can charge 10 million authorization fees, and 1 million cars can receive 1 billion authorization fees.
At present, the intelligent electric vehicle industry is indeed developing rapidly, and the sales of intelligent electric vehicles in China are doubling almost every year. Under the software licensing model, the business of Guangting Information can be bound to the entire market and grow with the growth of the market. Moreover, this growth is sustainable, and the licensing fee is charged annually.
In fact, most of the software giants have adopted a software licensing model. Every Lenovo computer that has a Windows operating system installed pays Microsoft a fee. Therefore, Lenovo has become Microsoft's "hit worker". The more Lenovo computers sell, the more Microsoft earns. Due to the diminishing marginal cost of software products, with the growth of installed capacity, the profit growth rate even exceeds the revenue growth rate. In the same way, every mobile phone sold by Xiaomi must pay a fee to Qualcomm. Qualcomm's patent fee is charged directly according to the price of the mobile phone, 5G single-mode mobile phones charge 2.275%, and 3G/4G/5G multi-mode mobile phone rates are 3.25%. The more Xiaomi mobile phones are sold, the more expensive they are sold, and qualcomm's revenue and profits will be higher. Just imagine, if Lenovo can buy out Microsoft's operating system for 1 billion yuan at one time, and Xiaomi can buy out Qualcomm's chip patents for 1 billion at one time, can Microsoft and Qualcomm still enjoy such a high market value? In the field of cloud computing, one of the most core reasons why SaaS companies are generally able to obtain high valuations and are sought after by the capital market is that the volume-based charging business model has opened up its valuation space.
Although Guangting Information is in the rapidly developing intelligent electric vehicle industry, its business model with project customization as the core determines that it cannot share the development dividends of the entire industry well. If the smart electric vehicle industry is regarded as a high-speed train, the destination of the train is a huge gold mine. Guangting Information is also just an industry bystander, not on the "car", but just a water seller on the platform, making a small profit when the train passes. If you want to go to the gold mine, Guangting Information must "get on the bus", and the software authorization model is the ticket of Guangting Information.
Intensive R&D investment is an indispensable foundation
Of course, Guangting Information knows the difference between project customization and licensing model, and of course imagines microsoft and Qualcomm, lying down to make money. However, the software licensing model has a high threshold. Only with strong technical advantages can Guangting Information occupy a strong negotiating position in this industry. Taking the smart cockpit as an example, if the intelligent cockpit product developed by one manufacturer is significantly better than other products in terms of user experience, technical performance, cost control, etc., and many technologies have originality and carry out a forward-looking patent layout. Then, this manufacturer has an advantageous position in the industry and can talk to the terminal car manufacturer about the software licensing cooperation model.
To achieve such an industry position, high-intensity investment in research and development is an indispensable foundation. However, we do not see such ambition in the Light Court Information.
When Guangting Information went public in 2021, it over-raised a large amount of funds, resulting in a large increase in cash in a short period of time. In 2020, the monetary funds of Guangting Information were only 225 million yuan, and by the end of 2021, its monetary funds reached 1.610 billion yuan, an increase of more than 7 times.
Guangting information monetary funds
These billions of cash are still lying idle on the account of Guangting Information, and they are not well used. In contrast, Guangting Information paid employees 262 million yuan in wages in 2021. In other words, the cash on the Guangting Information account is enough to pay its employees for 5 years.
Guangting Information Cash Flow Statement
It is reasonable to say that as an emerging technology enterprise, after having a large amount of funds, the most important thing to do is to increase investment in research and development, quickly build their own technology and product barriers, and increase their market competition chips. However, Guangting Information's R&D investment in 2021 accounted for 8.28% of revenue, nearly 3 percentage points lower than 11.12% in 2020. That is to say, after having the "ammunition" of funds, guangting information has reduced the intensity of technology research and development.
In summary, although the business of Guangting Information focuses on the intelligent electric vehicle industry, its project-based business model limits its future development potential. To some extent, Guangting Information can only be said to be a foot on the super outlet of smart electric vehicles. In order to step into this outlet with another foot, it is necessary to strengthen investment in technology research and development, create a technical product system with independent intellectual property rights, and build competitive barriers in terms of product performance and technical reserves. To observe the future development potential of Guangting Information, the revenue proportion of software licensing business is a core indicator. This indicator has been significantly improved, and Guangting Information can open up its own development space and be recognized by the capital market.
Text: Gaze at Deep Space / Data Ape