Image source @ Visual China
Text | damask
Investors who bet on iFLYTEK (SZ:002230) should be confused about the time of the most recent year. Why is it that the performance of each reporting period is growing at a high rate, but watching the stock price from last year's high point to the waist?
I say "serious" because five hundred billion years of revenue is very difficult to achieve. If you take the reference as the standard, compare the financial data of Tencent, the big brother of the Internet industry, and today's AI leader SenseTime. Specifically analyzing each business, we do not see much feasibility. I think it's good to achieve 60 billion revenue in 5 years.
Unlisted companies bragged that no one cared, such as Huawei's Yu Dazui. However, the expected management of listed companies must be prudent, after all, if you dare to speak, investors dare to believe and dare to buy.
01 Why can't performance drive market capitalization?
On the surface, the market value of iFLYTEK has been basically consistent with the trend of the CSI 300 Index since the high point of 618 last year. The theory is logically self-consistent enough.
But such an appearance cannot help but deceive oneself.
The market reasons are secondary, and the core problems are mainly still in the company. It should be known that the magnitude of the decline in the index represents the average of the decline of 300 companies (considering the weight), of which: there are companies that outperform the index, there are also those that have run flat and those that have lost. The core difference is still performance, iFLYTEK's performance is far better than the average of the CSI 300, let's take a look at the revenue of the three time periods:
In 2021 H1, the revenue growth rate of the CSI 300 was 31.7% (median), and iFLYTEK was 45.3%, 13.6 pcts higher;
In 2021, the revenue growth rate of the CSI 300 was 20.2% (median), and iFLYTEK was 40.6%, 20.4 pcts higher;
In Q1 2022, the revenue growth rate of the CSI 300 was 12.3% (median), and iFLYTEK was 40.2%, 27.9 pcts higher.
Chart: iFLYTEK's historical trend, source: wind, brocade
It is worth noting that overdrafts are not only about market expectations, but also about management's ambitions. Regarding ambition, we must start with the annual planning conference of iFLYTEK in early 2021.
02 Expected management pulls stock prices
For companies with good texture, the capital market has always been: as long as you dare to say it, I dare to believe it.
There is no doubt that iFLYTEK is an excellent company, so the ambition of management – the annual planning conference on February 8, 2021 to propose hundreds of billions of revenue for the next five years – directly led to the rise in the stock price.
On the day of the annual meeting on February 8, 2021, iFLYTEK's stock price was 44.11 yuan, and the highest point on June 18 was 68.5 yuan, soaring 55% after the market value reached 159.1 billion, the logic behind it is - first overdraft the expected performance in the next 3 years.
That some people have to say, the funds that run in the three years of performance are short-sighted, as long as iFLYTEK can achieve the goal of 100 billion yuan within the specified time, there will be a rise, and the rose of time will eventually bloom. That seems to make sense, but does it really make sense?
The question seems to be back to the original point, can iFLYTEK reach the revenue target of 100 billion yuan in 5 years? It's hard, how hard it is.
Revenue in five years to achieve 13.025 billion yuan to 100 billion yuan, 50% of the CAGR, from history there are few such companies, directly pick the top reference: Tencent.
In 2009, Tencent's revenue was 12.44 billion yuan, which was comparable to iFLYTEK's revenue in 2020. Five years later, Tencent's compound growth rate was 45%, achieving revenue of 78.9 billion yuan. In 2012, Tencent's revenue was 43.89 billion yuan, which was the initial stage of the mobile Internet, and after 5 years, Tencent's compound growth rate was 40%, achieving a revenue of 238 billion yuan.
In fact, after the 100 billion small target was thrown, the data of the 21-year semi-annual report, 21 annual report, and 22Q1 was there, and there were still 10 pcts away from the 50% growth rate.
After understanding what the concept of the five-year average 50% growth rate is, let's analyze the specific problems and split the feasibility of the 100 billion revenue target.
03 The feasibility of achieving 100 billion yuan of revenue in five years
Specifically, regarding iFLYTEK's decomposition of the 100 billion goal - education 30 billion, medical care and pension 20 billion, open platform + C-end 20 billion, automobile 10 billion, operator 10 billion, smart city 10 billion, we look at one by one.
Figure: Target disassembly, Source: Conference call
1) Field of education.
In 2021, the revenue is 6.23 billion yuan, in view of the fact that this is the traditional strength of iFLYTEK and the competitiveness is relatively strong, we will tacitly accept that it is OK and can launch an impact towards the goal of 30 billion.
2) Medical field.
3) Open platform and C-side.
Revenue in 2021 was 4.23 billion yuan, an increase of 51.1% year-on-year. iFLYTEK has the second largest open platform in China, bringing together 2.93 million developers (second only to Baidu's 4.06 million developers), optimistic about the low-code and zero-code way to let AI land this model, which has a high probability of sustained high-speed growth in the next few years. However, the intelligent hardware business represented by translation machines and voice recorders has a relatively niche application scenario and needs new explosive support. This sector can be described as both opportunities and challenges, and whether it can achieve 20 billion needs to be observed.
4) Automotive field.
5) Operator field.
Revenue in 2021 was RMB1.39 billion, up 26.8% year-on-year. This piece is basically to do AI voice telephone customer service for operators such as Mobile Unicom, etc., the technical threshold is actually not so high, 10 billion yuan in 2025, that is to say, the compound growth rate in the next four years will reach 64%, which is a bit unimaginable.
6) Smart city field.
Revenue in 2021 was 4.97 billion yuan, an increase of 29.6% year-on-year, and if this growth rate is maintained, the target of 10 billion yuan is no problem. The question is whether this growth rate can be sustained?
If the smart city field wants to achieve 10 billion revenue, it must rely on information engineering, and I think its growth depends on the digital government/government business in the long run, and entering more new cities can further receive the information engineering business under the smart city, while the former is growing at a stall under competition (from 54.5% in 2020 to 17.5% in 2021). Therefore, the revenue target of smart cities has great uncertainty.
Overall, among the 100 billion goals - education, open platforms and C-end can try to launch an impact on 50 billion revenue, medical and automobile revenue of 30 billion is a bit of a satellite feeling, and operators and smart cities to achieve 20 billion revenue Has a relatively large uncertainty. I personally think that the revenue of 60 billion yuan in the next 5 years is relatively good (the compound growth rate of 5 years is within 35%).
Look at the consensus expectations of securities companies (the average of the forecasts of 29 brokers): the average revenue in 2022 is 24.4 billion yuan, a year-on-year growth rate of 33.2%; the average revenue in 2023 is 32.12 billion yuan, a year-on-year growth rate of 31.6%. The forecast revenue growth rate of these two years is far lower than the growth rate implied by iFLYTEK's management target of 100 billion.
04 Hematopoietic ability is always a weakness
There is nothing wrong with the expected management of listed companies, but it cannot break through the boundaries of feasibility, because it will form a guide to the capital market that is traded all the time, which is reflected in pricing. If you are an unlisted company, like Huawei, Yu Chengdong loves to brag that no one cares, because Huawei's equity is not traded in the open market.
Chart: iFLYTEK's Cash Flow Scale, Source: Wind
Chart: iFLYTEK's financing, source: wind